johnnymk

http://www.nytimes.com/2006/04/10/ed...gewanted=print


April 10, 2006

By JONATHAN D. GLATER
Alexandra Baldari and her parents have talked a good deal over the past year about how to pay for her college education, and the upshot is this: If she enrolls at the University of Miami in the fall, she will bear much of the cost, which could total $40,000 or more a year, on her own.

"The problem here," said Ms. Baldari, who lives in Parkland, Fla. "is I'm 18 and looking to go to college, and my parents are looking to retire."

Ms. Baldari's parents earn about $100,000 a year, but her mother, Anne Angelopoulos, said little is left after paying for housing, three cars, gas, food and utilities, as well as saving to contribute to Ms. Baldari's 11-year-old brother's education. Ms. Baldari's parents prepaid for her to attend a public university in Florida, but she does not want to go to a public institution. The Florida Prepaid College Program allows parents to lock in the cost of college in the future by paying at today's prices.

"We did in fact plan for this and anticipate this and have it covered, in our opinion, but she has made a choice," Ms. Angelopoulos said, adding that the prepaid money could be applied to tuition at a private university but would not cover all of it. She said that while the family was trying to come up with ways to reduce how much their daughter would have to borrow, they did not see how they could take on more debt. "This is where we draw the line."

More middle- and upper-middle-class parents are drawing similar lines, limiting what they will pay for higher education. While financing has long been a strain, parents seem willing today to pass more of the burden on to their children, financial aid officers say. Many are worried about affording retirement and say their fixed costs eat up their income. Others have not saved enough or are helping pay for care for their aging parents.

"What I've really seen in the last 10 years is a generational shifting of the responsibility" to pay for college, said Ellen Frishberg, director of student financial services at Johns Hopkins University in Baltimore. "Our parents helped us pay for school. These parents are not as willing to help their children pay for school."

There are no data directly measuring shifts in who bears the cost of college. But financial aid officers at institutions from Johns Hopkins to the University of California, Los Angeles, to Carleton College say they have observed a shift in recent years.

Tuition and fees at many colleges have long exceeded the amount of money that students themselves are permitted to borrow for college costs under the federal loan programs. Parents, however, can borrow up to the cost of attendance under federal programs, known as PLUS loans.

But although the aggregate volume of federal loans to parents has risen over time, it is far outstripped by the total of private loans for education from banks, the number of which has increased steeply. Private lending is the fastest-growing piece of higher education finance and, responding to demand, more banks are expanding their offerings.

In 2004-5, for example, there were $13.8 billion in private loans for graduate and undergraduate education, up from $10.4 billion the previous school year. Meanwhile, the amount of parental PLUS loans, which 10 years ago nearly doubled that of private loans, totaled $8.4 billion in 2004-5. This is true even though private loans typically have less generous terms than federal government loans do: higher and variable interest rates, and interest that accrues even while the student is still in college, for example.

Although there are no statistics on whether those taking out private education loans are students or parents, financial aid officers said it seemed unlikely that parents could account for all of the increased private borrowing because they could get more favorable rates under the government program. They suggested that the private loan activity is indirect evidence of a phenomenon they have noticed anecdotally.

And they fear that after graduation, students may be left with onerous debt burdens.

Still, some students say they are unwilling to let financial constraints dictate where they go to college. Thomas W. Dillon, 20, of Warwick, R.I., decided to go to the University of Connecticut over the University of Rhode Island, where his parents would have covered tuition, and faces tens of thousands of dollars in debt.

"The way I see it is, I only get to go to college once," Mr. Dillon said. "If I have to pay an extra $20,000 a year, that's what I have to do."

Some parents may be asking their children to borrow for their higher education but then assisting them in the repayment, but that is difficult to discern. Mr. Dillon expects to receive some repayment help, for example.

And the pattern is not evident at elite institutions like Harvard and the Massachusetts Institute of Technology. Officials at these colleges suggest that parents may view the cost of tuition there as worth any sacrifice.

"It's such a new phenomenon that there's not a lot to compare it to," said Christine W. McGuire, director of financial assistance at Boston University. She said changing attitudes about debt were behind the trend.

"We're so comfortable with debt burden now as a society, and the parents already have a significant debt burden of their own, they may not see it as a big deal if students are also taking on large amounts of debt," she said.

Ms. Angelopoulos, Ms. Baldari's mother, said she had consulted with a financial adviser.

"I want to do whatever I can to send her to the college she wants to go to," Ms. Angelopoulos said. The advice? "She told me, the best thing you can do is have money to retire," Ms. Angelopoulos said, to avoid being a burden on her daughter.

Mr. Dillon's father, Thomas J. Dillon, who makes more than $100,000 a year as a vice president at a software company, spoke directly with his four children about their college options. There was no choice really, he said, because paying for all four to go to private institutions could cost more than $600,000, and Mr. Dillon still has tens of thousands of dollars in student debt from his own law school education, which he completed in the 1990's.

"We basically did two things," Mr. Dillon said. "One is we said to them, if you go to the University of Rhode Island, which is a state school, here's what we would pay."

But if any of the children chose to go to another college, as his eldest son did when he chose to go to the University of Connecticut, then their parents would only contribute the dollar amount that they would have paid for in-state public university tuition, he said.

Financial aid officers also say some middle- and upper-middle class families may not have saved enough in part because they thought, incorrectly, that financial aid would compensate. But financial aid calculations focus on assets (other than a home) and past, present and future income, and while such calculations allow for living expenses, the assumed lifestyle may be more austere than what many families have enjoyed or are willing to accept.

"We can't be awarding financial assistance based on discretionary choices" parents have made in spending their money, Ms. McGuire said. "You say that as nicely as you can: I can't give you more money because you have a large consumer debt. I have got to have an analysis that is not rewarding you for discretionary spending."

Concern about the higher interest rates and other burdens of private loans on borrowers has led Carleton College in Northfield, Minn., through the Associated Colleges of the Midwest consortium, to try to negotiate with lenders for better terms for their students, said Rod Oto, director of student financial services and associate dean of admissions at Carleton. "Our thinking was, joining together we might have a little bit more leverage."

To take advantage of growing demand, big banks are expanding their student loan operations. Chase recently bought Collegiate Funding Services, an education finance company based in Fredericksburg, Va., to be able to service student loans directly, sending out collection notices, processing payments and the like.

"We're viewing it as a very important segment for us," said Brad Conner, an executive vice president. "It certainly is one of the fastest growing."

Maggie Walsh, a senior at McIntosh High School in Peachtree City, Ga., said that although her top choice for college this fall was New York University, she was worried about the cost, which could come to more than $30,000 a year for tuition alone, according to N.Y.U.'s Web site. As a Georgia resident, she said, she could take advantage of a state scholarship program that offers full tuition at any public state university to any high school student with a B average.

"I've been thinking about it," Ms. Walsh said. "If I don't get any financial aid from such-and-such a college, is it worth going into years and years of debt? It's starting to look like more and more of a bad idea."

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DarkFury

What a spoiled little brat Alexandra Baldari must be... Well hey, she can go out and find a job to pay for her costs to go to "The U". I just hope that she can stay away from the Lacrosse team long enough to get through all 4 years.

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clutchy

interesting read. I have a similar situation although my folks helped me out quite a bit with my college tuition.

i went to a private school @ 25k/year for 4 years. I now have about $26k in college loans. I'm also back in school again and paying about 4k per year at a state school. It's an interesting feeling actually being able to pay your own way through school. I kind of enjoy it and it makes me value my education more.

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LK was treated unfairly

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Daedalus

I'm wondering why he wants to go there so badly. If his post-graduate income is anything close to average, it will take him decades to pay it off.

ShawnLee

The chicks dude, the chicks! But in all seriousness, that's a good question.

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kgsilvas

Grrr! I hate that my logon keeps timing out. This re-type is going to be shorter!

I don't see a problem here. Where is it written that parents have to saddle themselves with hugh amounts of debt to send their kids off to whatever college they want all expenses paid??? I never expected my parents to pay for my college education, and they didn't.

I didn't get saddled with tremendous debt because I went to a state school for the first two years, then finished off at a private school.

johnnymk

I wonder what kind of mega-wedding she will want when she gets married?

You know, some kids are a liability from the day they are born.

DarkFury

/me prays that DFJ will appreciate the little money I have set aside (and continue to contribute to) for his college fund in 15 years...

avlena

My dad helped out how he could (ex: he paid for my car insurance, but I made the payments on my car), but probably 90% of school was financed between my scholarships and my student loans. And I feel a sense of pride that I did it by myself, or mostly anyway. My parents did enough by providing emotional support.

If I can afford to send my kids to a private college, I will, but putting myself into a large debt years before I'm supposed to retire and live on a fixed income?? I went to a state school, and came out just fine, and so I would hope my kid wouldn't be snotty enough to turn down a good education. The student will have a lifetime to slowly pay off their student loan over the years without really affecting his/her lifestyle too much. IMHO, student loans are as much a fact of life as a mortgage or car loan is.

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VTGreg

Pretty much echoing what everyone else is saying, but I applaud these parents for saying, "We will pay $X for your college and you have to cover the rest if you want to go somewhere more expensive."

There are plenty of great bargains out there that have great programs and great name recognition.

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Daedalus

LOL I thought all kids were liabilities. I don't know how much diapers cost but my buddy swears that his baby goes through 14 a day.
I'm not sure where the idea of ponying up for a kid's private school tuition came to be seen as normal. Definitely not in my parents' generation, and definitely not when I was a freshman. The subjects of the article are not rebelling against the norm. Tuition is just another item on a list of costs that are rising much faster than incomes, through competition and budgetary woes mostly.
Assuming a 30-year career, a person would have to make about $6k more per year, every year, just to break even on their $80k tuition upper. Some schools are probably worth it, depending on the chosen field, but if a high school senior wants to get a BA and has no idea what he/she wants to be in life, maybe think twice.

cheapchinese

I basically loan my tuition....and some fed, state, univ grants...summer is when I become full time status@ my work place....and save money for entertainment expenses...during the school year. the part time pays for rent.. and living. Its weird asking money from my mother, as I come from a single parent family. Plus, I'm a guy, somehow I was taught that being the male in the family I had to assume more responsibility, I haven't taken money from my mom ever since I hit 18, I give money to my mom during chinese new year, and she give me back some, just for ceremonial purpose.

UCSD is a state school with quality education, I am proud to attend here.

DarkFury

7 diapers a day were the norm for DFJ.... Your friend must be over-changing them (or overfeeding the child so that it poops that constantly)

As far as generational funding... my Brother and I didn't have "college funds" but both of us managed to get college educations. We were both lucky enough to get scholarships (his athletic, mine academic) to attend college and my parents assisted in our "living conditions" (i.e. paid our rent and helped with our expenses).

Both of us were LUCKY to have that scholarship money... without it, we probably wouldn't have been able to go to school without severe financial hardship to our parents. In my case, my Father passed away during my Junior year in High School... so I know that my Mom wouldn't have been able to single handedly put me through school (especially none of those Ivy league or Private institutions), so I pretty much got the best education my state run school could provide and was happy to get it.

These "spoiled kids" kinda make me sick to my stomach... bitchin' and cryin' that they can't go to the "party school" of their choice when another "just as good, if not better" yet "paid for" option exists. Truly the DEFINITION of "spoiled brat" in my opinion... so yeah I thouroughly agree with the parents makin' them pay the extra on their own if they wanna go there rather than the school that the parents could afford (or set aside for). Kids gotta realize how hard the struggle is just to come up with this kind of money.... we want the best for them, but dayuuum... too far is still too far.

And you wonder why SO many kids from POOR families never can get ahead in life... many of them will NEVER see the inside of a college lecture hall due to financial reasons alone.