Expensive Colleges - Investment Worth It

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Kagord
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Expensive Colleges - Investment Worth It

Post by Kagord » Sat Dec 22, 2018 11:06 am

One of my daughters wants to go to a top 10 school, these are 70-95K a year. Because we have saved, and we have 2 in more children already in "affordable" state univerisities (25-35K year each), and 2 more coming up to go to college, I've put a hard cap on 30K/year per child on what I will spend. Meaning, that I will be at 90K next year for us supporting 3 children, and maybe 120K for the following year, that's a sizable chunk of take home pay.

So, FAFSA returns 0 for every school, because, apparently 5% of non retirement savings is expected to contribute, which is what is calculated for us, even with other children in school. Our daughter is discouraged because she has prepped (all A's with hard courses in a top high school, 12 AP courses, president leadership positions in school clubs, 100s of hours of charity time, works a part time job, letters in sports...etc) to position herself to be accepted in a high tier school. With all that effort, she can't afford it (doesn't want 250K in debt) and academic scholarships don't really exist because everybody accepted in high tier schools is already top 1% academically gifted, you're just average at this point.

So, she blames us, as her other, "less well to do" friends, are practically getting a free ride in these schools. So all that effort, she is realizing, was for nothing, no payoff for her. I just don't see any ROI here for 250-300K more for an education. She's not speaking to us at this point, even after we've explained the return on the money we've saved cannot buy what she wants. There's equity considerations with the other children as well. She can get a free ride at some 30-40K/year schools, just not at the top ones. And besides, she'll likely go into medicine or law, so undergrad doesn't matter much.

Am I off base here, any boglehead's in a similar situation, thoughts?
Last edited by Kagord on Sat Dec 22, 2018 11:15 am, edited 1 time in total.

Gill
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Re: Expensive Colleges - Investment Worth It

Post by Gill » Sat Dec 22, 2018 11:14 am

I don't think the real question is whether expensive colleges are worth it. I think, for the most part, yes, they are worth it. The real question is whether the expense makes sense in your family context and, as you've carefully outlined and with five children to put through college it clearly doesn't make sense for your family. It may be difficult now, but she has to understand you simply can't pick up the entire tab for such an expensive education when there are four other siblings to educate.
Gill
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SchruteB&B
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Re: Expensive Colleges - Investment Worth It

Post by SchruteB&B » Sat Dec 22, 2018 11:16 am

Has she even been accepted yet? Maybe the admissions office will do the hard work for you. From what I’ve heard from friends so far, this admissions season at elite schools is off to a brutal start. I know Kids with 4.0+ and 35+ ACT that have been rejected during early decision so far.

You can never really know what other families are paying for college. A lot of them get loans and call it financial aid.

And make sure you understand—your child can only get a very limited amount of loans in their own name, something like $5500 per year. Everything else requires a cosigner, namely you, and then it is your credit and your money on the line.

dbltrbl
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Re: Expensive Colleges - Investment Worth It

Post by dbltrbl » Sat Dec 22, 2018 11:19 am

What does she plan on majoring in? Does she plan on ( She can and will change her mind) graduate school?
I general you are correct ROI is bad on those schools. Essentially you want to be a big fish in a pond or small fish in the ocean.
On the other hand she is more likely to study harder at a school of her choice.
My suggestion is she can go to school of her choice but your contribution towards her will be same 30000 or so and she can get loans for rest. THat is her choice. You are in noway obligated to provide the most expensive education.

If she plans on graduate school, she can go to state school now and graduate school of her choice in future.

Good Luck.

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vineviz
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Re: Expensive Colleges - Investment Worth It

Post by vineviz » Sat Dec 22, 2018 11:22 am

In order for your expected family contribution to exceed $100k, your non-retirement liquid assets must be in excess value of $2 million. Is that right?

If so, clarifying that this is just a matter of opinion and/or personal values, I’d say that putting a hard cap of $30k per kid is probably unnecessarily rigid.

First, there are definitely top-tier schools where you will be able to negotiate something less than full list price.

Second, with that amount of wealth there are definitely estate planning options that can get Daughter C to Yale or Stanford while still being fair to the other four children.

Having a conversation about the value of college and the dangers of debt is useful, but is an arbitrary cap of $30k worth risking a lifetime of alienation and resentment with a child? I’m not saying I would capitulate to her every whim, but if I had the means to actively listen to her concerns and search for a compromise then I would absolutely do it.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Kagord
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Re: Expensive Colleges - Investment Worth It

Post by Kagord » Sat Dec 22, 2018 11:24 am

She can't do binding do the financial situation, we'll see, I would say, it's likely she will be accepted in one, but yeah, definitely not all will accept, as there's more people with top grades and scores than open enrollment.

The one thing is I keep wondering, maybe it would payoff, I.E. a contact later in life comes to fruition, opens a door.
Last edited by Kagord on Sat Dec 22, 2018 11:27 am, edited 1 time in total.

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ResearchMed
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Re: Expensive Colleges - Investment Worth It

Post by ResearchMed » Sat Dec 22, 2018 11:27 am

Gill wrote:
Sat Dec 22, 2018 11:14 am
I don't think the real question is whether expensive colleges are worth it. I think, for the most part, yes, they are worth it. The real question is whether the expense makes sense in your family context and, as you've carefully outlined and with five children to put through college it clearly doesn't make sense for your family. It may be difficult now, but she has to understand you simply can't pick up the entire tab for such an expensive education when there are four other siblings to educate.
Gill
Is that "hard cap" a decision that you've made by choice, or is it a necessity?

That is, all of those college expenses total a staggering amount if all is paid out of pocket.
But there are some here who probably "can afford it" (without having any major effect on lifestyle or retirement style, etc.), which is different from someone who genuinely cannot afford it, or "could" afford it, but with considerable sacrifice.

IF you've got the money, did you plan/hope to leave inheritances to your children? Perhaps considering adjusting things that way would be one way to handle it?

One never knows for sure if various "networking" will really make a difference, but there are ways to increase the likelihood, ceteris paribus. And a single "good connection" can really make a difference, if one is fortunate enough to have that happen. Encountering more "good connections" just ups the chances...

Although a "top college" isn't the only way to have some fortunate encounters, it could really make a difference.
And the credential can make a difference early in one's career (and possibly for grad school as well).
Once one is well established, the undergrad "name" starts to fade. But it can help "getting there" - although it's certainly possibly without. But IF you can afford it, why not help her if she is really sharp and also motivated?

RM
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Silas
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Re: Expensive Colleges - Investment Worth It

Post by Silas » Sat Dec 22, 2018 11:27 am

I think expensive colleges are silly (and i used to teach at one)

It is an epic waste of money and resources to borrow money for college, as the RoI simply isn't there. This isn't the 1950s--everyone has a degree, and many employers care very little about the piece of paper.

As a guy who works in the bleeding-edge of the IT industry and who has traveled around the world quite a bit, this is the approach I am taking with my two boys:

1. Two years at a good community college (we are lucky to have a good one in our area). The boys will prove to me that they can handle their studies, cook and clean for themselves, etc.
2. Two years at any university of their choosing, preferably one overseas.
3. They will study three things: business, technology, and foreign language. They can minor in whatever they want, but I want proficiency in these areas when they graduate. The humanities are totally worthless, and even the hard sciences have a poor rate of return and tend to lead to more expensive schooling and time wasted.

The modern economy wants you to be technologically savvy, have an understanding of business and finance, and to speak a foreign language. Employers don't care if you graduated from Williams College vs. Franciscan College. They care if you can do the job they need you to do.

And don't wait for college to get the training you need. Start learning NOW

We homeschool, and today, my 15-year old will be doing the following for me: recompiling a Linux kernal and writing some scripts, learning Farsi with an online tutor, and reading some chapters in his economics book.

Mark Cuban has a lot to say about this (college is a business decision).

Broken Man 1999
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Re: Expensive Colleges - Investment Worth It

Post by Broken Man 1999 » Sat Dec 22, 2018 11:28 am

Kagord wrote:
Sat Dec 22, 2018 11:06 am
One of my daughters wants to go to a top 10 school, these are 70-95K a year. Because we have saved, and we have 2 in more children already in "affordable" state univerisities (25-35K year each), and 2 more coming up to go to college, I've put a hard cap on 30K/year per child on what I will spend. Meaning, that I will be at 90K next year for us supporting 3 children, and maybe 120K for the following year.

So, FAFSA returns 0 for every school, because, apparently 5% of non retirement savings is expected to contribute, which is what is calculated for us, even with other children in school. Our daughter is discouraged because she has prepped (all A's with hard courses in a top high school, 12 AP courses, president leadership positions in school clubs, 100s of hours of charity time, works a part time job, letters in sports...etc) to position herself to be accepted in a high tier school. With all that effort, she can't afford it (doesn't want 250K in debt) and academic scholarships don't really exist because everybody accepted in high tier schools is already top 1% academically gifted, you're just average at this point.

So, she blames us, as her other, "less well to do" friends, are practically getting a free ride in these schools. So all that effort, she is realizing, was for nothing, no payoff for her. I just don't see any ROI here for 250-300K more for an education. She's not speaking to us at this point, even after we've explained the return on the money we've saved cannot buy what she wants. There's equity considerations with the other children as well. She can get a free ride at some 30-40K/year schools, just not at the top ones.

Am I off base here, any boglehead's in a similar situation, thoughts?
Well, it seems she just wasn't as good a candidate as others to secure scholarships. I would tell her to accept offers she has received. She will get over it, or she won't. I'm sure it was a hard slap in the face when she realized she was just a big fish in a small pond. Life has a way of resetting a lot of things, including ego. Why she blames you for her credentials being found lacking makes no sense, as her "less well to do" friends applications must have been shinier than her's. As well, getting a full ride at any decent college means her efforts were not for nothing. I'm sorry, but I sense a whiff of entitlement from her attitude.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Topic Author
Kagord
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Re: Expensive Colleges - Investment Worth It

Post by Kagord » Sat Dec 22, 2018 11:31 am

Yes, entitlement going on here for sure, we're concerned if we loan the rest, it won't be paid back. Yes, we have 2M in non retirement investments, for some reason, I still feel poor, a 5% return is only 100K. I drive a 19 year old car to work, me and my wife both had depression era mentality driven into us, we're probably doing this to our children.

Edit, I actually love my 2000 Toyota Camry, it keeps going, does everything I need.
Last edited by Kagord on Sat Dec 22, 2018 11:39 am, edited 2 times in total.

desafinado
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Re: Expensive Colleges - Investment Worth It

Post by desafinado » Sat Dec 22, 2018 11:37 am

So, a top university education is a bundled product. It's part luxury consumption good and part financial investment. I think whether or not you should think of it as more one than the other depends on a few factors.

1. Your student's aspirations and specific talents. There *are* doors that are only open, or open much wider, at a handful of top schools. In my opinion, these doors account for most of the marginal financial value of going to a top school.
2. The school in question. Harvard and say, Northwestern, are both expensive (at sticker) and are both very good schools. The academic product is very similar. The university experience is also similar. However, the bespoke job opportunities are much more widely available at Harvard. I think this advantage fades rapidly after the top handful of schools (maybe just Harvard, Yale, Princeton, Stanford, and MIT).
3. Value placed on optionality. At the top schools, your career choice is often less constrained by academic major. You tend to be able to access whatever field interests you, or failing that, find something where you can make a lot of money.

If none of those apply to you, then you should think of it as a luxury consumption good. It is a great luxury consumption good. You will always have something to talk about at parties and you'll meet a bunch of really interesting people and be able to travel to far away places and go to lectures with world famous professors.

Personally, the financial return I can attribute to going to a top school instead of a state school is significant. My total compensation in my first job out of college is something like 2-4x more than I would have achieved from a state school. I would not have known my job existed if I went to a state school, let alone been able to get it, so I am comfortable with that counterfactual analysis.
Last edited by desafinado on Sat Dec 22, 2018 11:44 am, edited 1 time in total.

02nz
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Re: Expensive Colleges - Investment Worth It

Post by 02nz » Sat Dec 22, 2018 11:39 am

Several thoughts:

- There's far too much obsession - in general - with attending a "top" school. I attended a top school and had a great experience, I'm glad my parents made it possible for me. But for any student there's at least a dozen (usually far more) schools that can be the right fit - academically and in many other ways. It's easy to lose perspective, and it can seem in the moment that there's only that one "dream" school; that's an illusion. Students and parents need to get their heads out of the (largely meaningless) rankings and think about the right fit for them. One of the considerations, obviously, is financial. And yes if she goes on to law or medical school that will count more than undergrad, but I wouldn't jump too far ahead in this conversation either.

- "So all that effort, she is realizing, was for nothing, no payoff for her." Not true, not by a long shot. The hard work will absolutely pay off whether she goes to a super-elite school or just a "good" school. If that is what she thinks (or is saying), it just shows she has a lot more growing to do (as HS seniors all do!).

- The FAFSA isn't necessarily the last word. I'm not intimately familiar with the financial aid process today, but my understanding is that the very top and most expensive schools do their own calculations separately from the FAFSA (in my day they used the CSS Profile more than FAFSA, maybe that's still true). So don't jump to conclusions, work through the admission and financial aid process. Perhaps there'll be a pleasant surprise (or a less pleasant one where the admission office solves the problem for you).

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Kagord
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Re: Expensive Colleges - Investment Worth It

Post by Kagord » Sat Dec 22, 2018 11:42 am

She's been trying to work with admissions, initially for a binding application, explaining her plight, they weren't too helpful, but maybe she needs to try harder.

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Kenkat
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Re: Expensive Colleges - Investment Worth It

Post by Kenkat » Sat Dec 22, 2018 11:44 am

It seems like there’s a little bit of “it’s worth it if you pay for it but not if I pay for it” coming from your daughter. I would try to work with her a little bit, but I would put the problem at least partially back in her court to solve. Sometimes an expensive college might be worth it if it gets you to a certain job at a certain company, but I suspect a lot of times it is not worth it for many people. In general, nobody cares where you went to school after you’ve been working 5 or 10 years. Especially if it is undergrad with further education somewhere else. Yes, there are exceptions but mostly not is my experience.

To put it into a sports analogy, nobody cares that Tom Brady was a 6th round draft pick. If you are good, you will eventually rise to the top in the business and professional world - regardless. Exceptions might be if you have plans to try to rise to a very high level in a profession - a federal judge, a top medical researcher, a high level wall street or business type. Then it probably matters. I would just remember, most football players don’t make it to NFL.

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ClevrChico
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Re: Expensive Colleges - Investment Worth It

Post by ClevrChico » Sat Dec 22, 2018 11:53 am

I'd be hard pressed to think it's worth it at all for an undergrad. What's an expensive college going to get you? Maybe networking with other students that can afford it or take on massive debt? Finding a "rich" husband? I'd much rather put the resources into grad school, as that would have better roi.

Anything more than splitting an undergrad with community college + public university is probably extravagant if we're being honest.

If my dd blamed me for this, I'd remind her who owns her 529 account. :twisted:
Last edited by ClevrChico on Sat Dec 22, 2018 11:57 am, edited 1 time in total.

HEDGEFUNDIE
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Re: Expensive Colleges - Investment Worth It

Post by HEDGEFUNDIE » Sat Dec 22, 2018 11:53 am

You have over $2M in liquid assets. You can afford it. Whether it is worth it depends on your child’s motivation for going.

Here is another way to think about it. Will you expect to leave at least $250k (inflation adjusted) to this child as an inheritance in the distant future? If so, do you think she’ll get more value out of this money now?
desafinado wrote:
Sat Dec 22, 2018 11:37 am
2. The school in question. Harvard and say, Northwestern, are both expensive (at sticker) and are both very good schools. The academic product is very similar. The university experience is also similar. However, the bespoke job opportunities are much more widely available at Harvard. I think this advantage fades rapidly after the top handful of schools (maybe just Harvard, Yale, Princeton, Stanford, and MIT).
I know you just picked Northwestern at random, and I actually agree with all of your other points. But as a proud NU grad let me just point out that classmates of mine were recruited by all the major investment banks and consulting firms. Two friends in my class joined D. E. Shaw, the famously selective hedge fund where Jeff Bezos incubated Amazon.

snowman
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Re: Expensive Colleges - Investment Worth It

Post by snowman » Sat Dec 22, 2018 11:55 am

OP, I still don’t understand what exactly happened and when. A lot of BHs post similar question – is the top 10 school worth it? And you will get a lot of responses, both ways. However, the issue today for vast majority of students and parents is not ROI, the issue is getting accepted!

Was she accepted already? If so, did she apply ED or EA? If ED – did you tell her NOT to apply ED, because you cannot commit financially if accepted? Was that the cause of family tension? Or you allowed ED application, she got accepted, and NOW you are saying you cannot pay? Or did she apply EA to multiple schools? It’s hard to tell from your post what exactly is going on.

Don’t take it the wrong way, went through the process twice in the last 4 years, so I am very familiar with it and just trying to understand better your situation before offering any suggestion.

quantAndHold
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Re: Expensive Colleges - Investment Worth It

Post by quantAndHold » Sat Dec 22, 2018 12:00 pm

Kagord wrote:
Sat Dec 22, 2018 11:42 am
She's been trying to work with admissions, initially for a binding application, explaining her plight, they weren't too helpful, but maybe she needs to try harder.
Unfortunately, “my parents have the money but won’t cough it up” is unlikely to work for her. Elite colleges are under fire right now for having too many upper income kids, and not enough lower income. They aren’t likely to pull aid resources from a low income kid to support someone who the FAFSA says can afford to pay, unless that kid is really, truly, extraordinary.

The main ROI for an elite college is mostly the networking. In certain jobs and certain fields, that is very important. Some recent study showed that the ivy effect on career is apparently more pronounced with women than men, so there’s that, too. If she is planning a career that will require grad school, then state school for undergrad, then elite school for grad school would be viable, and a lot more cost effective.

So ROI really depends on what she’s planning on doing with the degree.

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Re: Expensive Colleges - Investment Worth It

Post by SchruteB&B » Sat Dec 22, 2018 12:02 pm

snowman wrote:
Sat Dec 22, 2018 11:55 am
OP, I still don’t understand what exactly happened and when. A lot of BHs post similar question – is the top 10 school worth it? And you will get a lot of responses, both ways. However, the issue today for vast majority of students and parents is not ROI, the issue is getting accepted!

Was she accepted already? If so, did she apply ED or EA? If ED – did you tell her NOT to apply ED, because you cannot commit financially if accepted? Was that the cause of family tension? Or you allowed ED application, she got accepted, and NOW you are saying you cannot pay? Or did she apply EA to multiple schools? It’s hard to tell from your post what exactly is going on.

Don’t take it the wrong way, went through the process twice in the last 4 years, so I am very familiar with it and just trying to understand better your situation before offering any suggestion.
This. You seem confident that she will get in to some top school but that is far from a foregone conclusion, especially if she did not apply early decision.

desafinado
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Re: Expensive Colleges - Investment Worth It

Post by desafinado » Sat Dec 22, 2018 12:11 pm

HEDGEFUNDIE wrote:
Sat Dec 22, 2018 11:53 am
I know you just picked Northwestern at random, and I actually agree with all of your other points. But as a proud NU grad let me just point out that classmates of mine were recruited by all the major investment banks and consulting firms. Two friends in my class joined D. E. Shaw, the famously selective hedge fund where Jeff Bezos incubated Amazon.
go wildcats! :beer

mouses
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Re: Expensive Colleges - Investment Worth It

Post by mouses » Sat Dec 22, 2018 12:13 pm

I think a top college is definitely worth it. It was in my long ago day when it gave me instant credibility, which I would not have otherwise had, as a female in a scientific field. However, I got scholarships so the enormous debt burden was not there.

I would let her apply and see if she gets admitted and gets any financial aid. Then it is up to her to decide if she wants the debt to pay over that plus your $30,000.

If she doesn't get in, this is all moot and the problem goes away.

UPDATE: adjusting the inheritance sounds like a possible way out of this.
Last edited by mouses on Sat Dec 22, 2018 12:20 pm, edited 1 time in total.

Cruise
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Re: Expensive Colleges - Investment Worth It

Post by Cruise » Sat Dec 22, 2018 12:14 pm

OP: ResearchMed said it well: Adjust your daughte’s inheritance to compensate for early giving.

Another issue: With such a high achiever, I’d be concerned with depression setting in when she attains her goals for college acceptance, but fails to achieve them due to an external force beyond her control. (See “learned helplessness). She really could give up under a scenario like this. How would you feel about your $2M in the bank then?

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unclescrooge
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Re: Expensive Colleges - Investment Worth It

Post by unclescrooge » Sat Dec 22, 2018 12:34 pm

Silas wrote:
Sat Dec 22, 2018 11:27 am
I think expensive colleges are silly (and i used to teach at one)

It is an epic waste of money and resources to borrow money for college, as the RoI simply isn't there. This isn't the 1950s--everyone has a degree, and many employers care very little about the piece of paper.

As a guy who works in the bleeding-edge of the IT industry and who has traveled around the world quite a bit, this is the approach I am taking with my two boys:

1. Two years at a good community college (we are lucky to have a good one in our area). The boys will prove to me that they can handle their studies, cook and clean for themselves, etc.
2. Two years at any university of their choosing, preferably one overseas.
3. They will study three things: business, technology, and foreign language. They can minor in whatever they want, but I want proficiency in these areas when they graduate. The humanities are totally worthless, and even the hard sciences have a poor rate of return and tend to lead to more expensive schooling and time wasted.

The modern economy wants you to be technologically savvy, have an understanding of business and finance, and to speak a foreign language. Employers don't care if you graduated from Williams College vs. Franciscan College. They care if you can do the job they need you to do.

And don't wait for college to get the training you need. Start learning NOW

We homeschool, and today, my 15-year old will be doing the following for me: recompiling a Linux kernal and writing some scripts, learning Farsi with an online tutor, and reading some chapters in his economics book.

Mark Cuban has a lot to say about this (college is a business decision).
Very interesting.

How did you design the syllabus for your kid?

jerryk68
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Re: Expensive Colleges - Investment Worth It

Post by jerryk68 » Sat Dec 22, 2018 1:02 pm

Kagord wrote:
Sat Dec 22, 2018 11:06 am
One of my daughters wants to go to a top 10 school, these are 70-95K a year. Because we have saved, and we have 2 in more children already in "affordable" state univerisities (25-35K year each), and 2 more coming up to go to college, I've put a hard cap on 30K/year per child on what I will spend. Meaning, that I will be at 90K next year for us supporting 3 children, and maybe 120K for the following year, that's a sizable chunk of take home pay.

Am I off base here, any boglehead's in a similar situation, thoughts?
You already are putting two thru school and set the tone in the family by paying for only state schools. So if you break your unwritten rule of paying beyond a state university be prepared to do it for the last two and to hear it from the first two on how they suffered by attending state schools debt free. She is attempting to lay heavy guilt on you dad, resist it.

I experienced almost same thing you are going through with my daughter and I said no. She graduated from a state university debt free and I did pay 90% of her tuition/living expenses when she went to graduate school. I keep a mental math note in my head how much each of my kids have gotten after age 18 and try to keep it approximately even. Some of them have received unsolicited gifts or as I call them dad dividends over the years in my efforts to even the score. This is how I run my bank of dad.

Whakamole
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Re: Expensive Colleges - Investment Worth It

Post by Whakamole » Sat Dec 22, 2018 1:08 pm

Cruise wrote:
Sat Dec 22, 2018 12:14 pm
OP: ResearchMed said it well: Adjust your daughte’s inheritance to compensate for early giving.
This will just kick the can down the road. Daughter will be bitter as hell once OP passes and it will tear the family apart; that, or OP ends up giving in and both paying extra for this daugther's education, and splits the estate evenly, which will make the other kids bitter.

gips
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Re: Expensive Colleges - Investment Worth It

Post by gips » Sat Dec 22, 2018 1:09 pm

We' have two in college, one graduated two years ago. As is my wont, I've done a ton of reading and research on this subject and here's my recommendation on how your daughter gets a payoff: While it's true, most of the top schools don't offer merit scholarships, many of the schools in the 20-50 range do offer merit scholarships that can bring their cost into your $30k limit. My kids hit paydirt at schools like u of rochester and tulane, which brought the cost in line with our state schools.

You haven't said how your D fared on her standardized tests, IMO that's a large determining factor for scholarships. Also, it will be very difficult to get into a top 10 school without 1% percentile performance.

as an aside, it's best that you had the conversation with her before she applied. My dad waited until I was admitted to a top school before admitting that he wasn't going to pay a dime for my education. When asked why he waited so long to tell me, his response was: "I didn't think you'd get in". Not a great day in my life and not a great memory of my dad.

edit: also, if you live in states like wisonsin, virginia, michigan or california, your D is obviously going to receive a top education at a great school.
Last edited by gips on Sat Dec 22, 2018 1:20 pm, edited 1 time in total.

randomguy
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Re: Expensive Colleges - Investment Worth It

Post by randomguy » Sat Dec 22, 2018 1:13 pm

HEDGEFUNDIE wrote:
Sat Dec 22, 2018 11:53 am
You have over $2M in liquid assets. You can afford it. Whether it is worth it depends on your child’s motivation for going.

Here is another way to think about it. Will you expect to leave at least $250k (inflation adjusted) to this child as an inheritance in the distant future? If so, do you think she’ll get more value out of this money now?
desafinado wrote:
Sat Dec 22, 2018 11:37 am
2. The school in question. Harvard and say, Northwestern, are both expensive (at sticker) and are both very good schools. The academic product is very similar. The university experience is also similar. However, the bespoke job opportunities are much more widely available at Harvard. I think this advantage fades rapidly after the top handful of schools (maybe just Harvard, Yale, Princeton, Stanford, and MIT).
I know you just picked Northwestern at random, and I actually agree with all of your other points. But as a proud NU grad let me just point out that classmates of mine were recruited by all the major investment banks and consulting firms. Two friends in my class joined D. E. Shaw, the famously selective hedge fund where Jeff Bezos incubated Amazon.

I think the cut off for general academic recognition is more like top 20 (i.e. Northwestern is there) and in specific fields more like top 10.

To some extent you need to compare your alternatives. If the choice is studying computer science at stanford or studying engineering at University of California Berkley, your picking from a couple of top 10 programs. It doesn't matter. Make it Stanford and University of Fl (#49 program) then yeah it matters. The programs might not be that different but the amount of companies showing up recruiting interns is vastly different, your network is diffferent, and so on. But good luck trying to quantify that. If your roommate happens to start dinder.com (you know tinder for dogs) and you become a zillionaire, that 250k will be the best investment ever. Drop out and become a bum, not so much. And most of the time it will be right in between.

And to some extent your daughter is right. It is unfair that if she was born to parents only making 100k that she would get a free ride. Of course she might not have had all the same opportunities up until now. What she needs is a plan. Hoping for financial aid is one thing. Applying for scholarships is another. Doing ROTC (probably too late) is another. Maybe she can close that 160-200k gap (and 95k/year tends to require a lot of personal spending.) to something that seems more doable.

And to some extent planning on grad schools is foolish. Back in my day everyone was premed until chemistry. Then half of them became business majors:)

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Re: Expensive Colleges - Investment Worth It

Post by livesoft » Sat Dec 22, 2018 1:16 pm

I'm a little ambivalent about the OPs situation. I went to a private elite university and my parents didn't pay for tuition, fees, nor books. I worked 20 hours per week to pay for it and graduated in 3 years with essentially no debt. So your daughter should apply and see what happens. She appears to be intelligent enough to work her way around her parents.

And your argument that she should get college for free someplace is not fair I think, so I would suggest you never use it. If you are paying at least $30K a year for your other children, then you should expect to pay $30K a year minimum for her.

We paid for / are paying for our kids education. One went to a private elite university (in top 3 in some programs, otherwise top 10 in many surveys) at sticker price. She worked during school, but we didn't make her use her earnings for college expenses. She also graduated early which saved some bucks.

The other went to a Tier 1 state university. It was dirt cheap in comparison.

Both kids will be fine in life I think.

If 5% of your non-tax-advantaged accounts are enough to pay for all those college educations, then I think that your taxable portfolio probably increases in value each year on average more than what you pay out. For us, I remember the portfolio going up by the full cost of 4 years at the private university in one year for several years. Under the circumstances, college expenses were truly a non-issue. You have described something similar: College expenses are a non-issue.

And though one shouldn't compare their children, it seems you have some college graduates or near graduates. What are the outcomes of your daughter's siblings? That will help me understand what the issues are.
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Re: Expensive Colleges - Investment Worth It

Post by almostretired1965 » Sat Dec 22, 2018 1:28 pm

My own view, as someone who did attend a top tier institution, is that if you have to pay your own way, it is not a good investment from a purely mercenary point of view. What data there is on this question comes from an old study by Alan Krueger that looked at the outcomes of candidates who were accepted to Ivy League institutions but who chose not to attend, and compared their salaries to their cohorts that did. This is as close to a natural experiment as one is likely to find in the literature. It turns that on average, those who chose not to attend did just as well. (For what it's worth, my parents were lower middle class and had zero savings, so both my sister and I got more or less free rides, though we had to borrow/work to cover room and board. The joke was that my Dad probably saved money sending us to school since he did not have to feed us anymore.)

I will say this: I thought I got a great education and from an academic point of view, loved the experience. Made some great friends and was mentored by someone on the junior faculty at the time who eventually won a Nobel prize. (I attended the trade school on the Charles River near Boston, so the non-academic side of things, were, frankly miserable.) In the end, did the education and the skills I learned really make a difference in terms of my career? I seriously doubt it. It helped me get my first job since that employer recruited almost exclusively at high end universities, but after that, I doubt that anyone really cared. I suppose it might get someone to take another look at your resume, but I'm pretty sure things would have turned out more or less the same if I had chosen to go the state university that most of my friends ended up attending. Looking back, what has mattered most, my analytical skills, ability to abstract complex problems, good deal of common sense, were all things that I already possessed. What has held me back, a tendency to procrastinate, getting easily frustrated when things stagnate, were not traits that schooling was able to fix.

I think the way you may need to look at it, unfortunately, is as a luxury good to show off to your friends and family, or a reward for your daughter for having worked so hard in high school. Best of luck to you, but whatever happens, I hope she gains the maturity at some point to better appreciate where you are coming from and her own sense of entitlement .....
Last edited by almostretired1965 on Sat Dec 22, 2018 1:33 pm, edited 2 times in total.

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Re: Expensive Colleges - Investment Worth It

Post by gips » Sat Dec 22, 2018 1:29 pm

livesoft wrote:
Sat Dec 22, 2018 1:16 pm
And though one shouldn't compare their children
sorry for quoting you a little out of context, but I agree with this statement. However, we put this metric in place for our kids: we'd pay the difference for school of choice as long as it was demonstrably much better ranked than our state school. I imagine OP might make a similar statement to his kids: "we'll pay for a top 10 school if you get in" I'm sure his D is a very strong student but from a probability pov, probably won't be admitted to a top 10. and if she is, I'm guessing he can afford it.

best,

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Re: Expensive Colleges - Investment Worth It

Post by sambb » Sat Dec 22, 2018 1:33 pm

I feel that an ivy has an ROI. At least it did for me. Ymmv.

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Re: Expensive Colleges - Investment Worth It

Post by ResearchMed » Sat Dec 22, 2018 1:36 pm

almostretired1965 wrote:
Sat Dec 22, 2018 1:28 pm
My own view, as someone who did attend a top tier institution, is that if you have to pay your own way, it is not a good investment from a purely mercenary point of view. What data there is on this question comes from an old study by Alan Krueger that looked at the outcomes of candidates who were accepted to Ivy League institutions but who chose not to attend, and compared their salaries to their cohorts that did. This is as close to a natural experiment as one is likely to find in the data. It turns that on average, those who chose not to attend did just as well. (For what it's worth, my parents were lower middle class and had zero savings, so both my sister and I got more or less free rides, though we had to borrow/work to cover room and board. The joke was that my Dad probably saved money sending us to school since he did not have to feed us anymore.)

I will say this: I thought I got a great education and from an academic point of view, loved the experience. Made some great friends and was mentored by someone on the junior faculty at the time who eventually won a Nobel prize. (I attended the trade school on the Charles River near Boston, so the non-academic side of things, were, frankly miserable.) In the end, did the education and the skills I learned really make a difference in terms of my career? I seriously doubt it. It helped me get my first job since that employer recruited almost exclusively at high end universities, but after that, I doubt that anyone really cared. I suppose it might get someone to take another look at your resume, but I'm pretty sure things would have turned out more or less the same if I had chosen to go the state university that most of my friends ended up attending. Looking back, what has mattered most, my analytical skills, ability to abstract complex problems, good deal of common sense, were all things that I already possessed. What has held me back, a tendency to procrastinate, getting easily frustrated when things stagnate, were not traits that schooling was able to fix.

I think the way you may need to look at it, unfortunately, is a luxury good to show off to your friends and family, or a reward for your daughter for having worked so hard in high school. Best of luck to you, but whatever happens, I hope she gains the maturity at some point to better appreciate where you are coming from and her own sense of entitlement .....
But "salary" isn't the only metric that matters.

There are many of us (here on BH, here among our colleagues, in our community, etc.) who care far, far more about doing something we care about, which involved getting very special jobs, or perhaps, regular jobs at special places.
We didn't go after top salaries, and although over time, we've done well, it's nothing like some at/near the top in other fields earn.

I'd suggest that in these cases, college and grad school can make a difference, one that isn't reflected in salary.

Some of this might depend upon what OP's DD thinks she wants to study and "to do" in life.
Problem is, as pointed out above... that can change, and it can change dramatically.

RM
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Re: Expensive Colleges - Investment Worth It

Post by nanosour » Sat Dec 22, 2018 1:43 pm

No...know that it's not worth it. What's worth knowing is that the same drive and effort she's put forth to this point will serve her well no matter where she goes to college. However, if she becomes a whiny, spoiled, brat about not being able to attend her #1, top-tier school, and is willing to sacrifice her relationship with the most important people in her life over it, it's likely to be a very bumpy road ahead. Her choice.

Seems your DD needs a good, healthy dose of tough love parenting. Reality is going to hit you when your DD is out on her own and you rarely, if ever hear from her. I see this over and over and it's truly sad. Granted, she's an immature 17-18 year old, but the quicker you start treating her like an adult, the quicker she'll become one. Personally, I would not allow my DD to get away with treating me and my wife that way. Her attempt to guilt me would result in me sending her on her way to the School of Hard Knocks and wishing her well. I'm sometimes baffled by this privileged generation the current upper middle class seems to be creating. We need to get our act together....self included.

Please accept my apologies if I offended anybody.

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Re: Expensive Colleges - Investment Worth It

Post by livesoft » Sat Dec 22, 2018 1:45 pm

nanosour wrote:
Sat Dec 22, 2018 1:43 pm
Please accept my apologies if I offended anybody.
I am not offended, but I also realize that the OP has told us a story. I imagine the daughter could tell us a story, too. :)
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Re: Expensive Colleges - Investment Worth It

Post by chipperd » Sat Dec 22, 2018 1:57 pm

Edited for grammar
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Re: Expensive Colleges - Investment Worth It

Post by chipperd » Sat Dec 22, 2018 1:58 pm

chipperd wrote:
Sat Dec 22, 2018 1:57 pm
As a parent of 3 teens, one a private, NE university honors frosh, the second just getting into a different small NE university ED and a 3rd a soph in h.s., I've been an avid reader and challenger of the method and amount, one need pay for a private, college/university education. We are seemingly no where near the income level of the OP, so my/our experiences come to the same question from a different starting point. We actually adjusted down our income and work hours, as the hourly rate vs net cost of the two, soon to be three, in school at the same time, wasn't worth it to my wife and I. It was a gamble that seems to have paid off with our kids. Working less moved us up from 30k/year for our first (current college frosh) in scholarships to 50k/year in scholarships/grants for the second, (current h.s. senior). Is this something you have considered or does lifestyle/career type prevent this option?
I agree with others, and I believe mentioned by the OP, that equity or something close to equity, is important between your 5 kids. So if playing the game and reducing income isn't an option, then I would go with the equity idea and your current h.s. senior will need to make up the difference or downshift undergrad expectations. As you mentioned, if med school is going to be in the future, undergrad isn't nearly as important (or expensive) as med school, which really should be the focus and drive of the under grad decision. :sharebeer
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Re: Expensive Colleges - Investment Worth It

Post by stan1 » Sat Dec 22, 2018 1:59 pm

Kagord wrote:
Sat Dec 22, 2018 11:31 am
Yes, we have 2M in non retirement investments, for some reason, I still feel poor, a 5% return is only 100K.
So you have a lot in retirement accounts, too? You can afford it.

I think its important to assess the needs of each child. If you are sending her to a Top Tier high school and all of her friends are going to Ivy League schools I agree it sends a mixed message especially if this communication is just coming out in her senior year.

Since there are a number of siblings you could start keeping a tally. Ivy League is her inheritiance. Wedding is another child's inheritance. Some get there money now, others get it hopefully in decades.

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Re: Expensive Colleges - Investment Worth It

Post by Afty » Sat Dec 22, 2018 2:07 pm

I started writing a long post about my experience at a top college, but I can sum it up with: I have mixed feelings about it, but in the end, if I had it to do again, I would do it the same way.

I agree that salary is not the only metric that matters. It would be a pretty boring world if everyone just did whatever would earn them the most money. I guess we'd all work at hedge funds.
almostretired1965 wrote:
Sat Dec 22, 2018 1:28 pm
What has held me back, a tendency to procrastinate, getting easily frustrated when things stagnate, were not traits that schooling was able to fix.
My personal experience was the opposite. Before college, I could get away with coasting and procrastinating, but once in the "big leagues" I wasn't able to compete with all the other skilled, capable kids who actually worked hard. I learned a difficult lesson about the value of hard work and responsibility, which has served me well in the real world.

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Re: Expensive Colleges - Investment Worth It

Post by stan1 » Sat Dec 22, 2018 2:09 pm

What I would tell her right now is: If you get accepted and want to go there we'll figure something out.

If I had a child who was accepted at Harvard or Stanford I would not tell them they couldn't go there because of money and then leave them $1M as an inheritance 30 years later.

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Re: Expensive Colleges - Investment Worth It

Post by ram » Sat Dec 22, 2018 2:09 pm

viewtopic.php?f=11&t=43726&start=200
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Re: Expensive Colleges - Investment Worth It

Post by PhilosophyAndrew » Sat Dec 22, 2018 2:12 pm

OP, “worth it” what sense exactly?

Some here have a narrow definition of value along the lines of expected future earnings, whereas others value non-financial things like quality of professors, degree of intellectual challenge from peers, present and future networking opportunities, level of academic support, co-curricular opportunities, etc.

So, what exactly does your family value about higher education?

My wife and I — and to some extent our parents — benefitted from the elite education that interests your daughter. We have allocated enough to pay those prices and would gladly pay for our daughter to attend an elite school if one were a strong fit for her needs and interests.

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Re: Expensive Colleges - Investment Worth It

Post by KlangFool » Sat Dec 22, 2018 2:17 pm

OP,

It is your money. You get to decide. But, if you say yes, how is this fair to the other 4 children? Is your daughter willing to deduct this extra amount from all her future inheritance?

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Re: Expensive Colleges - Investment Worth It

Post by Ben Mathew » Sat Dec 22, 2018 2:21 pm

Kagord wrote:
Sat Dec 22, 2018 11:06 am
One of my daughters wants to go to a top 10 school, these are 70-95K a year. Because we have saved, and we have 2 in more children already in "affordable" state univerisities (25-35K year each), and 2 more coming up to go to college, I've put a hard cap on 30K/year per child on what I will spend.
I think that's a fair way to do it. It would not be fair to the other kids if you spend a hundreds of thousands more on one kid's education that others'. You are not limiting her options. It's only a question of who will pay. She can take a loan out for the difference, but doesn't want to. Looks to me that she has done the ROI calculation, and decided that it's not worth the extra $250K to her.

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Re: Expensive Colleges - Investment Worth It

Post by Mingus » Sat Dec 22, 2018 2:27 pm

Why does the opinion of a teenager have much weight on going to an expensive school?

There is something wrong in this society and is creating a generation of entitled spoiled brats.

As much as I wouldn't take the opinion from a 6 year old to feed him oreos and ice cream for dinner, I wouldn't rely on the opinion of an entitled teenager on how much to spend on her college degree.

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Re: Expensive Colleges - Investment Worth It

Post by mouses » Sat Dec 22, 2018 2:35 pm

ResearchMed wrote:
Sat Dec 22, 2018 1:36 pm

But "salary" isn't the only metric that matters.

There are many of us (here on BH, here among our colleagues, in our community, etc.) who care far, far more about doing something we care about, which involved getting very special jobs, or perhaps, regular jobs at special places.
We didn't go after top salaries, and although over time, we've done well, it's nothing like some at/near the top in other fields earn.

I'd suggest that in these cases, college and grad school can make a difference, one that isn't reflected in salary.
I always chose the interesting jobs, except in one case when the amount of salary was staggeringly different. That latter choice was a Mistake.

I agree that more generally, experiences can be valuable even of they don't "pay off financially" in some manner.

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Re: Expensive Colleges - Investment Worth It

Post by mouses » Sat Dec 22, 2018 2:38 pm

Mingus wrote:
Sat Dec 22, 2018 2:27 pm
Why does the opinion of a teenager have much weight on going to an expensive school?

There is something wrong in this society and is creating a generation of entitled spoiled brats.

As much as I wouldn't take the opinion from a 6 year old to feed him oreos and ice cream for dinner, I wouldn't rely on the opinion of an entitled teenager on how much to spend on her college degree.
The teenager is practically an adult, and is making a decision that will affect her future dramatically. It's hardly like wanting ice cream for dinner.

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Re: Expensive Colleges - Investment Worth It

Post by beyou » Sat Dec 22, 2018 2:39 pm

livesoft wrote:
Sat Dec 22, 2018 1:16 pm
I worked 20 hours per week to pay for it and graduated in 3 years with essentially no debt. So your daughter should apply and see what happens. She appears to be intelligent enough to work her way around her parents.
What did you major in ? Big difference between an engineer working through school and a history or bus major.

Seems from OP, parent does not know (nor does child usually) what the kid will study. From a purely ROI standpoint, few majors pay off, but there are differences.
Not only that, if not sure, ability to switch majors, explore options, without extending cost (extra semesters) and without bad grades in failed experiments ( try experimenting in Engineering or Chemistry in a top tier school and potential impact on GPA that may effect law school). Honors college at a less competitive public school may help her meet peers, give her extra guidance as to her varied options, and give her better gpa for grad school.

That said, sent both my kids to private colleges with little relief. They have benefited by the peers they meet, and the career options. One kid, as a soph/junior had interviews with all the major name tech firms, dream jobs and had multiple offers. One of the firms hiring interns and grads, was founded by 2 from my eldest son’s college, and they regularly make offers to their fellow alumni. Other went from top undergrad to top grad school.

Expensive, but I only had 2 kids and both picked practical majors that lead to career opportunities, and did so at schools heavily recruited in their majors. YMMV.

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Re: Expensive Colleges - Investment Worth It

Post by DidItMyWay » Sat Dec 22, 2018 2:43 pm

You've already been given a lot of good advice/food for thought.

I agree with much of it. The answer is, IMHO, it depends on a lot of different factors: family's finances, how you prioritize higher education, intended major and career goals, availability of good options in state, which expensive school we're talking about, motivation of student, etc.

Did she already get accepted ED or EA to a top 10 school?

Are you in a state where the public school is a great one?

Is she willing to have some skin in the game, such as working summers and using the money she makes towards tuition?
Is she willing to sacrifice/forego things like spring break trips her friends may be taking or daily Starbucks trips/going out to eat in order to attend the more expensive school?
Does she want to go into debt for grad school and, if so, does she realize how much the monthly payments would be?
Maybe posing some of these questions directly to her will allow her to think about it more in terms of a soon-to-be adult making an adult decision.

And yes, whoever above said that admissions in recent years is brutal is not kidding. It is insanely competitive and can be somewhat unpredictable, as you probably already know. The tippy top schools are reaches for almost everyone.

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Re: Expensive Colleges - Investment Worth It

Post by RickBoglehead » Sat Dec 22, 2018 2:46 pm

I was struck by the entitlement perspective of the young lady, and happy to see the OP recognized it. One could argue that she is not entitled to anything. I think the OP's perspective of treating all kids equal and setting a max budget is perfect.

Our youngest applied to some very top schools, one of which was in-state (GO BLUE! We told him that if he got in a better school, and he could demonstrate that it was in fact better (not just that he liked it more), then he could go there but we'd be discussing how he would be working and getting scholarships to significantly impact the difference. He ended up getting wait-listed at a very prestigious engineering school in the Boston area, but then didn't get accepted, but he had already made the "RIGHT" choice. :wink: We required him to work his first two years also.

A top school in a specific discipline MAY open doors. But an average student in a top school will likely lose out to a top student at a school in the 11-20 ranking. And once you're in the door, what school you went to matters less.
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Re: Expensive Colleges - Investment Worth It

Post by livesoft » Sat Dec 22, 2018 2:50 pm

beyou wrote:
Sat Dec 22, 2018 2:39 pm
What did you major in ? Big difference between an engineer working through school and a history or bus major.
Biochemistry. Author on 2 papers from undergraduate research, too, in the Journal of Biochemistry. Had a cover article in Nature a few years later. :)
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