College loan pressure starts shockingly early

In a lawsuit fluke, a judge ruled that 800,000 students should have their student debt canceled. Researchers took the opportunity to compare outcomes of students with canceled debt to students who did not have their debt canceled.

Canceled debt improved student outcomes in all sorts of unexpected ways. More of them got married and had kids, for example. They earned 12% more than their indebted peers because without debt the students could take risks –– they could relocate, change jobs to improve their career, protect their credit score.

I understand the benefits of graduating without student loans. But I decided there was no way I could save enough money to pay for my kids to go to college. And since I couldn’t save enough, I didn’t believe most parents in my generation could save enough either. It felt like a safe decision.

But now there are hard choices. I had to tell my kids if they can’t get a full scholarship they have to go to a really cheap school. They might have to work their way through school.

And I started telling my kids really early on that they have to get a full scholarship.I thought that would make it easier. But now we’re applying and it’s not feeling easier.

Ivy Leagues and other private schools will calculate how much money you and your parents have. Including the value of your step-parent’s second home or your non-custodial parent’s sixth car even if it’s leased in their brother’s name –– it’s a very thorough questionnaire. And the school will determine how much is reasonable for your family to contribute. The school will cover the rest. For Harvard, for example, if your family earns less than $65K a year they probably won’t have to cover any tuition.

It’s a very fair system that is set up to attract low-income kids to a group of schools that typically attracts kids from families in the top 1%. I’m not saying the whole college system is fair. Believe me. It’s not. But the Ivy League financial aid system is pretty fair.

If your parents can’t pay what the Ivy League thinks is fair then the best situation you can hope for is a merit-based scholarship. But those scholarships aren’t that common at top schools. Top schools can attract top students without giving merit scholarships. So for the kids who need more help than the financial aid office thinks they should, this means they have to go to a school that is not the best they can get into.

And if you can’t do either of those things –– and let’s face it, both those things are hard to do –– then you are going to have to take out a loan.

My older son in particular didn’t realize how much pressure he was under to perform well on tests. Because when he was 13 or 14, I didn’t tell him how high he’d have to score to get in at a great school. I kind of assumed he wouldn’t score that high, so I didn’t really introduce the possibility of a great school.

But then his scores came back high. And other people started telling me he should go to a great school. I was sort of devastated, really. I had to tell him that he has to get a scholarship. I had to tell him he might have to take out loans. I had to tell him how much easier it is for kids who can just pay.

He’s still applying. So now we are waiting and hoping.

6 replies
  1. Maura
    Maura says:

    Sounds like you’ve left no rock unturned in being the best advocate for your sons, In case you haven’t read this book it helped my sister get her daughter through Johns Hopkins: Paying For College without Going Broke.
    Now for the ugly part- Open The tracks government spending… from every local municipality up to “The Swamp.” The Ivys make several times for a year in government subsidies than they take in from tuition. So really you and I and everyone else are already sending kids to Harvard and Yale. Here’s Open The founder Adam Andrzejewski explaining it:

    After watching that talk you might want to discourage your kids from trying at all, and switching to plan “B” working for the government. In his talk Adam asks the audience how many of them get eight weeks paid vacation a year? Most government workers do.
    Then to understand why and how college has exponentially out paced inflation in its exhorbitant cost:
    Watch this one:
    Colleges are heavily subsidized by the federal government but the flip side is, if the college Agrees to accept federal government college loans, then they must add infrastructure improvements a percentage of each year. Have you noticed most college students balk at the crappy cinderblock walled cell dorm room we all endured? They now have quads and luxury apartments with sitting areas and kitchens…and I’m not talking off campus housing, these are “dorms.” Well, someone has to pay for all that right?
    Apparently the student loan “bubble” has wall street more concerned than the former “.com” bubble.
    I know your main concern right now isn’t to be burdened by the corruption of the whole system you just want what all of us want, the best for your kids.
    But somehow this monster of government bloating is hurting that effort on every level for some of us.
    Another idea- it seems grad school is a must these days, maybe go to a lesser school initially and get into a better grad school. It’s not where you start, but where you end up… as a cocky surgeon from HSS (Hospital for Special Surgery told me. I questioned that he went to a mediocre SUNY school as an undergrad.. and be shot back with that answer. Touché!

  2. Jim Grey
    Jim Grey says:

    I wrote the last college tuition check for my youngest son the other day. He’s on track to graduate in the spring. My older son graduated two years ago and is now gainfully employed and lives independently. The older boy will be 20k in debt and the younger is paying off 15k in debt.

    Both were reasonably bright and capable, but not so much that they’d get into elite schools. So one went in-state public at Purdue, which is one of the great bargains in education as they have held costs flat for nine years. The other has Asperger’s and was afraid Purdue would be overwhelming. He wanted to study computer science so he found a small private school close to home that had a foundling CS program and was giving big scholarships to attract people to it. He believed that he’d navigate a small school successfully and he was right. Final cost was in line with Purdue. Their mom and I were able to cover the older son’s entire first year but after that we needed both of them to take the federal loan offered each year and we picked up the rest.

    These were prime years for saving for retirement, but most of that money went to colleges instead. Now that I’m done paying that I need to catch up on retirement. I told my sons not to expect there to be any money left when I die — I gave them their inheritance by paying the majority of their educations.

    We have one more in college, my wife’s youngest. He graduated high school in 3 years and then essentially took a gap year. We live in a surprisingly wealthy suburb now and most of his friends’ parents could just pay for the wonderful schools they all went to. We are not surprisingly wealthy and as our son looked at wonderful schools, and the debt he would need to incur, he pivoted entirely and enrolled at Indiana University Purdue University Indianapolis and commutes. It’s about 5k a semester. He wants to be a clinical psychologist, and his research tells him that his undergrad choice matters far less than his postgrad choices. Through his program at IUPUI he will receive a full degree from Indiana University — not elite, but also not community college. Then he’ll compete for as good a grad school as he can manage.

    I applaud all these kids’ choices. They all have or will have good educations that will set them up for reasonable success. Not elite success, but then, they never had to face the pressure of elite competition. They’ve had balanced lives and I expect that will continue.

    • Jim Grey
      Jim Grey says:

      P.S. I graduated from the most expensive school in Indiana in 1989 with $12,500 in debt. That’s more, adjusted for inflation, than either of my sons have. My monthly payment was entirely manageable and I expect my sons’ to be as well.

  3. ru
    ru says:

    I’m surprised you are shocked given how much you career coach. I wonder if your kids are. And the conversations of money managing is too hard in your household.

    Once they move onto non-home schooling environments, your kids will also observe different money mindsets manifests in different people. That will be another huge jump will be hard to digest for both sides. I mean that respectfully. I am surprised by how much my parents spending habits continuously influenced mine unconsciously to today and to an extent, how I picked my spouse.

    My parents were living at poverty line when I applied to university but we didn’t look like that type of family. The hard part was to present myself as someone who didn’t need financial help in person while look like someone who does on paper. Pretty quickly you figure out everything is a game.

  4. Bostonian
    Bostonian says:

    It’s nice to see you back in full swing, PT. I hope it means you’re getting better.

    In terms of scholarships to college, in our discussions with admissions officers we found the cutoff for need-based scholarships was astoundingly high. A lot of people don’t apply for student aid because they mistakenly think they make too much money. It’s well above 200K a year at many colleges, so unless you make a preposterous amount (say, more than 500K a year), fill out the forms.

    Second, in terms of merit scholarships, these are also far more common than most people know. “Merit” is a euphemism. What the award really represents is the calculated amount that makes it more likely that a student you want will go to your school. There is an entire industry (financial aid optimization) that provides data to colleges so that they can balance their incoming classes the way they want, using not only acceptance but specific aid packages (enrollment management).

    Here’s a good NYT article that ran a few years ago:

    Here’s a good paragraph that introduces so-called “merit aid:”

    The modern practice of enrollment management was invented in the mid-1970s by a man named Jack Maguire, who was then the dean of admissions at Boston College, and one of his most important innovations was to deploy financial aid strategically, as a way to attract the students he most wanted to admit, whether they genuinely needed financial assistance or not. It was something of a radical idea — giving aid to students who didn’t need it — and it didn’t seem, at first, to make sense. But in the 1980s, other colleges began experimenting with this new strategy, giving these grants the euphemistic name “merit aid,” and they found it worked remarkably well. It turned out that offering grants — even relatively small ones — to students with high family incomes made it significantly more likely that those students would enroll in your college. (If you called the grant a “scholarship,” it worked even better.) And if a well-off student was willing to pay, say, $30,000 of your $40,000 tuition, that was still a pretty good deal for your college.

    There are a few general statistics that stand out, regarding the further evolution of this concept: at private, non-profit four-year colleges, 89 percent of students now receive some sort of financial aid. The average tuition discount rate for freshmen passed 50 percent in 2018 (i.e. if you multiply the stated cost by the number of students, the colleges actually take in less than half that). That aid money is not evenly distributed; going to college is like being on an airplane, where people in different seats paid wildly different amounts of money to be there.

    PT, you’ve been studying, and talking about, college admissions since your kids were tiny. We all recall the “move to a rural state” idea. But here you are now in Boston, of all places, with two more Jewish kids to send to college, so such advantages won’t apply.

    If your elder son has anything he’s particularly good at, it’s more a matter of whether an individual school really wants him than anything. They all want to goose certain numbers to look good. They’re unlikely to count your kids as minorities, they’re not rural, and they’re not first-generation, so those stats aren’t going to be helped. Applying broadly may be be the best strategy, as you don’t know which colleges, this year, want a student just like him. The one mistake to avoid is failing to apply somewhere because you don’t think you can afford it, because there’s the official cost and the real cost and you don’t get to know the latter until later.

    I admit I’m talking from a great lack of personal knowledge. As you know, I planned for my kid to finish out high school and use his musical and mathematical advancement to his advantage in application, but it seems he bloomed earlier than expected, so I don’t actually have any experience in today’s competitive college admissions environment. He applied to one college, was accepted there, and they gave him more “merit aid” than we expected. Turns out it’s cheaper for us to send him to college than it was for us to send him to high school. We did not expect that.

  5. Not that Melissa
    Not that Melissa says:

    Students under the age of 24 are considered dependents by FAFSA (Free Application For Student Aid), with a few exceptions. Most of those conditions are probably not something you would every want for your child to go through.

    However, applicants under the age of 24 are considered independent if they are *married*. At this point, taking on the tens of thousands of dollars in student loans is probably more influential on one’s life than a starter marriage-of-convenience.

    New business idea: matchmaking middle-class kids into partnerships that reduce their parents’ financial aid burden.

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