The Financial Aid "Kill Zone" in America - A Model

Paying for College
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<p>The problem with college costs is that too often the reality of the costs hit the families at the time of application when it is too late to do much about changing life styles to make those payments. Even planning for it can be an issue if things don’t work right as this economy has shown. </p>

<p>When raising kids, having a family life, things like school district, accessibility to family, work, facilities, opportunities can be important. Immediately important. Then in times like this, selling the house may not be a good option. Savings may not have panned out the way one has planned. I have a feeling that we will be hitting a period of high inflation soon that is going to wreak havoc on many families’ finances as well. When we are talking about cost that are edging into the $60K a year zone, making the changes in lifestyle to make up that kind of a hit is not easy, and sometimes unrealistic. There are some things in life that are of higher priority than saving for college, and they often have to be addressed.</p>

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<p>I agree with you, but I don’t think lower level state colleges and community colleges are lower on the “food chain”. For the most part, college is college. The problem lies in that some low-income families are being pushed out of the college level of education ALL TOGETHER. I don’t care who goes to CC or public school; my issue is that some low-income schools are being pushed out of college as a whole. Low-income families depend upon need-blind, strong aid schools in order for their kids to have a fighting chance. When these schools ditch their need-blind status or start offering aid to families that can afford public schools, low-income students lose much of their possibility of going to college. Not all, but much. For example, if my five-person family with an income of $25,000 gross doesn’t get a solid financial aid practice from a private, need-meeting school, I will barely be able to afford community college - and then I’d STILL have to take out $40,000 in loans just to transfer to the local flagship. Lots of students with situations like mine depend on private schools. Families with higher incomes have options.</p>

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<p>Unfortunately, the 90-140k family can no longer keep up the 45-50k per year (even if it is discounted 10k with merit aid to lure them in). Every year the schools increase their costs 4-7%, so each year more 130k families will vote with their feet, because there is a limit. It won’t be long before the schools will be filled with only the rich, and those getting doable merit/FA packages. Argue all you want, but it boils down to how much debt the student and family can and IS WILLING take on before they just throw the towel in and say no more!</p>

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<p>depending on need blind strong aid schools is probably not a good
strategy. There are so few slots available probably less than 1% of
low income kids will enroll at these colleges. As for the $25,000 family,
in my state the lower level states are already out of reach for that
income level but community college is still doable. As a former community
college “professor” though, I would suggest that my cc is not really
suitable for a kid with 1250 and above sats - pretty much a waste of
time.</p>

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<p>My biggest issue is that many on these forums assume that there should be equal access to private schools with no regard for price. I don’t know of one public university or public liberal arts college that costs $50,000 for instate students. If I’m wrong, correct me. Where all the aid models and all the griping starts is when the private school strategy made cost a secondary decision to student body composition. A noble cause yes, but difficult to execute. You must either accept the business model that the schools will buy the students they want with aid (while accepting the students they want that don’t need aid) or you can walk away or you pony up. It’s really not that complicated. This is not to say that the current vogue business strategy won’t change or that consumer demand won’t cause the strategy to change but current college consumers drive the process as much as the schools do at least in the private arena where there are less governmental and public pressures. I may not like the way the private system is currently operating, but I don’t like paying as much as our first house for a car either and heh…guess what…that business model of rising prices offset by subisides in the form of rebates, extended loan terms, etc. to get more people into more expensive cars didn’t hold up either. What about the housing market business model of upselling? Not working. We can intellectualize all we want but higher education is a comodity and product exists at all cost levels. The public model is quite different than the private model no doubt. We may not like it but it is what it is. Finally, as many have said we who are fortunate enough to eek out a living do have choice about how we spend our incomes, we choose where we live, we choose where we work, we choose what we purchase, we choose where we shop. We drive up the prices of housing and discretionary goods by choices we make not by some destiny that we don’t control.</p>

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<p>Sure ya gotta know the rules and play the cards you’re dealt. But
lately the goal posts have been moving. i suspect next year when
some of these high priced LACs are only half full we’ll see some
changes again. I note one fairly well known midwestern LAC has only
100 deposits others including some top 20’s are discounting heavily.
If you play your cards right, it’s could be a good time to be in the
“financial kill zone.” You can probably get into a top 50 grand LAC
for 30,000.</p>

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<p>I agree that there will be some changes in college costs. We may see some colleges closing or cutting back on resources as well. However, it appears that the top schools are getting more applicants than ever.</p>

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<p>momofthreeboys >> My biggest issue is that many on these forums assume that there should be equal access to private schools with no regard for price. <<</p>

<p>I believe all Americans should have need-blind access to “private” schools. Are there any well-known private colleges that are truly private for-profit ventures? Most “private” colleges are, as far as I know, 501c3 non-profits that rely heavily on tax subsidies and federal grants. Since “private” colleges are quasi-public institutions, then I think admissions should be need-blind to give all taxpayers a shot at sending their kids there.</p>

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<p>cpt, the top schools will always have applicants and their seats filled. It is the private 2nd, 3rd, and 4th tier that will need to work hard on filling seats. I have seen this deck of cards about to tumble for some time now. Just how much in loans do we expect our young people to take on? How much in PLUS loans, HELOCs, and private loans do we expect parents who are 5-15 years from retirement to take on? Are they supposed to be uprooted and sell their homes to pay for an undergraduate degree for their children? At some point it is ridiculous!! We are seeing more and more financial discussions on this board. We are in the middle of a terrrible recession where parents have lost jobs, homes are being foreclosed, families don’t know how they are going to pay their everyday bills to live and we really don’t have affordable higher education in every state!</p>

<p>I was just in the hair salon the other day. A woman, mid 40s, who has a teaching license cannot find a job. She left teaching to go into marketing and she is currently unemployed. She is hearing that teachers are being let go just prior to getting tenure. I cannot back up that fact, but I am repeating what she said. She has some training in automotive repair, and she thinks at this point that will be her best bet. She has not found employment for a year. She was in the salon because she had not had a haircut in one year. It was her birthday and her father gave her a haircut as a BD present. She had a job interview the following day and just wanted to look presentable. Now, do you think she is thinking about sending her kid to a 4 year school and is signing up for more debt than she already has? I think not!</p>

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<p>The problem here is that college financial aid distribution has evolved over the years into a zero-sum game wherein for me to get a few dollars more, it has to be taken away from someone else. As long as there was surplus in the pipeline (in the pockets of the colleges or the pockets of the applicants) this model was masked. </p>

<p>The schools are an arm of the government (with extensive federal funding and subsidies). This applies to public and private schools alike. It is somewhat artificial to say that they are “private companies” free to do what they want in terms of admissions and aid – if they were, then we would still have only whote rich boys going to college. The Feds dictate how the scholarship money can and must be allocated, requiring that the schools abide (by law) to the FAFSA calculations. The lopsidedness and archaicness of the algorithm was masked for the past years by bloated endowments at the colleges and bloated stock portfolios amongst the middle class. Once the market tanked, the population of “needy” (in terms of education subsidies) has grown beyond the bounds of the stale assumptions dialed into the FAFSA-dictated allocation process. And that “need” is not necessarily a need for a full-boat scholarship for everyone. It may be full-boat for the lower-income and something, *anything *for the higher middle income. </p>

<p>This is what makes it difficult to argue against what folks like applicannot say on here – if no money is made available based on need, then it is without a doubt an exclusionary process for the lowest of income earners, whereas the upper-middle class may be able to afford something, if not the best. But I think he and others may make the mistake of thinking it is easier to live in the low-100’s income band than it really is, especially when a commitment of $30K or $40K is put into them mix. And in this zero-sum environment, he would be a fool to admit that some money is deserving to go to the low-100K folks, knowing that this dictates that some come out of his aid package. </p>

<p>Failure of the government and the private schools to anticipate the fall of this house of cards is creating class warfare in the aid portion of the admissions process. And this is not the very-poor in conflict with the very-rich. Both of those groups have it covered. The fight ends up being the bolus of the population that is wedged between having just enough and having a little more. The King and Queen are all set, as are the pawns, but the Rook and the Knight have to go head to head for whatever is left over. This may be the tip of a larger class-warfare iceberg as more and more people (like notheastmom’s woman at the hairdresser’s in the previous example) realize that despite being “wealthy” in the eyes of some for having a nice home and some retirement funds, they cannot fill the gap that the Feds have left open.</p>

<p>When Barney Frank gets on TV and shills for giving a bail-out to help fund college educations on a wider basis, rather than funding junkets by AIG and Fannie Mae execs, then there will be hope that the government gets it.</p>

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<p>Retirement Confidence at Record Low
By Marion Asnes-Financial Planning Magazine
April 14, 2009</p>

<p>The impact of the market downturn and the recession on Americans’ expectations for retirement is dire, as evidenced by the 2009 Annual Retirement Confidence Survey, the 19th fielded by the nonpartisan Employee Benefit Research Institute. The number of workers feeling very confident about retirement dropped 50% since 2007.</p>

<p>The factors leading to this severe drop in confidence won’t surprise you: economic uncertainty, inflation, the cost of living, job loss and loss of retirement savings. In addition, workers and retirees alike are concerned about medical expenses, with only 13% of working Americans and 25% of retirees feeling very confident about meeting medical costs.</p>

<p>Another important finding in this year’s Retirement Confidence Survey is that Americans are saving more, and are more likely to consider working with a financial professional. In addition, Americans plan to work longer, with 89% reporting that they’ve pushed back retirement plans to increase their financial security. The median survey respondent planned to retire at 65, with 21% of respondents stating that they’d work into their 70s. Today, however, the median retirement age is only 62. Forty-seven percent of retirees report that they retired earlier than they had planned.</p>

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<p>So I am in that category…I can’t retire cause I am wealthy. Well at least according to FAFSA I am. HA! Being in the middle class I disagree with the assertion that the college aid process is a redistribution of wealth. This assumes that the middle class has wealth. Most do not. Most have a predictable income stream and very little equity in their home. Yet somehow there is a belief that if you make $150,000 gross income you have the ability to spend 1/3 of your gross income on college. Which after tax turns out to be 50% of your net income per year. This is not a redistribution of wealth it is mechanism that funnels most middle class kids into state colleges. The reality is as the original poster showed that actually net worth is transferred from middle class to a lower income group so that all things being equal both families after paying or free riding at the end of 4 years are on the same par economically. The lower income family may live in a different neighborhood or the middle class one may have more toys. But in the end their net worth is about the same. This is the hidden tax that no one wants to discuss except a few on this thread that see it for what it is. But as one poster noted a private college degree is a privilege not a right!!!Despite the enormous tax bailouts private schools obtain. But we won’t go there… So on to state schools with all of you. well get going!</p>

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<p>Just to clarify, the mortgage is per year, as are all of those figures.</p>

<p>I am not saying that the parents who are making $40,000 should be expected to contribute $5-10k, but the student should. I will be contributing about $17k/year for mine which I feel is high, but my best option. </p>

<p>Since I live in PA and got accepted to Schreyer’s Honors College, I will be attending PA for $22k/year.</p>

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<p>State schools are expensive too. For those who live in states where there are nearby state schools where kids can commute and where the standards for admission are not so high,good for them. Not everyone is so lucky. Sometimes the choices are very limited. The only choice some students have are community colleges, and they may be inaccessible. I know a number of kids in that situation. Also, there are areas where the community colleges are not very good. A friend of mine has been very frustrated with the community colleges in her area. They drop classes all of the time, so you never know until the last minute if you are going to get the schedule that you want. Then you could end up blocked out of any other courses as alternatives if they are full. I know I ran into this myself one year when I signed up at a community college for some interesting programs. They were all cancelled at the last minute due to lack of interest. This can pose problems for kids who are going for a particular degree and who need full time status. Also some CCs do a poor job in preparing their students in the foundation courses that are crucial for getting that 4 year degree. I’ve seen some really lousy calc and science courses.</p>

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<p>I actually won’t be a legal adult when I move into Vandy in the fall… if that has any importance. I’ll still be 17 until mid-November.</p>

<p>Kentuckymom, I’m about as far from socialist as you can get, but I see a major flaw in your critique of HarVandy. You argue that students (for simplicity’s sake let’s pretend they all are legal adults) should not be tied to their parent’s income, thus ensuring true fairness. As you see it, every student should pay the same, regardless of their parents’ income. However, this assumes that every single parent will contribute exactly $0 to their child’s education over the course of four years. If your ideal were to be in place, students fresh out of high school, many of whom have never worked a day in their life, are suddenly expected to finance an education on their own. Can you ever realistically foresee this happening?</p>

<p>Also, I’m guessing you’re one of two people: a laissez-faire capitalist, or someone who truly enjoys seeing other people in poverty. I’m going to guess, and hope, that you’re the former. </p>

<p>As a capitalist I assume that you, like myself, believe in the invisible hand of the market that by supply and demand will ensure that the best and brightest people, and most efficient ideas are put to use, ultimately creating a trickle-down effect that makes everyone wealthier.
I’d like to think that I’m a bright person- I’m the top student in my class, with a 34 ACT. However, I’m from a small rural school in Michigan, where about 25 students, out of 110 total in my class are going to college. Incomes here are below average, unemployment is one of the highest in the nation… the financial aid I’m receiving from Vanderbilt each year is more than my mother- who happens to be a single mother raising three kids- earns annually. Therefore, I think of this need-based financial aid not as a handout, but as an investment; keep in mind that the financial aid I’m receiving is 100% privately funded. Vanderbilt had seen potential in myself and my application, and offered me admission and a means to afford an education there. In the long run, in the eyes of the University, my value to them and to society is much higher than the $200,000 they’re giving me… if their investment pays off. My job is just to make sure that it does.</p>

<p>So you see, the issue really is about profit here. If Vanderbilt is willing to offer a lot of money to someone like myself, then it could pay off big for them in the end. If they can find promise in someone from a family that can afford a Vandy education, they why pay so much? It’s simply not efficient.</p>