I'm completely obsessed with student loan debt. (Yes, I have issues.) Some people collect dolls or first edition books. I collect numbers related student debt. Here's some old and new numbers from the New York Times, which talks about how prospective home buyers have been turned down by mortgage lenders due to high student loan debt.
- Outstanding student loan debt now totals over $1 trillion, according to a report last month from the Consumer Financial Protection Bureau. That surpasses the amount owned on all credit cards in the United States.
- Last year alone, students took out $117 billion just in federal loans.
- Why? According to the College Board, the average annual cost of out-of-state tuition, room and board at a public institution is $29,657; at a private nonprofit, it is $38,589.
- Impact? Many first-time buyers get turned down for mortgages because their student loan debt significantly raises their overall debt level. Most lenders follow underwriting guidelines that limit total debt payments — for the mortgage and property taxes, plus credit cards, student loans, car loans and other debts — to 45 to 50 percent of a borrower’s adjusted gross income.
UPDATE: More on Student loan debt from James Poulos, Conor Friedersdorf, and the Economist.
Apt. 11d 
I realize this is a side note to your main point, but I’m more worried that you can still borrow up to the point where your payments are 50% of gross income than I am about student loans. I thought that was a feature of the bubble that had ended.
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MH,
That is a very good point. If your income is cut in half at that point and you have no significant cash reserves, the choice has to be made between the mortgage and actually living, and reasonable people are going to choose living.
I think it is important to recall that those student loan averages cover a vast number of different situations, for instance: 1) people who only went a couple years and dropped out 2) people who graduated with moderate loans 3) people who graduated NYU with $90k in debt 4) law grads 5) doctors or other sure-thing medical folk. The impact of various amounts of debt is totally different depending on the particular situation. Doctors, for instance, may be carrying a disproportionate amount of US student loans, while being at the same time disproportionately able to carry the load. Likewise, a low-income person who is carrying debt for their one or two years of unsuccessful college may be in a very desperate position even if the total debt load is moderate.
I’d also note that 1) a lot of student loans were signed (or co-signed) for by mom and dad (hence the headlines about people going into retirement with student loans and 2) since I was in college in the 90s, there’s been a weird shift toward paying for living expenses with student loans. You have to actually poke around a bit to see if the high college tuition is at fault, or if something else is going on. I was weirded out the first half dozen times I heard of people living off student loans (Octomom was doing that for a while), but I now collect the stories. Some friends used to vacation on their student loan money when they were young and foolish and a guy I know once had a student who bought a (not cheap) horse with her student loan. In some ways, it’s a parallel to the situation with home equity loans. Those used to be just for very limited purposes (like urgent home repairs), but by the end of the bubble, you had people sucking the money out of their houses for basic living expenses, like a snake eating its tail. Not to sound like somebody who says “Get off my lawn!” a lot, but back in the day, even if tuition was out of reach, it was certainly true that an undergraduate could pay for a huge chunk of living expenses by working.
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If you’ve borrowed $25,000 for tuition, an extra few thousand to live nicely probably doesn’t seem like a big deal.
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I ran up student loans in grad school as living expenses. Stupid, but I didn’t have a heck of a lot of options, not being Mitt Romney and thus not able to borrow money from my parents.
My question is how many of these student loans are for for-profit colleges? Do you have data that breaks down the info that way?
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Again with the math, but “$117 Billion” doesn’t really mean a lot to me. I certainly couldn’t pay back a $117 billion loan, but 117 million college graduates could probably all pay back $1,000. I feel like I see a lot of aggregate Dr.-Evil-like stats “a TRILLION dollars!” and a lot of really scary anecdotes (“Anna graduated with $250K in debt and a degree is macrame. Now she is an unemployed macramist . . .”) But where are the individual statistics?
This is what I found:
Click to access Trends-Who-Borrows-Most-Brief.pdf
Honestly, I have no idea if “The College Board Advocacy and Policy Center” are extremist ideologues or policy wonks, but they gave me a chart with the numbers I was looking for, so that’s Plus One for them.
On Page 2 of the PDF, it looks like half of all people with a bachelors degree graduate with $5,000 or less in student loans. The 90th percentile had $30,900 in student loans, which is a good chunk, but honestly doesn’t strike me as terribly high.
Looking only at students who graduated with debt (so, excluding the 41% who graduated without), the median level is $15,100, and the 90th percentile is at $38,900.
So, putting aside the Billions and Trillions, how much student debt is “too much” for a college graduate to be saddled with? Is the upper limit $30K? Then maybe we should just promote policies that limit undergrad debt to $30K (this will mostly effect “Independent Students” who are older and no long their parent’s dependents.)
If it’s higher, then maybe there is no problem at all, and if it’s lower, then I’m not sure who should pay the difference. Honestly, these number make it seem like the “graduated with tons of college debt” people are extreme outliers. But I’m open to being convinced that I’m missing something.
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Wendy — the bottom of page 4 of the PDF I posted separates out Private, For-Profit schools. They define “high debt” as $30,500 (I don’t know where that cut-off comes from, but it seems like as good a starting point as any.) Looks like it doubles at each level — 12% of public college grads, 24% of private, non-profit grads, and 53% of public, for-profit grads.
Also, it looks like I mis-stated a couple of my numbers above, which was for “all degrees and certificates,” not “bachelor’s degrees”. The median bachelor’s recipient had $11K in debt, and the 90% level was $39,300. My overall point above doesn’t change much with these numbers, except replace “$40K” for “30K”.
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I with Ragtime in that I’m having a hard time assessing how big of a problem this really is. Certainly everyone would prefer to graduate without loans, but if you have to take them, $15k or even $30k doesn’t seem like that much to me particularly when the average person doesn’t seem to think twice about spending that amount of money on a new car. Education is certainly a much better bet than a new car. I do think students would benefit from counseling related to loans: work-study that could supplement loans, grants, scholarships, what their payments might look like if they paid them off in 5, 10 or 20 years, etc.
I finished graduate school with $45k in student loan debt. A good return on my investment? I don’t know. I do know that the payments haven’t felt burdensome and that I’ll have them paid off in the next year, eight years after I made my first payment. When I finished grad school and got my first job my salary was exactly the same as my total loan amount and I’ve heard that as a good rule of thumb for students.
I don’t think the problem is student loans in isolation, it’s student loans combined with the expectation of new cars, a nice house, vacations, being able to stay home with your kids and live comfortably, etc. That lifestyle isn’t available to the vast majority of people but a lot of college students don’t seem to know that.
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Ragtime said:
“Honestly, these number make it seem like the “graduated with tons of college debt” people are extreme outliers. But I’m open to being convinced that I’m missing something.”
I don’t think you are. I think hyper-debt for undergraduate (mid-five figures and up) is totally avoidable. Maybe it’s time for some mean, shaming PSAs like they used to do for smoking?
Wendy said:
“I ran up student loans in grad school as living expenses. Stupid, but I didn’t have a heck of a lot of options, not being Mitt Romney and thus not able to borrow money from my parents.”
Neither my husband nor I have Mitt Romney for parents, but neither of us had student loans per se for graduate. He had a Canadian fellowship for much of his time and I had a FLAS (foreign language area studies) fellowship for one year and then normal TAships and we lived in low-cost Pittsburgh, which helped a lot. We did, admittedly, get the occasional plane ticket home from family and had about $10k in credit card debt by the time he finished, which is not ideal, but that level of consumer debt is unfortunately not uncommon among people in their late 20s.
You don’t have to be freakishly wealthy to get through graduate school without major borrowing, at least as long as the local cost of living is low.
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2 things:
If you graduate at 29 with student loans from grad school and spend 8 years paying off — but also have your first child when you’re 30, there’s at least seven years when you’re not saving for your child’s education, and there’s also just something horrifying about the thought that you start borrowing money and paying it off when you’re 17 and finish when you’re in your 50’s or 60’s if you help kids or grandkids with college. Is it actually reasonable to expect people to spend even ten or twenty percent of their salary on education FOREVER? How can anyone argue that it makes financial sense to go to college when one is looking at that kind of debt in perpetuity. It does feel like indentured servitude.
I have students who borrowed money for living expenses in undergrad and grad school and who are now going on for PHD’s — meaning they have been living on borrowed money for 10 years. Doesn’t seem wise, somehow. (There’s also the puzzle that the people with the BEST grades, CV’s and BEST prospects for a successful future as an academic are the ones getting PAID to go to grad school via fellowships, etc. whereas the ones who are least able are the ones borrowing the money and gambling on being able to pay it back — least likely to get a full time tenure track job equals most likely to need one. Gotta wonder about the logic there.)
I have students now who are graduating and being offered government jobs that pay less than 50 K, who are wondering how they’ll be able to swing paying off the loans on that money. There’s one student I’m really worried about because she owes all this money and she’s a newlywed and I know she won’t EVER be able to afford to stay home with the baby because she owes all that money. (When you’re borrowing it at the age of 18 and spending it at Starbucks, you don’t think about the fact that you’re going to want to be a mom when you’re 30 and you won’t be able to afford to.)
It’s a house of cards — if you’re leveraged like this and you’re 30, you’d better pray you don’t ALSO end up with infertility, cancer, a car accident, etc. because there’s no cushion.
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So Chart 3 of the Ragtime link (which comes from the College Board, btw) says that 12% of public BAs, 24% of private/not-for-profit BAs, and 53% of private/for profit BAs have debt of over $30,000. That’s a shit load of money. Especially because most of those kids are going to end up with some unpaid internship after college and not a real paying job. Also, that number is just the tip of the iceberg. Parents are paying for college using their retirement money and home equity loans.
Grad school debt is a whole different kind of insanity. I have friends who left grad school with a Phd in the liberal arts who owed $90,000+.
Also, another missing piece of this puzzle is credit card debt. Lots of people are paying for living expenses in college and even their tuition with credit cards. Stupid, but true.
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Another problem with that College Board data is that it only looks at kids who received their BA. It does not include the many, many kids who go to college for a few years and never finish.
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Also, that number is just the tip of the iceberg. Parents are paying for college using their retirement money and home equity loans. . .Also, another missing piece of this puzzle is credit card debt.
Probably so. I’m at a loss, however, to even begin to think about how to “fix” the problem. You could attack the student loans. But capping student loans won’t work if it will just push more people to use high-interest credit cards instead.
You could attack the schools, but then if you are closing down for-profit colleges, then you end up with fewer graduates along with lesser debt.
Or you could attack the students — essentially do nothing an allow students who take out lots of debt to suffer the consequences.
I guess I can see the point of “students should have less debt,” but I’m not seeing any path to get there that doesn’t make other problems worse.
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A friend recently told me she was perplexed that other friends wouldn’t take out loans so that their child could attend the Berklee College of Music to study composition (with playing the viola as a backup plan). She felt that one had an obligation to provide your child with the opportunity, and that the other parent’s priorities were mixed up (’cause they paid off their house mortgage instead).
It struck me that this is a common feeling in the middle class, that parents owe their children an education that allows them to live have a chance at their dreams, even if they’re not Mitt Romney.
I understand the feeling (as someone who is arranging to drive my kids 60 miles a week so that she can play basketball and paying big bucks for private school). And, I think what drives parents/children over the bend is that they all want to provide those experiences for their children, and though I’m quite comfortable not having a second house or driving another car, I’d feel bad, too, if I had to deny my children opportunity.
It’s a tough business, and I fear, is prone to create even more continuing divisions in society.
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Shorter version: If my kids wanted to go to Berklee College of Music, they could, and they wouldn’t have to take out loans, and if in the end, the backup plan of playing the viola for a living didn’t work out, we could still support them while they went back for some other degree that might result in employment. But, not every kid has this opportunity. So, do only the privileged kids get to play the viola?
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It’s just plain disgusting that for profit four-year colleges leave most of their students with more than 30K in debt. Disgusting and unjustifiable unless those students are skating straight into jobs that directly require their degrees. It’s crazy that we’re talking about measuring the “effectiveness” of public four-years when that’s the comparison point. There’s no evidence here at all that allowing for-profits into the system produces a better marketplace.
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“If you graduate at 29 with student loans from grad school and spend 8 years paying off — but also have your first child when you’re 30, there’s at least seven years when you’re not saving for your child’s education,”
I can only speak to my experience but for us it hasn’t been an issue, and we’re well-paid but don’t make an obscene amount of money ($120k most years). Since I finished grad school at 27, seven years ago, we’ve bought a house, had two kids, had two kids in daycare, had two kids in daycare AND preschool, saved for retirement, saved for their education, bought and paid off a car in a year, accelerated payments on my student loans, saved outside of our retirement investments.
What have we given up? We live in a small house in a crappy neighborhood, we have one car, we don’t rarely take vacations and never ones that involve flying, we don’t buy new things.
So I think it is possible to have student loans and save elsewhere, it’s just not possible to be financially sound with student loans AND to enjoy a high level of personal consumption. That’s why I don’t think student loans on their own are a problem; the problem is excessive student loans along side additional excessive consumption.
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(with playing the viola as a backup plan)
I’d assume that was somebody making a very dry joke.
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“A friend recently told me she was perplexed that other friends wouldn’t take out loans so that their child could attend the Berklee College of Music to study composition (with playing the viola as a backup plan)”
Going off what Louisa said, unless the kid is a total superstar, she (he, whatever) probably won’t be self-supporting as a musician. And if she were a superstar, she’d get a nice scholarship, so the loan wouldn’t be necessary. So, in effect, if the parents borrow to pay for this music school, they are dooming themselves to supporting this child for life.
Some near relatives poured vast resources into their daughter’s music and have had zero to show for it. There were complicating factors, but I still think you’d better be ridiculously well-off (i.e. Mitt Romney) before you send a child to conservatory. If you have to borrow to send a child to conservatory, you can’t afford it.
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“There’s no evidence here at all that allowing for-profits into the system produces a better marketplace.”
There are some sticky details with public colleges (both CC and four-year). For instance, course availability. If you need a course for your program of study, it may not be there when you need it. There are bottlenecks in the public system.
“([Public] Colleges can) raise prices, which creates new inequities, or don’t raise prices and perpetuate huge waiting lists for courses. In practical terms, as Nate Johnson of Postsecondary Analytics notes, when students eager for education are shut out of community-college courses, they tend to enroll in for-profit colleges, where they pay far more per credit than the proposed expensive tier at Santa Monica. Many students exit these for-profit institutions with few marketable skills.”
http://communitycollegespotlight.org/content/community-colleges-face-catch-22_8973/
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“There are some sticky details with public colleges (both CC and four-year). For instance, course availability. If you need a course for your program of study, it may not be there when you need it. There are bottlenecks in the public system.”
Yes, that’s why we should take the money we now use to subsidize loans to private colleges and give it to the community colleges to offer the courses the kids need.
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(with playing the viola as a backup plan)
“I’d assume that was somebody making a very dry joke.”
Amazingly, it wasn’t.
I agree with all of you that taking loans to go to Berklee is a bad idea and said that in the conversation. But my heart also understands the sadness of not being able to give something like that to your child, the child who is an amazing musician (who still probably won’t be able to make a living at it) and I can see going into debt to do it, even knowing it’s not rational. Saying you shouldn’t, when you don’t have to, is a little bit like telling an overweight person they should eat less. Easy to advise but hard to follow.
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As scantee said, loans are a matter of priorities. In scantee’s report, the loans made the education possible, and they took them with the expectation that they would have to downgrade their consumption for a number of years, and were willing to do so, while still hitting the money goals they thought important (house, kids, savings, . . . .). Those who advocate against student loans want kids to sacrifice now so they can consume more later.
I think it boils down to having a realistic plan for paying off what debt you’re planning on taking (and understanding that playing the viola isn’t it).
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Another problem with music is injuries. I’ve met and heard of so many people who were promising young musicians and then had to abandon it and change course after serious injury (often caused by over-practice). It’s as bad as sports that way, but fortunately nobody is spending six figures on the possibility of their child becoming a professional athlete.
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“…fortunately nobody is spending six figures on the possibility of their child becoming a professional athlete.”
On second thought, there’s probably somebody doing it, but it’s a bad plan.
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I’m thrilled that lenders aren’t willing to give out mortgage loans to people at significant risk of defaulting. It makes sense to me that people should be paying off their debt before going into more. Is this supposed to be a bad thing?
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“It’s as bad as sports that way, but fortunately nobody is spending six figures on the possibility of their child becoming a professional athlete. ”
You’ve clearly not been hanging out in the right places to see the student athlete industrial complex. Lots of people spend six figures on the possibility of their child becoming a professional athlete. My kid has no such dreams, but have spend a sum I would have not imagined for my kids’ basketball and I just encountered a whole large group of people who clearly have such fantasies (and, this is for girls, where professional athlete doesn’t even win you a lottery).
What drives even the somewhat sane parents is that the possibilities seem endless the kids so hopeful.
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“You’ve clearly not been hanging out in the right places to see the student athlete industrial complex.”
Yep.
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Well, ftr, we did live in a low-cost area and I still took out loans. 😦 No new cars, no crazy vacations, no drug habit. I think our apartment was a *little* more than we could afford, but the plus side was location near campus. My dad declared bankruptcy while I was in grad school, so no help there. The first thing I paid off when we inherited money was the student loan debt.
It’s funny–one of my old HS friends plays viola professionally. Looking her up on Linked In–she freelances and teaches as an adjunct and lives in NYC (which means she probably has a lot of freelance opportunities). Don’t know her partner status.
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Your links smell of nasty libertarianism, privileged adult kids saying that their student loans (obtained at Pomona, NYU, top-20 law schools) are teaching them a valuable lesson in responsibility, and so we shouldn’t do anything about the debt burdens of PTSD-affected veterans who got suckered into taking on significant debt to pay for the for-profit we take your money and run college should have to learn their lesson, too.
As usual, the government loan debate is ugly sausage (I don’t know that keeping the interest rates low is the way I’d go — I’d allow the debts to be dischargeable in bankruptcy (potentially with special rules), and then use those bankruptcies to limit the loan availability to the schools that sold those degrees, or some more convoluted plan like that). But I don’t see tough love as the simple answer (though it should be part of it, in the form of limiting access to the debt).
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Scantee said:
“I can only speak to my experience but for us it hasn’t been an issue, and we’re well-paid but don’t make an obscene amount of money ($120k most years).”
That’s a best case scenario. There are a lot of worse ways for it to turn out (don’t get a tenure track job, don’t get tenure, spouse gets laid off, spouse can’t get reasonably paying job in podunk college town, etc.). The same loans that are tolerable at $120k a year are monstrous with half or a third the income.
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That’s a best case scenario. There are a lot of worse ways for it to turn out (don’t get a tenure track job, don’t get tenure, spouse gets laid off, spouse can’t get reasonably paying job in podunk college town, etc.). The same loans that are tolerable at $120k a year are monstrous with half or a third the income.
Certainly. It’s not that I think that student loans are problem free it’s that I think they’re less of a problem than other forms of debt, particularly consumer and mortgage debt.
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One of the best ways of limiting one’s student loan burden is to not attend an expensive college.
When I was in high school, I was admitted to Kenyon College. I really wanted to attend their creative writing program, which is one of the best in the country. The college wanted me to attend. My admittance letter had a hand written note saying that they really loved my essay. They gave us some money, but not enough. So, I went to SUNY Binghamton instead. My dorm was full of other students who were admitted to elite colleges, but their parents could not afford the tuition. What terrible things happened to us? Nothing. We got a fantastic education at Binghamton for a reasonable cost. I worked in the dishroom in cafeteria to earn spending money, and actually had a great time doing it.
What should be done?
1. Parents and students should be better customers. There should be more transparent information about college costs, graduation rates, average student loan debt, quality of classroom experience, and other factors to help student become better shoppers.
2. Colleges should do a better job booting out marginal students who have no hope of graduating. They should give students a yearly total of their financial burden, along with a breakdown of expected monthly bills.
3. We need to create an environment where colleges compete to provide students with the best education at the cheapest cost. Again, the way to do this is through public information and a new ranking system of schools.
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I think part of what makes them so cumbersome is that you can never escape them, no matter what happens in your life. So consumer and mortgage debt can be discharged for people whose lives fall into dire enough straits that they declare bankruptcy, but even bankrupt people will never be able to slip out from under their student loans. Also, students and parents alike took these loans out when they had no idea how sour the economy would go, most of them. I wonder if we had called this a Depression, instead of a series of “bad slumps” or “terrible recessions,” we would be having a different conversation.
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I guess what amazes me about this discussion is the idea that two adults get great educations, do well in school and earn 120K and then get to live in POVERTY, in order to be able to afford to do the same thing for the next generation. I don’t think it’s unreasonable for a couple earning 120K to expect NOT to have to live in a crappy house in a bad neighborhood.
Have you ever watched Mad Men? Have you ever noticed how back then when someone was an EXECUTIVE — it meant they had a really nice lifestyle? A new house? a car? a secretary — who dropped off their dry cleaning and answered their phone and made their travel reservations?
Yes, I know that that lifestyle was balanced on the backs of minorities and women and so forth — but I can’t help but feel that our generation has been cheated. We work our butts off — and we NEVER get to have a secretary, or a office (vs. a cubicle) or a vacation on an airplane or a new car or the house in the good neighborhood — even though we might have master’s degrees and smarts, etc. Instead, we get to work our way through college and grad school, and then we get to scrimp and save to pay off the loans, and then we get to scrimp and save to pay for college — so that our kids can wor their butts off in college and grad school and scrimp and save, so that their kids can . . when does it end?
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For me, it doesn’t feel like we’re giving up that much or that we’re missing out on the middle-class lifestyle of years past by prioritizing saving over consumption. Consumption is way overrated. Eventually, soon even, we’ll move to a bigger house and we’ll be able to take a vacation every year but I don’t think we’ll necessarily be much happier when those things happen.
There’s a lot of talk among professionals like us about how a $100k or even $200k a year income isn’t that much money. It’s certainly not a fantastic amount of money but I feel it’s an income that puts us out of the regular middle-class and provides us with a stability that the average person doesn’t have the privilege to experience. I don’t know. Generally I feel unbelievably lucky about how fortunate we are.
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I have a house in a good neighborhood, but it’s kind of small, and an office with a door on much less than 120K. I think most of the problem is everybody wants the nice house in the same three or four cities. Of course, fewer people have secretaries these days for the same reason that fewer farmers have horses. Most of what secretaries did can be done faster by computer. It is nice to be able to put some tasks on a secretary, but without the need to type and file, 95% of the job is gone.
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Jackie said:
“So consumer and mortgage debt can be discharged for people whose lives fall into dire enough straits that they declare bankruptcy, but even bankrupt people will never be able to slip out from under their student loans.”
Right. Although if you become disabled or if you are only living on Social Security, you may be able to legally escape. Woo hoo!
Louisa said:
“I guess what amazes me about this discussion is the idea that two adults get great educations, do well in school and earn 120K and then get to live in POVERTY, in order to be able to afford to do the same thing for the next generation”
Yeah–but with good retirement savings, it sounds like. So it may look poor, but there’s good stuff happening that you wouldn’t be able to see just looking at the car or house. I think that’s actually rather typical–these days, the stuff that makes an upper middle class family comfortable is invisible to outsiders: their insurance policies, their savings and their retirement.
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I should clarify that our household income is $120k for two people with professional jobs. I don’t make a $120k salary on my own!
Admittedly, I have different priorities in how I spend/save than a lot of people. I’m hoping to semi-retire in the next eight to ten years and to do that I really need to focus on saving, paying off all debt, and keeping our family’s consumption low. I realize this path isn’t for everyone and I don’t expect people to live exactly as we do but I do think there is value in promoting happiness outside of buying stuff.
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Interesting perspective scantee. Do you ever look at the website Mister Money Moustache? He and his wife retired at a very early age through living frugally. He has A LOT of followers!
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Do you ever look at the website Mister Money Moustache?
I sure do! He’s been a big influence on my decision to make a go at early retirement.
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I have been reading a lot about colleges and, in particular, college debt lately. It is something that we are going to have to deal with personally in 7 or so years (when our oldest goes off to college) so I have been getting my head start on preparation and planning.
The thing that has struck me is that, if everything works out like it is right now, we will be making enough money/have enough money saved to pay for our children to attend college without very much trouble. And, yes, I get how lucky that makes us. However, in order to be able to do that – we live lives very unlike those of other people making the same amount of money. And, most likely we will still be pushing our children to apply and attend very good “strategic” schools (that offer the most merit money) rather than the most “prestigious” schools – very few of whom offer any merit aid – as we know there is no way we will ever be considered eligible for need based aid.
We have the tiny house, one car and not very many consumption toys. if any. Most of our friends and acquaintances probably believe that money *is* an issue for us because our lifestyle is so out of proportion to theirs.
It sounds like our lifestyle most reflects the same one that scantee is living (though at a slightly different price point). It is not one that anyone would point to in envy. And that is the rub.
To really be able to afford college now ($60K in tuition/R&B/fees) if you make an affluent salary (>$100K) – you really need to be living a non affluent lifestyle. There are EFC calculators that you can use to estimate your expected family contribution for college. When I plugged our numbers into the EFC calculator – I found that our expected contribution was within a couple of thousand dollars of what we have available “to save” each year currently. But, as I said before – what we have to save currently is based upon a consumption lifestyle that conservatively is 1/3 that of our socio-economic peers. That is the only reason that college looks affordable to us for our children – because we are spending such a tiny amount in relationship to what others are spending with the same take home salary.
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Regarding Mad Men, fantasy entertainments aren’t really good guides to how people actually lived. To take some counterexamples: Wilbur (on Mr. Ed) didn’t have a secretary, I don’t think Jim Anderson had a secretary, and Ralph Kramden for sure did not have a secretary. Correlatively, Miranda Priestley gets two secretaries, who do all her personal errands, and she is only in publishing. Imagine how the investment bankers live!
For me, a better guide (which I might have mentioned before) is Norman Rockwell. Do people remember that print “Freedom from Fear”? Here’s a middle-class couple (the father wears a tie), and children of the opposite sex share sleeping quarters, and it isn’t even a real bedroom. No middle-class family lives like that now.
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“…Here’s a middle-class couple (the father wears a tie), and children of the opposite sex share sleeping quarters, and it isn’t even a real bedroom. No middle-class family lives like that now.”
It might possibly be an upstairs bedroom with the door open. On the other hand, there are definitely two kids in a single bed, which would be very rare in a tie-wearing household of today. (That’s 1943.)
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To really be able to afford college now ($60K in tuition/R&B/fees) if you make an affluent salary (>$100K) – you really need to be living a non affluent lifestyle.
See, I think of a private college, the way that you think about a Mercedes Benz – nice, but a Toyota will get you to the same place. Actually, I got a better education at a state college than my best friend who majored in drugs and boys at Harvard. True fact – it is very hard to fail out of Harvard.
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“See, I think of a private college, the way that you think about a Mercedes Benz – nice, but a Toyota will get you to the same place.”
I think you’re right. But, people still buy Mercedes Benz’s. Thinking about it, reading books about Harvard’s definitely giving me the impression that it’s a Mercedes (i.e. not worth it).
But, I really like my Lexus (maybe Columbia? or Stanford?).
The key, though, is just because your EFC is a certain number doesn’t mean that you can go to college just paying that (or should). I’m reading on College Confidential about the loans that go into meeting that number (from many schools), which is money that you have to pay. It’s different if the school wants to give you a discount, but if they want you take loans, that means you’re paying the sticker price (or more of it) and not the “EFC”.
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bj said:
“Yes, that’s why we should take the money we now use to subsidize loans to private colleges and give it to the community colleges to offer the courses the kids need.”
I was poking around at Joanne Jacobs’ CC site (what a fantastic niche blog!) and found something you won’t like.
“Community colleges will rely on tuition, not state and local funding in the future, leaders said at the annual meeting of the American Association of Community Colleges.
““My own college behaves much more like a private college these days than a public,” said Stephen M. Curtis, president of the Community College of Philadelphia, reports Inside Higher Ed. By next year, nearly two-thirds of the college’s revenue will come from tuition.
“His fellow panelist, Rufus Glasper, chancellor of the Maricopa Community Colleges, said, ”We have no choice. The state funds are gone forever.””
http://communitycollegespotlight.org/content/college-heads-see-privatization-as-inevitable_9059/
Joanne Jacobs approves of the idea of raising student course costs. (She’s in California and CA CC costs almost nothing for students compared to some other parts of the country. But on the other hand, it’s really hard to get needed classes.)
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See, I think of a private college, the way that you think about a Mercedes Benz – nice, but a Toyota will get you to the same place.
We do, too, which is why we have already started creating each child’s list of “strategic” schools that offer tons of merit aid instead of looking at the most “prestigious” schools out there.
Unfortunately, we live in a state where state university tuition is insane, even for residents. So, we aren’t able to truly look at our in state options as more appealing than OOS ones, especially schools known for great financial aid packages. Having grown up in NYS, it was particularly hard for me to understand how many other states public universities weren’t nearly as affordable. Heck, you can even go to an Ivy league for in-state tuition in NYS (Go Ag School!)
But my larger point was not that it is necessary to spend $60k for a great education, but rather that if you are going to look at schools that cost $60K *and* you make > than $100K in salary – you had better be saving a ton of money because your EFC on $100K could easily be $30K a year. That would be per FAFSA, not even using the CSS profile. If the school you are looking at uses the CSS profile – they might calculate your EFC even higher than $30K per year. If a family is spending all of the $100K on their mortgage, car payments, parent’s student loans, etc…they are going to have a very rude awakening when they discover how much the government (and schools) think they should be able to pay.
If you make $100K a year, you probably need to be living like you earn $50K a year to be able to afford your EFC. Most people aren’t doing that. And that’s when sticker shock really hits.
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Oops, messed up my reply. Meant to only italicize the first paragraph. My apologies.
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Is sasha the same person as scantee?
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I note, from the parental perspective, that if each earner in a two-earner family has put $5,000 into a Section 529 plan, you will arrive at the child’s 18th birthday with some $240,000 in the fund, more than enough to pay for four years pretty much anywhere. (Obviously, the calculations get more complicated with two or more children etc., but the basic point holds.)
Furthermore, in New York, you get a state and city tax deduction for the contribution, so each $5,000 contribution only costs you something like $4,500.
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Nope. Different people.
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If a two-income family is putting 10K a year into 529s, they probably will have a good amount of money saved when their child goes off to school 18 years later. As long as they chose wisely in how to invest the money in the account and the stock market doesn’t drop right before college expenses start.
That family will also then have the 10K a year during college to put towards expenses.
If that family has been saving in 529s – I also hope they would have been saving in their 401(k)s and their IRAs. If they have been maxing those out (to take advantage of the tax benefits, as well as the obviously retirement benefits) – they would be putting $45K a year into retirement ($16.5 in 401(k)s and $5K in IRAs each).
So, if you have the income available to save $55K a year after taxes and living expenses – you and your (1) child will probably be fine paying for college, as well as paying for retirement. Can I get a show of hands of how many people are doing that? Or how many people are able to do that?
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As a graduate student, I get hives when I think about how I don’t have a retirement account yet. I keep meaning to open a Roth IRA, but I always put it off. Maybe add to the top of my to-do list.
Student loan debt does seem like a scary problem. I think more funding CCs might be a good route for most people, and Amy P, a lot of the links you provided showed that CCs rely more or fully on tuition because state funds for them are cut. If we were willing to pour massive funding into them, then CC would be a way for a majority of people to get the necessary higher education they would need for their jobs.
For how not to go into debt, a lot of it seems like things that aren’t really applicable to lots of people. “Live in a cheap area” is nice, but sometimes you need to go to school somewhere expensive. I agree no one should go to grad school (or undergrad) without a realistic idea of what awaits them at the other end and a realistic plan to avoid debt or be able to pay it off. But, I think we’re also dealing with a systemic problem, which is that even public universities are no longer affordable to middle class families, much less most private universities.
I think a part of the problem is an UMC one though, in that you do get punished for being UMC. I went to a fancy, expensive SLAC, and my family’s income was well under 100K a year (actually at about 50K). I graduated with no debt because I got massive need-based financial aid (basically full tuition). My parents saved not a whole lot for college, because they expected to get need-based financial aid to cover it, and they were right. Of course, this plan depends on going to a very wealthy private school which can be generous with financial aid, which basically means certain Ivies or SLACs, which is simply not possible for most people. Plan B for my parents was an honors program with a merit-based scholarship at a public university, which is also not a wide-spread solution. Funding public universities so that tuition in-state tuition is actually affordable, funding CCs so that they provide a viable option for people who need higher education but not necessarily a 4-year degree seems like it would really help.
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“Amy P, a lot of the links you provided showed that CCs rely more or fully on tuition because state funds for them are cut. If we were willing to pour massive funding into them…”
If California (which is a wealthy state) can’t do that, how are the many poorer states supposed to manage? It’s like thinking that if Bob (who makes $100k) can’t afford a new car, he should go in together with all his poorer friends so that they can all afford new cars.
In the case of California in particular, the CC tuition rates really is too low–as of 2011, it was $36 per unit.
http://www.kmph.com/story/14319116/tuition-hike-for-california-community-colleges?redirected=true
There was a failed attempt at Santa Monica College to create a two-tiered price system so that they could charge more for high-demand courses and perhaps relieve the bottleneck caused by course shortages, but the plan was struck down by the state of California.
http://www.insidehighered.com/quicktakes/2012/04/19/california-community-college-office-two-tier-tuition-illegal
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My parents gave each of our kids 40K for college by the time they were 5, and our son starts college in 2 years. His account is now worth 78K. We were told it would be worth 240K. I guess it would have been — if the recession hadn’t gone on for 8 years. We were also told our house would be worth a lot more than we paid for it. It’s now worth 150K less. We’re those people that actually did everything we were supposed to do — but college tuition rates went up faster than every investment on the market. Our investments didn’t do 8 percent a year, but college tuition sure did.
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Amy P, California isn’t a wealthy state. If you spend more than your income, you aren’t wealthy.
The cost of college is a complex topic. It would be a step in the right direction if parents and students researched the costs. The actual cost of college can vary wildly. Colleges do take family income into account. If you play around with this tool, you’ll see college costs can be unpredictable: http://cgi.money.cnn.com/tools/collegecost/collegecost.html. (Money Magazine’s estimated costs, after grants and scholarships.)
Here’s an example: Family income less than $30,000. Would you choose Amherst at $3,600 per year, or Boston University at $21,000 per year? Or Umass Amherst at $8,200 per year? Wellesley College at $3,900?
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“Amy P, California isn’t a wealthy state. If you spend more than your income, you aren’t wealthy.”
Would you prefer “high-income”?
According to the good people at Wikipedia, California is the eighth largest economy in the world. Per capita income is 11th in the US. California also already has the 6th highest tax burden in the US (as calculated on GDP).
http://en.wikipedia.org/wiki/Economy_of_California
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sasha, two points:
If you need the money in two years, it shouldn’t be in the stock market. A well-designed college savings plan starts mostly in equities, and shifts to bonds as the child approaches college age. New York’s 529 plan has an option that uses this approach automatically, so the investor doesn’t have to think about it, but anyone with the sophistication to enjoy reading 11d should be able to implement such a program for themselves.
Obviously, there are competing demands on one’s money. But, in the modern world of long lifespans and no pensions, the couple discussed earlier with an income of $120K–whom I would guess are about median for the readership here–had better be saving at least 20% of their income every year. So out of savings of $24,000 a year, putting $10,000 aside for the children’s college doesn’t seem inappropriate.
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Assuming a thirty percent tax bracket, the take home on 120,000 is actually 90. Subtract the 24,000 in savings, and the family now has 66,000 — or 5500 a month. Assume a two-earner household, and the family’s daycare expenses, two vehicles, insurance, commuting costs etc. and it turns out that actually the family making 120,000 — with the higher taxes, marriage penalty and assumed whopping savings rate for college — doesn’t actually live any better than the family that makes 50,000 a year. LIke you all said, maybe they have more job security and sometimes a retirement plan through work (though this is often doubtful these days) — but it still ends up seeming kind of pointless. It feels like socialism. Everybody basically ends up making the same wage, by the time the government and the colleges have extracted their cuts with their discriminatory pricing structures. What’s the point of the whole exercise?
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If California (which is a wealthy state) can’t do that, how are the many poorer states supposed to manage?
Let’s re-frame.
Spots in elite private colleges are “positional goods.” They are expensive for exactly to same reason that the big mansion on the best street in the best school district is expensive — because they are goods that are limited in supply, and which the well-off and pretty-well-off will bid up in price to the limits of their ability to pay, because “My daughter goes to Princeton” sounds a lot better than “My daughter goes to Rutgers.”
Personally, I paid 50%-100% more for my house than a comparable house two towns over, because half of what I was paying for was the right to say “I live in this town.” (Also, I was paying for the right to pay really high property taxes.)
If you increase the taxes on the sort of rich/ upper-middle-class people who bid up the price of positional goods, not only do you have more tax money to spend on stuff like community college but YOU DON’T ACTUALLY HURT THE RICH PEOPLE. They continue to live in the same houses and before, but when they sell their house, they can only get $900K for it, instead of $1.2M (which doesn’t hurt them, because they are only paying $1.6M for their new home instead of $1.9M).
As inequality increases, more and more of the money we spend goes to positional goods that keep us separated from those a few notches below us. People think “Raise my taxes” = “I have less money” = “I will have less stuff.” But that only applies if the “stuff” will have the same price after the tax increase. For 95% of the stuff we care most about, it simply won’t.
And, it will work better federally, because if California raises its taxes, then people will move from “high tax California” to “low tax Nevada” or “low tax Arizona.” If you do it through the Department of Education, then everyone pays more taxes, the poor get more more money for college, and the rich don’t lose anything before the prices of positional goods will drop to the level that the rich people can actually pay.
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Your calculations are wrong.
A married couple filing jointly at $120,000 would be in the 25% tax bracket. And tax brackets are marginal. The 25% would only hit the portion above $70,000. Income tax would be about $15,000 and there would also be about $7,000 in FICA (which is the same rate as for the family making $50,000). The total tax paid to the feds would be less than $23,000. Of course, no family with kids pays anything close to that because of various deductions. In addition to the (too small) deduction for having a kid, daycare is deductible (though not at the full rate of what it costs). Also, their retirement plan is, unless they are financially illiterate or self-employed, using pre-tax dollars. Their health care contribution is similarly pre-tax dollars. It is likely they have a mortgage, the interest on which is deductible.
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People think “Raise my taxes” = “I have less money” = “I will have less stuff.” But that only applies if the “stuff” will have the same price after the tax increase. For 95% of the stuff we care most about, it simply won’t.
That’s an absurd simplification of most people’s consumption baskets. For one thing, in much of the country, the price of houses is basically set by the price of building a house. The supply is only limited in a few nice cities. Same with schools.
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“And, it will work better federally, because if California raises its taxes, then people will move from “high tax California” to “low tax Nevada” or “low tax Arizona.””
And then the corporations offshore to some place where the tax burden doesn’t inflate wages and costs quite so much, and we all get to whine about how unpatriotic corporations are. That’s one of the objections to the whole taxes-are-membership-fees idea–there are many other, cheaper clubs available.
And what of the potential loss of access to the American consumer? Well, there are 6 billion other possible customers on the planet–corporations that we try to penalize for fleeing our taxes are going to have a lot of other options.
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“It feels like socialism. Everybody basically ends up making the same wage, by the time the government and the colleges have extracted their cuts with their discriminatory pricing structures. What’s the point of the whole exercise?”
Well, the colleges are practicing socialism, at least the ones that can afford it. Their financial aid is “to each according to their need.” Of course, this doesn’t apply to all the colleges, as Cranberry’s calculations show. Amherst can afford (both in money and prestige) to practice socialism and thus, subsidizes the 30K family at the expense of the 100K family (who was expected to live on 30K and save the rest to give to Amherst — you know, like the family that only had 30K, except they couldn’t also save to give money to Amherst). Boston University can’t afford to be socialist, so you can still buy your way in by saving money.
So, yeah, if you want to bet on your kid getting into Amherst or Harvard, you can “chose” to only earn 50K a year and expect to be subsidized. Of course, most people earning 50K don’t have that expectation (and shouldn’t), so what your middle class kid gets, if you save, is the opportunity to go to BU (that the poor kid doesn’t have).
My problem with this math is the subsidized, non-discharageable student loans and the role they play. We should lever those into policy.
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y81
I agree that money needing to be used within 2 years shouldn’t be in the stock market. I am a bit unclear as to how $10K a year in your example grows to $240K by 18 unless the money is in the stock market for a considerable amount of time – as you have total contributions of 180K and you are assuming appreciation of 60K. And, the stock market needs to not drop, or remain depressed during the time period you need it. Keeping that money (or a portion of it) in the market until the child is 16 only works as long as the market is on your side. If it drops right as you plan to move into more conservative holdings -you are SOL.
I also agree most people need to be saving 20% of their salary (or more). I believe the current average savings rate is somewhere between 4-6%. What people should be doing and what they are doing don’t exactly connect.
Too many people still believe in consumption smoothing and take on huge mortgages, large loads of student debt and other fixed expenses under the assumption that as they age they will have more money to pay those items off and will also be able to save more. But that is rarely what happens. The family making 120K a year is often saving 5% in a 401(k) – 6K a year and then spends the rest of the money they earn on the huge mortgage they take out to live in a good school district, on health care expenses, on their own student loans, on a car payment to get to work, etc. etc. etc. When college comes around, they are shocked to find out that on a salary on 120K – schools are going to expect $30-35K a year form the parents. And that is in current dollars.
As I said before, paying for college as an affluent family only works if you are choosing not to live the same lifestyle most other people choose to live on the same income.
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My problem with this math is the subsidized, non-discharageable student loans and the role they play. We should lever those into policy.
Me also. Especially since I expect the non-discharageable is going to cause far more problems that it solves. Attempts to use legal mechanisms to “control” risk just punt it down the line into a bigger problem.
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We should also note that Harvard and Yale are bad examples (I don’t know about Amherst). Those colleges nowadays cap tuition at 10% of family income at $120,000 (Yale has been playing with the numbers but that is what their website currently says). So our hypothetical family only needs $48,000 to send the Little Blessing to New Haven for four years.
Of course, not everyone gets in to the Elm City Valhalla. I guess another point is that people with incomes between $50,000 and $200,000 should examine the aid policies of various schools, including merit aid, very carefully. But I think most people who are actually applying to college, as opposed to running hypothetical numbers in blog comments, probably do that.
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I think most people do examine the numbers carefully, but it is very difficult to do so for a wide range of schools. Or at least it was back when I was applying. Maybe the internet has made it easier to apply to a bunch of schools. You certainly won’t find out how much a given school will actually cost for you until after you’ve been accepted and it certainly isn’t free to apply to most schools.
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“I guess another point is that people with incomes between $50,000 and $200,000 should examine the aid policies of various schools, including merit aid, very carefully.”
Yup, and they should do this when they are talking with their children about where they will apply. I’m hearing too many stories where the students think they will only have to pay their “EFC” only to realize that the school is not one that meets need, even as defined by the EFC (Johns Hopkins for example), or that meeting EFC includes parents taking unsubsidized loans, or that EFC isn’t anywhere near the number you think you can pay. For example, a short look will show that if you make 200K and have one child in college, your EFC is 50K (even if you have no assets).
And, families making under 50K need to research carefully, too, ’cause though they will have a fairly low EFC, there’s no guarantee that it will be met at many many schools.
Oh, and parents making over 200K have to think about how they’re going to pay out 60K+/year, for each of their children.
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I guess another point is that people with incomes between $50,000 and $200,000 should examine the aid policies of various schools, including merit aid, very carefully. But I think most people who are actually applying to college, as opposed to running hypothetical numbers in blog comments, probably do that.
I think you assume people are more rational than they are. As my eldest is now old enough for the whole college process, I don’t notice parents rationally comparing college costs. There’s a great deal of hope for athletic scholarships. There seems to be an assumption that the local state university would be the least expensive option, although a little noodling around with online tools should show that that’s not true for our state.
I have friends and relatives whose children have been offered merit scholarships, but those don’t seem to be predictable. It seems to pop up as a complicating factor, when kids are deciding between colleges. School A without merit aid, or School B (which is comparable) with merit aid? A relative did manage to improve the offer at School A by referring to School B’s offer–but merit aid does not seem to be predictable.
Some years ago, I heard an NPR piece in which a girl called in, trying to decide between a full ride to UVA or Vanderbilt, or Yale (full cost–parents would have to mortgage the house.) (Turns to Google) Found it!
August 21, 2008. (note date!) 26 minutes in. This child had a full ride + stipend to UVA, full tuition scholarship to Vanderbilt, and a scholarship to Ohio State. Chose to attend Yale, her family did not qualify for financial aid, so they would finance by a home equity line of credit on the house. Intended major? Environmental Studies. Oh, and there’s a younger sibling. http://www.npr.org/blogs/talk/2008/08/how_we_pay_for_college.html
(Pause to hit head upon table. I’ve remembered this Talk of the Nation for 4 years, because even before the fall of 2008, it struck me as The Wrong Decision.)
So, I think many families do not make rational decisions.
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“August 21, 2008. (note date!) 26 minutes in. This child had a full ride + stipend to UVA, full tuition scholarship to Vanderbilt, and a scholarship to Ohio State. Chose to attend Yale, her family did not qualify for financial aid, so they would finance by a home equity line of credit on the house. Intended major? Environmental Studies. Oh, and there’s a younger sibling.”
Well, by now we would know, right? Are there names mentioned?
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I have a junior. We have enough $ saved to pay for a week. Not kidding. We do have a tuition benefit through Mr. Geeky’s work, and we have a tiny 529 plus some regular savings. We’re looking at loans. And hopefully state school. Honestly, he’s not showing a lot of interest, but definitely some. We’ve thought about a gap year, which would, of course give us more time to save. I have lots of friends in the same boat. We had more saved, but put it into the house. We’ve never been good at scrimping, though we certainly don’t live in luxury. We just ended up in a very expensive area.
I went to a fancy liberal arts college 20 years ago that cost $12k/year, plus $3500 for room and board. I got a half tuition scholarship, which helped, I’m sure, but my parents footed the whole bill. That same school now costs $35k plus $10k for room and board. In addition to not being able to afford it, I don’t think I could even get in.
I have a friend, single mom, teacher (so making nothing), and she didn’t get much need-based financial aid for her son’s first choice. She says she’s looking at 60k in debt for herself or her son. It’s a state school (just not in our state). It’s a very tough thing to say to your kid, “I know you don’t really like this school, but this is the one we can afford.”
I don’t see any way around debt if I want my kids to go to college, and maybe I should have been better about saving, but there are huge gaps of time when I made no money or $10k a year and had grad school loans to pay off. My husband and I really weren’t settled financially until about 6 or 7 years ago (and that’s when we starting saving). I was 37 and my oldest was 10. I’m typical among academics.
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Found her!
http://blog.cleveland.com/pdextra/2008/04/hawken_schools_karoline_evin_m.html
http://www.linkedin.com/pub/karoline-evin-mcmullen/23/383/763
She ended up going into business, apparently.
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There’s an argument, if you are going to be in the business world, that going to Yale might be worth the money. I can assure you, for your entire life, when you are looking for a job, it gets your resume to the top of the pile. Mind you, (i) it won’t get you promoted, or even guarantee that you keep the job and (ii) the UVa and Vanderbilt resumes go right beneath the Yale one. Still, it’s a difficult decision.
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The “Ivy or bust” approach was my parents’ approach. They figured we’d all get into Harvard or some sort of wealthy equivalent and that with need based aid we’d be golden. My mother (after my father died) saved about $23,000 for me, and I’d saved up $7,000 by being a miserly child who never spent birthday money. The sticker cost of my school when I went there was $35-$40,000/year, about 100% of my mother’s income when I started (she took a pay cut when I started, and her pay rose fairly quickly after that). Of the $30,000 saved, I had to spend $20,000 over four years, my mother contributed about $3,000/year from her own salary, and I paid the rest with work-study. As a result, I graduated with 10K in my bank account, which is an incredible privilege for someone my age. At the same time I was in school, my little sister was at an Ivy League, getting a similar need based package. My brother got less aid, but also personally earned a lot more money since he had high paying skills (he could easily earn 10K on break from college working as a software engineer). It worked out well for my family (3 kids at top private institutions with no debt on a middle class family income), but to say that other people should do it is a bit of a “let them eat cake,” which is why, although personally I’ve never had student loans, I still think it’s a huge problem, and I don’t think people can or ought to all do what I did to avoid them.
I think people are right that many people at Ivies or top SLACs absolutely wouldn’t bat an eye if tuition was raised. A very large portion of people there are from families with incomes in the 7 figures (or at least high 6 figures). If you’re family earns 2 million, do you really care if college is $30,000 vs. $50,000 vs. $80,000? Since there’s a move away from need blind admissions, then raising tuition makes it easier for the very rich to get in, and the ‘poor’ students just get more financial aid, effectively making cost about the same. That’s why it’s so annoying these conversations always turn to the cost of Harvard. Harvard can take care of itself and the students it accepts. What’s more important is the cost of state universities, or CCs, or regional private universities, who feel pressure/ability to charge Harvard-like rates for a not-so luxurious positional good, or whom increasingly have no other choice as we as a society no longer want to sponsor a public education system.
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To go back to the Yale student, she actually left Environmental Studies as a major and is getting her BA in “Anthropology of Online Communities.”
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is getting her BA in “Anthropology of Online Communities.”
That can’t seriously be a major, right? And no one would allow a 21 year old to make a special major called that, right?
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MH said:
“For one thing, in much of the country, the price of houses is basically set by the price of building a house. The supply is only limited in a few nice cities.”
Right. I think that’s how it is in our local TX suburbs, although the city is somewhat more complicated.
Cranberry said:
“This child had a full ride + stipend to UVA, full tuition scholarship to Vanderbilt, and a scholarship to Ohio State. Chose to attend Yale, her family did not qualify for financial aid, so they would finance by a home equity line of credit on the house. Intended major? Environmental Studies. Oh, and there’s a younger sibling.”
That’s a doozy. I expect there’s not any home equity left now for younger sibling. That should enliven Thanksgiving!
Geeky Mom said:
“It’s a state school (just not in our state).”
Unless it’s something unusual, I think paying out-of-state tuition is one of the 7 deadly sins for college. (I’ve already mentioned my two young WA relatives who went to school in Colorado mainly just for the skiing–one was CSU (a real cow college), one was some private school I can’t remember the name of.)
BI said:
“As a result, I graduated with 10K in my bank account, which is an incredible privilege for someone my age.”
Very good. I think people forget that there will also be substantial after-college expenses for getting a young adult that first real job, relocating, etc.
Wendy said:
“To go back to the Yale student, she actually left Environmental Studies as a major and is getting her BA in “Anthropology of Online Communities.””
She might get a swell job with Facebook, if that’s combined with actual technical skills. Still…
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She seems to be good at self-promotion. It’s hard to reconcile a switch from environmental activist to promoting consumption, but young people should be allowed to change their minds. Presumably, the student debt requires a high-paying career. I wish her the best.
I’m impressed by Wendy’s Google skills!
Now, with online price calculators, Amy P, some out of state colleges would be less expensive for us than instate colleges. There’s something weird about Rutgers, though–the upper income brackets pay less per year than the lower income brackets? Is that a data entry error, or does it reflect merit scholarships, which are reputed to be linked to high SAT scores, which correlate with family income?
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“Now, with online price calculators, Amy P, some out of state colleges would be less expensive for us than instate colleges”
Wow–that is complicated.
I think some kids are very susceptible to the glamour of out-of-state schools, even when the out-of-state school is demonstrably less good than the in-state option.
Another issue is going to the wrong school for the wrong major. I had a young female relative who went to one of the famous science universities…and then switched her major to political science!
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“I’m impressed by Wendy’s Google skills!”
It’s one of my talents. I also know what all of you had for dinner tonight.
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Laura – regarding your potential solution #2 – kicking kids out who aren’t going to make it. Unfortunately, as states defund public higher education, the incentive is just the opposite. As state universities come to increasingly rely on tuition to fund operating costs, they have incentives to keep every tuition paying student around, regardless of his or her potential for success.
What I’d like to see (as a parent and an educator) is better calculation of graduation rates – the way the DoE calculates them now is abysmal – so that students can know if I take on this debt, what is the chance that I’ll make it out of here with a degree and how long will it take me? I’m not sure how this would work, but I don’t think we can continue to cut funding for higher education and then tell universities to kick out their key source of revenue.
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I was just looking at a question on the Catholic Answers Family Life forum:
“Please pray for me and my husband. He came home from visiting his friends in a college town this weekend and claims he wants to get a degree from the University of Phoenix for IT. This would be right up his alley and I think he’d enjoy this line of work, but it’s 3-4 years and the tuition is astronomical.
“My big thing is that he has tried college 3 times and given up before the first semester’s end. Now he wants to try it staying home part-time with the kids and working evenings. I’m really skeptical and after the last attempt at our local community college and we paid all that money out of pocket I told him I would never support any future attempts at school. Now I’m softening a little. I would still like to see him get his basics at the community college and he even said he wouldn’t bother if he couldn’t get some financial assistance (i.e. loans).”
http://forums.catholic.com/showthread.php?t=670576
This guy is so not college material. I wonder if the sort of students who are unlikely to succeed in college are particularly drawn to the for-profits.
There is some good news for that family–later in the thread the question writer says that her husband has decided against University of Phoenix, but still wants to do an online degree with Western Governors. Other posters suggest that earning IT certificates will be more helpful than getting an IT degree, particularly an online one. It occurs to me that even though those IT certificate programs are for-profit, they are very respected, well-policed programs. (One of my in-laws took an ASAP course after business school and has been minting money ever since.)
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“Other posters suggest that earning IT certificates will be more helpful than getting an IT degree, particularly an online one. It occurs to me that even though those IT certificate programs are for-profit, they are very respected, well-policed programs.”
I know very little about this kind of thing, but I will say that getting certificate type things in IT or Network Engineering is considered a major plus for our faculty in our technology programs.
Btw, to go back to Yale girl above, I spent a little more time last night poking around, and her brother is just as impressive a HS student as she was, though I haven’t been able to find out where he’s going to college yet. He is also very much into the environment, and he was named a Parade Magazine Service kid or something like that.
Here’s an interesting question. I look at her online footprint and it looks like in her 4 years at Yale she lost some of the entrepreneurial/activist spark she had in HS. So what’s going on? Is it that when she was in HS, she was bored, and these activities kept her busy/challenged? Was it her parents’ influence? Was she geared towards getting into Yale some day and doing what she had to do to stand out? Was Yale too hard for her? Did she end up going from smartest kid in her school to one of many smart kids, and therefore she stopped standing out? Did Yale benefit her, or would she have benefitted from going to UVA or Vanderbilt? Would she be the superstar she was in HS if she had gone to UVA or Vandy?
And finally, I think her major in anthropology isn’t quite as mockable as it seems. If she used the disciplinary knowledge of the field and applied it to online communities, she could have some incredibly valuable knowledge to bring to a business, which is probably why A&F hired her. I’ve sat here for years now while you guys pooh-pooh liberal arts majors as worthless, but I’m telling you, that’s where the creative thinking is, and it’s what businesses need. A kid might not be the creative/entrepreneurial type and will have a career in a “traditional” job, and gd knows my university prepares a lot of kids for these mid-level jobs. But if you’re worried about your kid becoming one of “the best,” I’d not balk if they were leaning towards these kinds of creative learning opportunities.
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“But if you’re worried about your kid becoming one of “the best,” I’d not balk if they were leaning towards these kinds of creative learning opportunities. ”
I actually agree. But, the key is being the “best” (and being an independent, self-motivated problem solver who is comfortable with big open ended questions). If a kid isn’t all that, they might be served better by focusing on a more content-specific field where they learn to trudge through problems others set up for them. Of course, you can be a creative independent problem solver who studies science or technology, too (plenty of big questions there). The difference is what you learn if you’re a middle level student, capable, but not spectacular. What do you learn in the anthropology class then? What can people tell you’ve learned in that class?
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“The difference is what you learn if you’re a middle level student, capable, but not spectacular. What do you learn in the anthropology class then? What can people tell you’ve learned in that class?”
That is very painful and true.
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I agree that there is a need for intelligent, creative problem solvers with a broad liberal education, but I think that need is entirely supplied by the top thirty or so universities. So I don’t have a problem with anthropology graduates from Yale, but I do have a problem with anthropology graduates from Knox College or University of Southern Maine.
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USM doesn’t have an anthropology major.
I poked around LinkedIn for a moment and found this guy:
http://www.linkedin.com/profile/view?id=2436561&authType=name&authToken=hh1B&trk=skills
So Intel saw the need for an anthropologist with degrees from Pitt and Kansas. but those are highly regarded publics. Will keep looking.
Re Knox, these folks have jobs:
http://www.knox.edu/academics/courses-of-study/anthropology-and-sociology/alumni-in-anthropology-and-sociology.html
My thing is that what you study doesn’t matter so much as having the ability to figure out what you want to do and then doing it. My sister is an accountant, the controller at a large non-profit organization. I asked her once what she learned in accounting classes that was useful for her career. She said, “Credits and debits.” That was it.
I still feel like a lot of you/us (will include myself–I’m not sure I really get it yet either) are missing the point somehow.
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I think to counter Y81’s hypothesis, you need to report what happens to the average student, not what happens to potentially exceptional students.
I’m inclined to agree that majoring in anthropology at Knox (a college I’ve not heard of) is unwise (if you have to pay for it yourself). But, there’s still lots of gray area. How about majoring in it at a SUNY, or Ohio State, or University of Michigan or University of Florida, or Arizona State? What about majoring in English, Philosophy, or Psychology at Knox?
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I somehow forgot this, but there is a middle road between paying the full student loan amount and bankruptcy. In normal debt collection after a debt has gone bad and the lender is sure that they will never get paid the full balance, the lender has the option to settle for a fraction of the original loan amount. This is quite standard with credit card debt that has gone bad. The only catch is that creditors generally want a lump sum at that point, not payments. The phrasing on this is something like, “I stopped paying on my Visa debt in 2005. I owe you $20,000. Would you take $5,000 as settlement in full?”
(By the way, I have the feeling that bad debt is probably a leading reason for the fact that poor people avoid normal banks. If you have bad debt and money in the bank, you can never be quite confident that it isn’t going to suddenly disappear.)
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Amy P
From what I hear a lot of hospitals work the same way. They’d rather get a few thousand in cash than try to rangle tens of thousands out of someone who doesn’t have it.
Interestingly enough, a guy in my program majored in anthropology at Knox college. He got a full tuition scholarship at a good MA program, then worked as an accountant for a year or two, and now is fully funded in a good anthro PhD program. Seemed like going to Knox and majoring in anthropology didn’t really do him any harm. I know people who went to better colleges and had to pay much more for an MA to get into a PhD program. On the other hand, going to a “name brand” school (at least name-brand for anthropology) can often allow you to skip the MA stage all-together, so that’s a bit of an advantage in a field where about 70% of PhD admits already have MAs. I suppose for many people have your kid getting a PhD in anthropology isn’t the type of success they’re looking for in their children though.
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Here’s what I know, based entirely on my own experience. 1) being smart is a good thing. If you’re smart, you’ll get a good education almost anywhere. 2) knowing people is important. I got money, internships,etc. because I knew people. When I find out someone went to the same school as I did, I use that. 3) you can’t really tell an 18 year old what to do.
What does this mean for college? 1) doesn’t matter where you go from an education standpoint. Factoring out the very top and the very bottom, your mileage will be about the same. Find an affordable place that you’ll like being at for 4 years. 2) disregard # 1 if you can go to a name school. It’s about knowing people. Your classmates may be nothing great now, but they might be president later. That could pay off. 3) as a parent/teacher/counselor, you can try to give advice, but they’re adults now. They make their own decisions.
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“1) being smart is a good thing. If you’re smart, you’ll get a good education almost anywhere.”
Conversely, if you’re not smart, it may be hard to get a good education almost anywhere.
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Amy, maybe. I think if you need more support academically, certain schools really will do a better job.
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When I went to undergrad, loan counseling was required. There was loan entrance counseling and loan exit counseling when leaving the school. Do schools not do this anymore? These were not online, you had to actually show up and the counselors went over what loans were, options for paying them back, interest rates, expected payments etc.
I had a loan for my first year. I dropped out after the first year and had paid off the loan before going back. I was still required to attend loan counseling (2000) before they would give me my degree. This, in spite of the fact that I took the paperwork to the registrar showing I had paid it off. Every other sentence was “This is a loan, you have to pay it back!” I actually had to take time off work for this (and my one and only loan was already paid off)and was so irritated that at the end that I went up to the counselor and said “Soo, I don’t have to pay this back, right” just to watch her sputter. Not one of my finer moments, but I had the paperwork showing I had paid it off and they still made me sit through that crap.
So, what else could be done to educate students and their parents? I do not think that $25K is unreasonable for an education – it’s the price of a car. I also don’t think people with that amount are prevented from buying houses, getting married etc. So should we lower the amount you can borrow?
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“When I went to undergrad, loan counseling was required. There was loan entrance counseling and loan exit counseling when leaving the school. Do schools not do this anymore? These were not online, you had to actually show up and the counselors went over what loans were, options for paying them back, interest rates, expected payments etc.”
When I got my Stafford back in the very early 90s, I dimly recall that there was some sort of mandatory group session thing on campus. What did they say? Something along the lines of wah-wah-wah-wah-wah, as far as I can remember. I’m pretty sure they didn’t do any individual explanations of payments at the time. My payments turned out to be $65 a month, so it wasn’t exactly a do-or-die thing. The thing stuck around as long as the odor of dead mouse in my parents’ Camaro when I was a kid, but it wasn’t large or crippling in any way.
In any case, once you’re on campus signing for the thing, it’s really too late–those numbers are most relevant when deciding where to go, not when you’re already there.
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