The ‘Missing Middle’ at Ivy-Plus Colleges

Applying to College
61

Honestly, it doesn’t take much for a $200K AGI household to decide that $40K/year/kid is unaffordable. I suppose, yes, if you have only one kid, no debt, no extra obligations, never divorced, never was out of work for long, and a good amount socked away for retirement (or in home equity) already, then you’d be willing to splurge. But many households aren’t so fortunate. Considering that in a moderate-income suburb of a non-coastal mid-sized city, a household with multiple kids can easily spend $90-100K/year. Various taxes (income/property/sales) can run around $50K. You’d still have a bit left over unless

  1. You have to support parents (possibly more than one set)/relatives at $35-50K/year or more.
  2. You have a kid or two with health/special issues that always takes a big chunk of your paycheck.
  3. Your family had a medical emergency/large grad school debt/was out of work for a while and have a large amount of debt to pay off.
  4. You didn’t get to $200K/year until recently and was making little before (or divorced and got wiped out financially) so really haven’t amassed much in savings up to now and you’re past 50 so don’t exactly have many years left to save up even a small nest egg.
  5. Parents are divorced and the one with income won’t pay.
  6. Many kids, and you’re not spending $40K X double digits because you’d prefer not to die at work.
  7. Some combination of the above.
62

@Mom2aphysicsgeek That makes sense. I wasn’t meaning to imply anything with my question. It does seem yours is not the typical situation that the models were set up for.

63

Another thing too is, even if you do have $160K total (or $300K total or whatever) to spend per kid on education, I’m not at all convinced that spending it all on undergrad is the best investment. Especially since an Ivy-competitive kid can get some pretty good opportunities (now that there are a decent number of good honors colleges) in undergrad for cheap and there are masters programs at elite schools, M7 MBA programs (you can get merit money at some), etc. that also open plenty of doors. I’d prefer to preserve the optionality.

64

I’m actually puzzled that people making six figures cannot afford college tuition. As the single mother in a MCOL making low six figures only recently, I was able to pay for both my kids. Yes, one went to Harvard with lots of aid, but the other is costing over 40,000/year. Of course we have a small house and an old car, but we vacation, and the kids has all the CC extracurriculars plus.

Not only am I puzzled by inability to budge for college, but I am shocked at the jealousy of the poor. I’m impressed by any child from a middle-middle class home, (let alone a working class or poor home), who can compete at a high academic level. My children benefited from music lessons, tutors, sports opportunities, international exchanges, summer programs, etc. I want my children to see all sorts paths to success, and I understand that diversity costs, but is basic to our world.

I suspect the colleges know that there is more genius, ambition, and originality in the upwardly mobile than in the entitled.

65

Are the financial aid calculations perfect, no. However, in the vast majority of cases, if the family makes multi year commitment to make funding education a priority, the EFC is at least in range. Will it be painless, no. Will you starve, no. The problem is when a family first starts considering this cost in the last year of HS. If you have an EFC of 40k, they don’t expect you to free up that much cash in 4 years. Some of it should have been saved prior. You can’t have your BMW and eat it to.

66

I find your assertion “you can’t have your BMW and eat it to [sic]” snarky, condescending and offensive. Many families, like mine, saved $100k to help with college costs. That’s a lot of money for anyone; but still no where near enough to cover the EFC of 40k per year for each of our 3 kids ($480k). And for the record, we drive a 10 year old Toyota… we can’t afford a BMW, despite our ‘supposedly’ high income because we’re too busy trying to pay for college.

67

“Not only am I puzzled by inability to budge for college, but I am shocked at the jealousy of the poor.”

Huh? Where do you see this jealousy?

As someone who received a Pell Grant in my youth, I have zero jealousy for the poor. Staying awake at night because you don’t know if you’ll bring in enough income to provide for your small family of 3 (as my parents did) does not lead to a happy stress-free life.

But possibly because I grew up in those circumstances, I’m not terribly cavalier about spending. Even though I am saving a good amount in to 529s, unless I manage to get to a net worth that can ensure a comfortable long retirement for me and spouse, paying that extra delta between “good and cheap” and “elite but the cost of a house” all on undergrad is not something I’d be comfortable with.

68

First thing to remember is that those are the numbers of kids who have an SAT of over 1400. So, when we are talking about actual number or even percentages of the college students, there are fewer of the bottom 20% than there are of the next three quintiles.

That number, of course, is because the bottom 20% are considered URM, though, looking at the numbers, the entire bottom 40% should be considered URMs. However, as others have pointed out, kids from the second lowest quintile cannot be put on a college’s brochure as "X% Pell Grant students…

Overall, looking at the percentages, I would say that the missing middle is divided into two parts. One part, especially those between the bottom quintile, cannot be accepted since they lack ECs and other accomplishments, even if their SATs and GPAs are high. They and their schools can’t afford to train and send teams to athletic or academic competitions, the families can’t afford to have their kids be part of clubs, etc. They can engage in ECs, w\but when places like Harvard are looking for kids with national level prizes, and kid from a lower SES family attending a lower SES school won’t have those. A kid at the lowest 20% will get a URM boost, but not a kid from a family which makes more than that, but not by a lot.

When you get to the lower income levels which can afford these, other issues kick in, such as the fact that a family can technically afford the CoA, they cannot do so realistically. Even if they can, with loans, or by cutting their own costs, these are middle class families, and a basic middle class philosophy is that if you pay for something, it should have the values of the money or more. For most families in this income range, with high stats kids, there are college option which cost far less. Why should a family send their kid to Yale for $300,000 when they can send the kid to Arizona for nothing (and the kid gets money for books) or to UMN for $60,000?

Only at the top 10% does the cost of the tuition that a family has to pay no longer become an important issue, in general, compared to the prestige or social status that attending such a school provides.

Not to say that there aren’t lower income families who think that a $200,000 debt is worth it for their kid to attend Princeton, or tha there aren’t families who are in the top 10% who think that the money spent of attending an ivy would be better spent elsewhere.

Finally, just because the graph divides income to quintiles doesn’t mean that the the boundaries between actual income groups looks like that, or that there even are clear boundaries. A family which makes $135,000 a year is similar to a family which makes $125,000 a year, but very different from a family which makes $500,000 a year, even though the first is in the fourth quintile, while the latter is in the top quintile, like the family making $135K.

69

Probably many of those whose income has grown to $100k/200k/300k relatively recently also had spending creep that consumed all of their extra income, rather than continuing to live on the previous middle income of $50k/75k/whatever.

Someone making $100k/200k/300k but still spending like someone making $50k/75k is much less likely to be having trouble affording their kids’ college than someone spending every last dollar that they earn.

70

“Probably many of those whose income has grown to $100k/200k/300k relatively recently also had spending creep that consumed all of their extra income, rather than continuing to live on the previous middle income of $50k/75k/whatever.”

Or their lifestyle hasn’t changed but their family (and thus costs) have expanded and now that they actually have some extra money they’d prefer to save it and see it compound for retirement while before, they had effectively zero retirement savings.

Remember, even if you save $1M, at a 4% withdrawal rate, that only gives you $40K/year.

71

At the end of the day, IF you are a middle class family and it’s important to have your kid go to a Ivy League college then you plan for it early on and save when your kids are young and do it regularly. These colleges are some of the most generous with financial aid but you can’t solely rely on them to pay for your kids college education or bring the cost down to what YOU think is reasonable.

In addition, I find it interesting that some of the posters here complain about the high cost of attendance at some top colleges and in the same breath state that it doesn’t matter where you go to college…

72

Dont confuse statement of fact with complaining. I’m not complaining. I dont begrudge them charging whatever they want. I also have zero envy over attendance at an elite. Our kids have been successful by any outside measure graduating from their scholarship public Us.

So statements on both pts. Not projections of outcomes. Current knowledge.

73

Some people are missing the main point from the original linked research. The research isn’t talking about the cost of attendance driving away low and middle income families from elite colleges, though this is a valid conversation to have.

The main point of the linked research is that the elite colleges themselves are discriminating against low and middle income students who have similar academic profiles to the favored groups.

The article shows evidence that elite colleges are choosing to accept a high percentage of students who fall into one of two categories

  1. Pell grant eligible first generation students
  2. Full pay students
    while systematically penalizing equally qualified students who are just above the Pell grant threshold.

The full pay students, for obvious reasons, always get an advantage. The Pell grant, first generation - and often minority students - help college rankings. The majority of students in between, unless they possess a hook, are mostly out of luck.

Click the link, check out the data. https://www.insidehighered.com/admissions/article/2019/01/28/study-pressure-enroll-more-pell-eligible-students-has-skewed-colleges

It’s a separate and worthy conversation to discuss general affordability for middle class parents. This thread started with a post about skewed acceptance rates to elite colleges based up full pay and Pell grant applicants - the far ends of the spectrum of applicants - getting an admissions boost compared with the majority in the middle.

74

Actually, I expect they got in on their merits. Rob Lowe is a great actor but his days of being a major star are behind him. It’s not a big draw for a college to get Rob Lowe’s children the way it is to get a President’s children.

No doubt they had the benefits of wealth, but that’s available to non-actors as well.

75

I dont think people have missed the article’s pt. It is more that people who pay attention to how admissions actually works already assumed as much. When rankings started to be influenced by number of Pell recipients, colleges adapted accordingly to match to influence rankings. That was their motivation, not benevolence. They are businesses.

76

I feel that if you have a small EFC, and you are short 5-10K a year, your family could potentially make up that difference through part time jobs, driving UBER, etc.

But let’s say have an EFC of 20K; and the college says you need to pay 40K - its much harder to make up that difference. When you live in an area without high home values and equity - where do you find an extra part time job at 10-12$ an hour to make up that 20K a year? I feel like that margin for is much harder to make up for that 135K zone.

77

@NearlyDone2024: That chart doesn’t show acceptance rates. It shows matriculation/enrollment rates.

It doesn’t help that the article writer themselves confuse the two.

Though granted, if these are meet-full-need schools, the two rates should be similar (but who knows).

78

If you are getting a reasonably conservative 6% return per year, and assuming 2% inflation, a 4% withdrawal rate will allow the investment to grow such that it keeps up with inflation, so it is still worth today’s equivalent of $1M at the end.

But if that’s your retirement fund, you can certainly spend it down along the way. You can extract out about $72k /year for about 30 years before it goes to zero. Quite a difference.

79

@hebegebe: Market volatility as well as secular bear markets (sadly, there is no foolproof way of predicting whether your retirement period will coincide with one) means that if you use that 7.2% withdrawal rate, you better plan on dying soon as your chances of running out of money go up pretty quickly.

In fact, even 4% may not be a safe withdrawal rate if US markets going forward are more like international markets rather than the benign (relatively high return, low inflation, low vol) markets the US has experienced:
https://financialmentor.com/retirement-planning/how-much-money-do-i-need-to-retire/safe-withdrawal-rate/13192

80

Elite colleges are not only businesses, but they are name brands. They’d like to perpetuate their brand values. With the possible exceptions of Caltech and MIT, what could be better for building their brands than to enroll a bunch of students who already have family connections and are more likely to become leaders/influencers in various sectors when they graduate? The inclusion of some severely disadvantaged students on their campuses is primarily for optics and an effective way for these colleges to avoid more harsh criticisms. Can you blame them?