I’m not sure comparing rise in COA to the rise in the $ value is the most helpful in understanding why the coats have risen so much.
If you are trying to point out that a dollar doesn’t go as far in purchasing power as it used to - that is true across a whole realm of areas (food, electricity, construction, cars…the list goes on and on). Then take in the fact that colleges need to maintain, repair, replace aging physical plants (the campuses themselves), and both faculty and staff to run the place - the costs they run into also aren’t necessarily tied to how well the dollar has maintained value either.
School costs correlate more to those other issues (cost of food, cost of construction) than they do to what inflation has done to the value of the dollar over the last 25 years.
Please don’t take my comments as being an apologist for colleges. They can take care of themselves. But I don’t think a facile comparison between two things (COA and dollar) necessarily sheds a lot of light on why costs have actually been increasing.
The COA for the top 10 college I attended has risen from $36k/yr the year I graduated to just under $100k this year (30 years between those two numbers). None of my children even thought of applying to that school. They applied to schools I hadn’t even heard of before we started their college search; though that speaks more to my lack of knowledge of many LACs than it does to the quality of the schools they attend(ed).
We are a full pay family, and I don’t have any complaints about this. We’ve been very lucky. So saying, we weren’t willing to pay full price for school. I don’t disagree with other full pay families who are willing to pay full price; we all get to decide what we are willing to spend for an education.
Instead of trying to figure out if Middlebury (or any other college) is worth full price, I think more families should be deciding what they are willing and able to spend on an undergraduate degree and then find the schools that fit that budget. There are a lot of schools where students can get a very good to excellent education - without costing 10% of a $4 million net worth. We will get three children through undergrad (college class of 2024, 2027 and 2028) for less than that combined.
The fallacy here is assuming that they’ve had to SAVE $4 million. I’m going to guess that someone savvy enough to be earning a healthy salary (whether 300 or 400K or even 250K) doesn’t stash their savings under the mattress. It’s the run-up in value over the period of time which needs to be considered, not the careful tucking away of $25 a week in a Christmas Club account at the Savings and Loan.
I’ve heard this argument 100 times IRL. Mainly from people who paid $90K for a house which they could sell overnight- without even touching up the peeling paint- for $900K. And then find a nice (but not luxurious) condo in the same neighborhood for $450K. Boom- college costs covered. But they don’t want to “trade down” in their lifestyle- and who could blame them? Trading down isn’t as much fun as scaling up. But scaling up with each successive raise, bonus, increase in the market, runup in your IRA or 401K means fewer options to invest. And for the folks in the very high real estate markets- those “simple cottages” are now worth $2 million (looking at you in California and elsewhere) and the argument that you needed the fabulous school system in Atherton starts to weaken once the kids are graduated from those schools, and your job has been remote for the last five years.
I ran some quick numbers. $150k income @ 3% raises over 25 years would be $300k in today’s dollars. After tax take home pay, assuming 18% effective federal income tax rate, 7.65% FiCA (assuming dual income so not beyond wage base), and 7% state income tax. This is assuming no AMT or NIIT.
So after tax take home pay would be about 67%. In order to accumulate $4 million in savings, family investing in an 70/30 portfolio, with market gains over 25 years wouldve had to save about 35% of their disposable after tax income.
Im not counting real estate gains (which could be huge in certain parts of the country but probably not the majority.)
If you’re saving around 35% of your disposable income, these people are super savers.
There are many families where they live on the income of Parent A and invest/save the income of Parent B. I don’t consider them super-savers per se…. they aren’t eating beans and reusing their Kleenex. They just realize that there are plenty of people who manage just fine on one income- and so do they.
My point (which you nicely confirmed with your math) is that nobody is being asked to “save” $4 million dollars over the course of their marriage. The market run up did the hard work; all they had to do was to engage in some basic financial planning (dollar cost averaging? no-load mutual funds?). And we aren’t including the value of company held retirement funds- if they have them– which could be quite significant.
I’m sure there are people who are saving and sticking under the mattress. I have no advice for them except to suggest that they understand the impact of inflation on a dollar. And that the FDIC does not insure your mattress whether from theft, fire or flood.
With the boarding school parents, I wonder if in retrospect, they wish that they had sent their children to public school instead of a boarding school and thus saved the 250K for college expenses? I am a huge fan of independent schools and I think there is an argument to be made that paying tuition in the K-12 years is a better use of the funds since it can prepare a kid to succeed anywhere. Nevertheless, I can imagine some parents feel tapped out after spending so much for secondary (or even elementary) school and now they are faced with four more years of even higher tuition payments.
These complaints aren’t coming from the generational wealth crowd. OP is frustrated looking down the barrel of $90k a year and wondering, “Is this truly worth it for a BA?” Did OP’s child ED and found out? Dunno, I’m just here to tell them that they are asking an extremely fair question.
One of the things that I am finding confusing here is whether the OP and others think that these donut hole families should be eligible for need-based financial aid –in other words, is the concern that financial aid is not available to high income families with high assets (even at the most generous colleges like Princeton, which are providing grants to families making 250K)? Or is the concern that 90K is too much tuition to charge for a BA –that is a BA from Middlebury or other similar elite schools is not worth that much money? And that makes me wonder if (as suggested) these colleges are driving many wonderful students away because of the costs, what would an appropriate remedy be to lowering tuition costs?
Right. But these people are not living “expensive lifestyles”. You literally cant live an expensive lifestyle on that income level and accumulate $4 million with normal market returns.
There’s a huge difference between once a week pizza night and an occasional family dinner out vs flying business class to Austrialia.
And by definition, people saving 35% of their disposable income are super savers.
Any college not named West Point (or the other military academies) is “driving kids away” due to the cost. Why are we only worried about the affluent kids who have grown up with significant advantages (healthcare, nutrition, etc.) and not the kids in the trailer park (some of whom ARE in fact, intellectually ready for college) who have not had these advantages and will end up getting a certificate to work as an LPN instead of the Bachelor’s degree which might open many more doors?
I’ve served on the board of a “last dollar” scholarship fund. The kids stories are heartbreaking. We would only consider applications from kids who have already applied for/gotten every single grant and loan for which they qualified. So these kids already have Pell, any state program, maximum federal loans, etc. But that gap- these aren’t kids who can borrow $1K from an uncle for lab fees and student health insurance, or kids where Mom can just “trim” to find that $500 needed for a bus ticket, winter coat, and first semester books.
So yeah, colleges are ‘driving kids away” due to cost. I’d argue that the kid whose parents could afford to pay for Middlebury but choose not to is in much better shape long term than the kid who keeps their job at the Waffle House for another year to save up for the state directional U or Community College- the two cheapest options in their state.
Well, I am not personally worried about affluent kids. I am not even worried about my own kids who are the opposite of affluent (think full pell grant), but I think are super privileged. But I am trying to take the original question seriously and offer thoughtful/respectful ideas that address the OP’s concerns. So most of my questions are trying to clarify what is at the heart of the issue. I guess that as far as I can tell, it not really about net worth. It is about the COA of private colleges and universities, which is very high despite the subsidy that all students get
Again just to give some numbers. Top 10% household income in 2000 was about $108K, in 2025 about $251K. That’s again a significantly higher increase than the consumer inflation rate, but in this case, the full COA increase for Middlebury is now higher total, not lower total, than the top 10% increase.
Given what I previously reported for 2016-2025, this implies the relative increase is packed into the 2000-2016 timeframe–which is correct. Middlebury’s full COA increased from about $33K in 2000-01 (that’s the number I am seeing) to about $64K in 2016-17, which works out to about 4.2% annualized. Top 10% income going from about $108K to $162K in that time is about is about 2.6%. That explains a lot of why even families at that level perceived full pay colleges as getting increasingly uncomfortable to afford, although again there is an important wrinkle here about increases in luxury/discretionary resources probably going up more similarly to the Middlebury rate, since base/non-discretionary expenses were largely only going up with consumer inflation.
Anyway, then from 2016-17 to 2025-2026, I have Middlebury up an annualized 4.4%, so not much different, but top 10% incomes up about 5.0% annualized. So they are clawing back.
This is what I mean about it having been a good period recently for both upper level incomes and upper level assets. We’ll have to see what happens next, but historically upper level incomes are more sticky.
You don’t have to live in very expensive Atherton to attend Menlo-Atherton High School, whose attendance area includes less expensive places like East Palo Alto and part of North Fair Oaks, or Menlo School, which is private.
$150k 25 years ago or $300k now is likely substantially higher than the median income everywhere in the US. If the family spent like a median income family, would they have been able to save 35+% of their disposable income?
We’re talking a small subset of American society who has accumulated enough wealth to be expected to pay 100% of their college costs whose finances will be substantially impacted. Yes, it is a choice but it still exists.
I note I can personally attest that if you have a college-aged kid in 2025, and were paying attention to what people were saying about future college costs around when that kid was born, you were in fact warned that it looked like college costs were going up faster than inflation. Indeed, that had been going on a long time by then, and then there was an acceleration starting in the early 2000s that was well-established by the late 2000s. And there were calculators and such available showing what you would have to save to end up with where those costs appeared to be heading.
Of course many families looked at those numbers and didn’t have it to save. But unless things radically improved for them in subsequent years, they aren’t full pay now.
Those at the time who were likely to end up full pay, on the other hand–I agree we usually had the means to start saving for college as per the calculators, and that in fact it has worked out pretty much as those calculators suggested.
Of course if you had the means to save for college like that but chose to do other things instead, that’s not necessarily bad parenting. But as you are saying, it was in fact a choice, and I do believe we were fairly warned about the consequences of those choices.
As an aside, I think part of what this hypothetical shows is 70/30 is too conservative for a long-term accumulation portfolio. But that’s a whole other story.
Another issue is if you used traditional 401Ks and such, then some savings were pre-tax.
To answer your question, though, back of the envelope–in this hypothetical you have $300K pre-tax, $200K post-tax, and you are saving $70K of that (again, we’re just ignoring likely some of that being pre-tax). You have $130K left to spend on consumption expenses.
Median household income is only like $84K pre-tax, so you already have a lot more to spend net of taxes AND massive savings than the median household even makes. I believe median post-tax income is around $72K, and then let’s give them a more modest 10% savings rate, say $7K total, and that leaves them right around $65K, half of what you are spending.
Of course your peer group probably isn’t made up of median households. But the answer to your question is basically that a household at that income level can afford to save on the order of 10 times as much ($70K to $7K), AND also spend twice as much ($130K to $65K) on everything else, as compared to what is realistic for median households.
Which is often what they do, basically. Accumulated savings has a much wider spread than income, and it is largely because higher income households can have much higher savings rates which then compound over time into very large differences in accumulated savings.
So of course I included that caveat because there are cases like that, which can include recent immigrants and also other cases.
However, of course aid formulas consider both assets and incomes, and if you actually only recently have higher incomes and don’t have much assets, you can be in the higher part of the aid range for your income category.
I actually just tried Middlebury’s NPC and did a hypothetical where the parents had $300K in AGI, $75K in federal taxes, but absolutely no assets, including no home. I got a Net Price of $59,456, and a Middlebury Grant of $33,900.
For simplicity, keeping a 25% federal tax rate, I zeroed out right around $400K in AGI. This is top 3%-ish territory.
OK, so yes, if you recently joined the top 3% with no assessable assets accumulated, you could nonetheless still be full pay. And that’s going to describe some households, but necessarily not many.
Honestly, “net worth” is not a number I use very often, precisely because it is so dependent on definitions.
Realistically, though, if you know what you are doing, you are likely going to be able to get some pretty shockingly low marginal tax rates during retirement even with relatively high amounts of spending money. RMDs might eventually force you higher, but then people do Roth conversions during the low marginal rate years to try to blunt that effect.
Bottom line is at least for the highest income families, usually their marginal rates are much higher when working and saving than when retired and no longer contributing to savings, and so the traditional 401K/IRA structure very much works out in their favor.
I would think though, if you recently joined the top 3%, it is a reasonable assumption that your spending should be fairly low because you haven’t had that income for very long. So, you should have a large amount of unallocated income that could go towards college costs.
Unless we are saying that people who reached top 3% of income should be assumed to immediately start spending toward the upper limit of their new income as soon as they get it - which again is a choice.