Observations on the Cost of College

[stephenandrew]

Not really sure if this belongs here, but I thought I would share some recent expereinces my son has had with the college admissions process and offers of merit based finanical aid.

A bit of background--my son is a senior in high school, and is a good student (not great) with a 3.8 GPA in an honors/AP curriculum, 1290 SAT scores, and some pretty decent extra curricular activities (e.g. Eagle Scout, Captain of HS Swim Team). My son wants to study history, and then go onto Law School--no interest in engineering, acccounting, or anything remotely "vocational". My wife and I are professionally employed, and have high enough incomes and have saved enough that based on the calculations on FAFSA website, will not be elligible for any need-based aid.

My son has applied to two tiers of schools---some well known private universities with strong reputations (like Duke, Emory) and some smaller lesser known liberal arts colleges (like Rhodes, DePauw). In general, the total cost of tuition/room/board/etc. at the universities ranges from $45K to $52K; the total cost at the liberal arts schools ranges from about $40K to $42K.

He applied early action to many of the schools and he has gotten admission offers from both groups of schools. What I find interesting is that without exception, the smaller liberal arts schools have all offered him merit based aid that is worth about 40% of the total cost of an education. None of the larger schools that he has been admitted to have offered him any aid. So what it comes down to is that he can go to a decent, smaller liberal arts college for about $25,000 per year or go a larger, major university for about twice that price. Finally, he has also been admitted to a public university in the state which we reside---based on his grades, he would only have to pay for room/board/fees--no tuition expenses. Total cost to go to State U is about $11,000 per year.

Now, I think people can get a good education at pretty much any college--the student is far more important than the school attended, but I am willing to "consider" the idea that a school like Duke might in some way provide a "better" education than our state university or one of the smaller liberal arts schools where he has been accepted. But I don't for a minute believe that the value of the education is worth 2 to 5 times that of the state college or smaller liberal arts colleges.

I always wanted to provide my kids with the opportunity to go to school where they wanted, and we have sufficent income and savings to pay for the more expnsive schools, but its hard as hell for me to justify paying the prices for the more expensive schools. Its kind of a living below your means thing---I can drive a Chevy instead of a Cadillac. What I am amazed is that, there must apparently be a virtually infinite number of people willing to pay $50K+/year for a college education as there is no shortage of people applying to these schools.

My solution to ths issue has been to put the decision making into the kids hands. I have told my son that I am giving him $X once he graduates from HS. If he wants to spend it all at a high-priced school, that's fine--but don't expect any help with graduate school. On the other hand, if he chooses to go to a less expensive school, he can keep what he has leftover at the end of college to pay for law school, a first car, travel the world, whatever.

I am interested to see what my son does.

 

[mn54]

I think you have made a wise choice to allow your son to decide what he would like to do. Since he plans on going to law school it would be interesting to talk to some law school admission people to see their perspective on where the applicants went to undergrad and getting into law school. Obviously the LSAT score is very important but how important is which school they attend? After having paid for two kids college educations I can relate. Please keep us informed on your sons decision, etc.

 

[LOL!]

I'd be interested to see how this works out for you as well. My daughter just got all her apps in yesterday, so we will go through the same dilemma on cost.

I've seen this discussion quite a bit. It seems that where the parents went to college has the most influence on the outcome. If the parents went to an elite private university, then they are more willing to spend the money on the same. If the parents went to a state university, then they are less willing to pay for more than a state u.

I worked in HS and saved to pay for my college. My college roommates spent their HS job money on cars and stereos. Since they had no money for college, they got more financial aid than I did. The college saw my savings and said, "That's ours now, sucka!" To pay the rest of my college expenses, I worked more than 20 hours a week all through college.

My wife did not work in college. Her dad died her freshman year, so she got SS benefits and her mom paid for the rest and a car.

So my daughter's parents (me and my wife) have 2 opposing views about paying for college: (a) Pay your own way and (b) We'll pay the whole thing. Needless to say, my daughter likes Plan B. There is some UTMA money and some 529 money so that the first year anywhere is covered. But if it's 4 years of Stanford, then years 2-4 are another matter.

Isn't there a new simplified FAFSA for 2010? Have you seen it? I did a prelim FAFSA a few months ago and our EFC was almost $90K (more than our taxable income!), so we're not expecting any financial aid. If the stock market is good in the next few years, then that will also be helpful with Plan B.

One thing that helps me, is that my spouse is willing to continue working simply to pay for college for the kids. I can be retired and doing whatever I want in the meantime.

 

[stephenandrew]

I'd be interested to see how this works out for you as well. My daughter just got all her apps in yesterday, so we will go through the same dilemma on cost.

I've seen this discussion quite a bit. It seems that where the parents went to college has the most influence on the outcome. If the parents went to an elite private university, then they are more willing to spend the money on the same. If the parents went to a state university, then they are less willing to pay for more than a state u.

Isn't there a new simplified FAFSA for 2010? Have you seen it? I did a prelim FAFSA a few months ago and our EFC was almost $90K (more than our taxable income!), so we're not expecting any financial aid. If the stock market is good in the next few years, then that will also be helpful with Plan B.

First---good luck to your daughter---I am sure she has been pretty busy getting her paperwork together. I hope she gets in wherever she has applied.

Yes, I think you are right about where the parents went to school, and how it impacts their assessment of where they want their kids to go. My wife and I are both products of private universities. Things were a bit different then (early 80's)--the most I ever paid for tuition was about $7000 in a year. Its about 6 times that now. I think I got a great education, but I don't think I would be willing to pay $42,000 (tuition only) for the same thing today.

Re the FAFSA, I got the same basic results you did--our EFC was some aburdly high amount as well, so no need-based aid here either. Here's hoping for Dow 20,000.

 

[Salaryman]

SA, congratulations on raising such a well rounded and accomplished child. At least you and your child have a choice to make, which is a good thing. We have three little ones and one day will be faced with choices to make as you are now. I am sure that the final choice will be a the result of a well thought out process. Do let us know how things turn out.

Lastly, I truly think that prices of higher education is really out of whack.

Salaryman

 

[W2R]

I went to large state universities and (as you predicted), I think that type of school provides terrific opportunities, as well as being cheaper. If he was my child, I would probably nudge hin in the direction of state universities. That is what I would want for him and that is what I would be pushing for.

BUT - - if he was the kind of child who knows exactly what he wants to do in life, and is completely focused on going to Duke, for example, and if going to Duke is something he has dreamed of for years and will make a huge difference to him personally and emotionally, I would reluctantly pay for Duke. (If he seemed equally interested in other schools, then I wouldn't!) OK, maybe I'm a pushover, but I think that for some kids, not being sent to the college he has dreamed of all of his life and that he got into and that you could afford, could really take the wind out of his sails.

Also, if he is the kind of kid that needs a lot of personal attention, or is perhaps even a little immature for his age, and if you think he might just get lost in the crowd and maybe wouldn't even show up to class, then I would send him to the small liberal arts colleges that presumably have smaller class sizes (but check) and a more personal approach.

But for 90% of kids, I would push the state universities. I would feel that way even if the expenses were equal between all of these schools.

 

[stephenandrew]

Also, if he is the kind of kid that needs a lot of personal attention, or is perhaps even a little immature for his age, and if you think he might just get lost in the crowd and maybe wouldn't even show up to class, then I would send him to the small liberal arts colleges that presumably have smaller class sizes (but check) and a more personal approach.

I think this is one of the key differences that may be worth paying for. It was pretty clear based that at the smaller schools that we visited, his abscence in class would be missed given the small class sizes. Some of the colleges he is condidering only have 1000-1200 students, so not really any place to "hide". It may have just been talk, but at one of the schools, a professor told me he makes it habit to call kids who miss his class.

 

[TromboneAl]

I can tell you how this worked out in our case.

Our daughter was offered a good scholarship at a second-tier college, and much less of one at a top school. She chose the latter.

I wondered for a while whether this was a bad choice, since it was so much more expensive. But as money saved in her name decreased, and when I retired and had much less income, the financial aid increased dramatically. By year four, we were paying about what we would have had she gone to a state school.

She graduated in the midst of the recession, and got a great job which she loves. I don't think she would have gotten that job had she gone to a lesser school.

 

[stephenandrew]

I can tell you how this worked out in our case.

Our daughter was offered a good scholarship at a second-tier college, and much less of one at a top school. She chose the latter.

I wondered for a while whether this was a bad choice, since it was so much more expensive. But as money saved in her name decreased, and when I retired and had much less income, the financial aid increased dramatically. By year four, we were paying about what we would have had she gone to a state school.

Now there's something I had not considered--another reason/benefit to retire early--make ourselves elligible for more need-based aid. Brilliant!

 

[Maurice]

...that the value of the education is worth 2 to 5 times that of the state college or smaller liberal arts colleges...

I wouldn't look at it that way, I'd ask the question is it worth 70-100k more.

 

[Spanky]

She graduated in the midst of the recession, and got a great job which she loves. I don't think she would have gotten that job had she gone to a lesser school.

Al, are you trying to feel good about paying for the cost to attend Washington University? Our company recruits candidates from local state universities as well as Ivies. My daughter (a 3.9+ student in electrical engineering from a big state U) have received many, many job offers.

 

[Spanky]

Finally, he has also been admitted to a public university in the state which we reside---based on his grades, he would only have to pay for room/board/fees--no tuition expenses. Total cost to go to State U is about $11,000 per year.

My daughter was a national merit scholar, 4.0 GPA, class valedictorian, decided to attend a big state U (ranked 28 - US News) at zero cost instead of Ivies that offered almost nothing.

 

[JustNtime]

How about 2yrs at State U then transfer to prestige U to finish degree? Potential ~40% savings...

For my daughter, state U and small lib college (after merit scholarships) costs were not significantly different. But that was more than a decade ago. Tech U's costs are also unbelievable now.

Btw: those finaid formulas tend to reward those who haven't set aside money for education. Any money in the child's name or ed accounts is particularly heavily utilized against the family total. Home equity and retirement accounts(IRA/401/403/etc) don't usually count against you (at least federally). A big benefit to paying off mortgages and then using an HELOC as needed after scooping up any available subsidized ed loans(grants/scholarships). The HELOC is probably better than most (if not all) unsubsidized student loans for most of us. Probably best to have student at least pay personal expenses while at college for some token contribution...

 

[Moemg]

In my experience with my two children ,the more expensive the school the more grants were given . My Son went to MIT and with all the scholarships and grants it cost me about the same as Rutgers and the job opportunities for MIT grads was really impressive . I think it comes down to were the child( within reason )really wants to go . My daughter went to a large (out of state ) University and loved it but my son had his heart set on MIT . It's money I've never regretted spending .

 

[LOL!]

My daughter was a national merit scholar, 4.0 GPA, class valedictorian, decided to attend a big state U (ranked 28 - US News) at zero cost instead of Ivies that offered almost nothing.

You already wrote that your daughter has received many job offers, but I wanted to know about the rest of the story. I doubt your daughter will ever say she made the wrong decision, but can one tell if she has any regrets at all? What about her friends/peers at her HS who did go to Ivies? Are they going on to grad schools? Is your daughter interested in grad school?

I do think there is a big difference in being admitting to an elite university and deciding not to go (whether for financial or other reasons) and not even bothering to apply to an elite institution because of preconceived notions about the cost.

 

[yakers]

Younger son is an an interesting case, he did OK in school GPA/SAT and was admitted to a several UCs but not the one he wanted. He went to a Cal State school (Long Beach) for the music program which they are actually really, really good at. He loves it and is doing well, Dean's List 3 of 5 semesters so far. It now looks like it will be a 5 year program, which I had not planned on but is remarkably common. I tried to talk him out of music (told him job wise 'do you want fries with that?' would be likely). But he is diligent, practices hours every day even on free days. So I am happy that he chose a cheaper school and is healthy & happy and still hope he will change back into science some day (I am a retired NASA guy) which he is capable of. But he knows what he wants to do, always has, and is pursuing it.

 

[stephenandrew]

How about 2yrs at State U then transfer to prestige U to finish degree? Potential ~40% savings...

I think this is an interesting idea--one that is worth sharing with my son. In my limitted thinking (and I think his as well), we just assumed that it was one school for 4 years. Thank you.

 

[LOL!]

I had an observation about flagship state universities that I want to air. I think these universities are extremely important in the grand scheme of things and can be every bit as good as an elite private institution and in many cases better.

I propose that in each state the top HS students have to go somewhere. In general, these students are not slackers (by definition) and can choose to go anywhere. For benefit of the state and its future, the state should try to keep these kids in the state. Otherwise, there is a brain drain of leaders to other states. Thus it behooves the people of the state to support and nurture their future business leaders, engineers, scientists, accountants, and physicians by supporting their flagship universities and making such institutions affordable to the top HS students in their states.

If I look across this great land of the United States, I see that the states with superb flagship universities are good places to work (OK, maybe Michigan is an exception ?) and those states with lesser universities are good places to emigrate from (Mississippi, no offense, but what's going on there?).

This is not to say that non-flagship or smaller universities do not turn out a good product. But it is to say that everyone will not develop into a leader required of society without some kind of help. And some universities produce more of the latter than others.

 

[RAE]

My view - I think what you are doing by offering your son $$XX and letting him make the choice is the right thing to do. I also think that, if your son is smart, he will go to State U., take the $$XX that you are offering, bank the difference, and come out of college with a bit of a financial cushion (or money for grad school), rather than starting from zero (or being in debt, like a lot of kids coming out of college are). I agree with you that the quality of the education a kid gets depends FAR more on their motivation level than the college they decide to attend. I know many, many State U. grads who went on to become highly successful professionals......I don't believe that the fact that they didn't have the name of an elite Private U. next to their degree held them back in any way.

 

[mews]

Based on what my sister once said - she worked for Columbia U -

If you are motivated, and KNOW you are going to grad school, get the best education you can from high-ranked state schools.

This may require some work - be sure to know your professors, do internships, whatever is appropriate for your major.

Then spend the big bucks on your terminal degree.

ta,
mew

 

[JustNtime]

Then spend the big bucks on your terminal degree.

OH Nooo, Mr. Bill avoid those 'terminal' degrees... They're killers!

Seriously, having that grad degree at presitge U might be helpful in some fields... Throw in an internship or something for experience and you have a marketable plan. (As long as you DON'T end up with something like a comparative lit or history degree)...

 

[Katsmeow]

to spend the money on the same. If the parents went to a state university, then they are less willing to pay for more than a state u.

I think this is true. I went to an OK but not wonderful state U for undergrad but did really well on my LSAT and went to a state U law school but one that was very highly ranked. I was never sorry.

I do not believe that there is long term substantial economic benefits for most people in attending expensive private universities. Given this we've told our kids that we will pay for state university (in state). If they want to go somewhere else it is on their nickel. So far they are choosing the state u route. For our oldest son he is choosing to go to residential community college for two years because it is so much less expensive than the 4 year school. They do work with the state university so he can transfer all credits.

 

[haha]

I think this is an interesting idea--one that is worth sharing with my son. In my limitted thinking (and I think his as well), we just assumed that it was one school for 4 years. Thank you.

Transfers into Ivies are not common.

Ha

 

[LOL!]

This then at the limit leads to only children of elite private university graduates going to elite private universities. Lots of folks complain about legacy admissions already and the perceived fact that Harvard, Princeton, Yale graduates occupy the highest political offices in the land and run Wall Street.

But also the same pernicious phenomenon haunts first-to-college kids. Their parent thinks: "I didn't go to college at all and I turned out just fine. I won't push my kid to go to college, but let them make the choice for themselves."

 

[stephenandrew]

Transfers into Ivies are not common.

Well, I don't think we are thinking Ivy League here---his preferred "elite" universities are more along the lines of Duke, Emory, etc. As I mentioned before, while he is a good student, I suspect that Penn, Cornell, Harvard, etc. are probably a bit out of his league.