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Tuesday, September 26, 2006

Heartwrenching Tuition Crisis Guest Post 2: Submitted by a Reader

In May 2006, I featured my first guest post from a reader on his personal tuition crisis. I recently received my second guest post on a personal tuition crisis on a different and important issue, namely the great mystery behind who qualifies for a scholarship.

I personally prefer more information to less information. I would like to know what the school's expectations are of parents in terms of tuition meeting tuition on their own: i.e., is tuition supposed to be paid for on a cash flow basis or a debt-flow basis (term coined by blogger friend JH)?

Do you have to be in debt to qualify for a scholarship? And, just how much debt? Do you need to dip into your savings? And, and to what point? And, which types of savings are you expected to dip into? Is enough room built the tuition equation to pay for basic, modest living expenses (food, gas, utilities, modest consumer expenses)? Or, are you expected to just pay the minimum on the credit card because room is not built in?

I've seen tuition assistance applications ask for children's income. I personally love to see teenagers "working hard for the money." But, I would hope that the money would be theirs to save, or spend as they and their families see fit(!). Do you expect a child's income to be used for household expenses (or even tuition or the extras that come with tuition), which takes away from any potential tuition reduction? I've seen tuition assistance applications ask for the amount of equity in your home? Do you expect parents to borrow against the home if tuition expenses cannot be met from income alone?

My guest poster touches upon these issues in the following post. Read on and leave your comments. And, a special thank you to guest poster 2. (I'm still taking submissions).

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Here's my story:
A few years ago when we were very much in need we submitted all of our records to the school - every bit of personal information about our income and our spending. We were denied because we make more than we spend. Well, of COURSE we do - we lived in a tiny apartment and our kids wore hand me downs and we drove a dangerous and dying car to be able to pay for tuition!

I was very hurt and embarrassed by the whole process so I said to them I am a responsible parent and I will never put my children into harm's way financially, but I would really like to buy a house and I will never be able to afford one without a scholarship.

So they said so buy a house, then your income will exceed your expenses and you'll get the scholarship. I was really torn up about it, I even asked our Rabbi who said to do it - so I did.

AND GUESS WHAT!? We were refused again. I was literally crying on the phone to the new finance director who had just replaced the one who made me that promise the year before. My husband had to take a second job working nights and we had to use our savings to supplement. I feel like we were really duped. I know I sound bitter, but that REALLY hurt - begging for money twice and being refused like that.

Mercifully Hashem has saved our butts many times (we won the shul 50/50 raffle twice - I inherited a bit of money from a relative I never heard of, my in laws sent us a couple of checks, my grandmother quit driving and gave me her car) but it's so hard to depend on miracles. What will happen when my "luck" runs out?

12 comments:

fashionista said...

Sorry to hear about the tough situation you are in. There is no reason you should be rejected because you make more than you spend.

Ari Kinsberg said...

"Do you expect parents to borrow against the home if tuition expenses cannot be met from income alone?"

YES.

A renter who has $25,000 in savings to dip into definately deserves a scholarship before someone who has no savings to dip into but does have $100,000 in home equity.

Anonymous said...

There are so many variables in every families financials, that it is impossible to have specific guidelines. Should the Yeshiva look at cashflow and reward the one with $600k equity in home who cant cover the tuition, or look at net worth and reward the one who has cash flow but a large mortgage. Each case must be looked at and basically the finance director or scholarship commitee has to put itself in the applicants shoes, and try to determine what that person can afford. Obviously in this case, there was a lack of communication, and there certainly should have been some understanding of a previous deal that had been made. There should be a scholarship committee aside from finance director, who could review the case, and perhaps meet personally to reach a decision.

HHH

SephardiLady said...

Ari-I'm hearing your point. But, I know that many people with home equity will reach financial disaster proportions by using that home equity.

And, with today's housing market, I believe anyone that bought in the past 2-3 years has $100,000 of home equity. But, many are already being killed by the mortgage.

I personally wish there was just a percentage of income that was required, so it could be budgeted for more easily.

But, at least TELL US what is expected, so we can make decisions that work.

Ariella said...

I had a similar experience when we first moved and had 2 children registered in a school that is actually very well off financially. As our first house didn't sell until months after we bought our second one in the new area, we had to pay 2 mortgages and had depleted nearly all of our savings for the downpayment on the new house. But the school offered no scholarship except an exemption from the dinner. They countered you have X amount in savings. I said that we don't. We had filled out the forms according to the amount we had before laying out the payment on the new house. It was all but depleted, plus we had to cover 2 mortgages each month on top of another loan. They wouldn't budge.

Joe Schick said...

This post is indicative of the fact that the frum economic system cannot be sustained in its current form.

I don't know if the school can be blamed for declining to offer assistance. It's not clear what the tuition charges are.

What is clear is that many with middle class incomes will not be able to pay tuition and buy houses in frum communities. As SephardiLady points out, "anyone that bought in the past 2-3 years has $100,000 of home equity." Whar about those of us who haven't yet bought a house? Either we won't be able to, or our mortgages will be massive, since we're the ones paying the extra few hundred thousand.

We need to create new communities, and to raise significant funds so that the tuition burden is shouldered by the community and not solely parents.

SephardiLady said...

Joe-Thanks for chiming in.

I really feel for those who have never bought a piece of property. While the standard wisdom in that your housing payment (escrow included, I believe) should NOT exceed more than 30% of your take home income. . . most Americans that are buying homes today are exceeding this "outdated" recommendation. I know that if we were to buy a home in our neighborhood (not the cheapest, not the most expense), after a 20% downpayment, we are looking at a mortgage + escrow payment of OVER 50% of the current take home income. Our taxes would go down, but we might get hit by the AMT, so I'm not sure if our take home pay would actually increase.

Anonymous said...

To expand on the issue of buying a new home, the Yeshivas will have a huge problem that will hit hard in about 5 years. I dont think any Yeshivas realize it. The problem is that recent home buyers and future home buyers, who based on income would have previously been solid tuition payers, are finding that approx $50,000 per year in earnings are going towards their home. The 6 figure earners have little left for tuition.

HHH

Joe Schick said...

Indeed, to expand on the last two comments, let's analyze the numbers of a family with three children, two in school and one at home. Both parents work and their monthly take home pay is $10,000 - pretty good by most standards.

10 percent goes to tzedekah, taking them to $9000.

Mortgage and real estate tax for those buying a home now will ofren cost around $4000 a month, bringing them down to $5000.

If tuition is $10,000 for each child (and this family ain't getting any break from the school), that's another $1700 a month, taking them to $3300.

A full time nanny is necessary for the child at home. That will cost, say, another $1600, taking them to $1700.

Food for five, tolls, gas, car payments, maintenance and insurance, electric and phone bills, etc., will take care of most of that.

If they're lucky, this family will save around $500 a month, despite after tax income of $120,000 per year.

If they decide to go to Israel one year for a two-week trip, they may actually have to dip into savings that year.

SephardiLady said...

HHH-Couldn't agree with your assessment more. I know if we buy a real house (i.e. something with at least three bedrooms) than there will not be money for tuition. So, back to the homeschooling forum we will go!

Joe-You analysis is actually pretty rosy, although it is decently fair.

Why rosy? Well, unfortunately, my experience and my reading tells me that many dual-income professional couples, i.e. those pulling in that kind of dough AFTER TAX, have student loans that can be costing them significant sums every month.

While one might trade in a fulltime nanny for a full time day care at a small discount, this necessitates summer camp for the older two, which blows any difference.

Food for five, tolls, gas, car payments, maintenance and insurance, electric and phone bills, etc., will take care of most of that [$1700].

Here is were things get really rosy IMO. I know what we spend, so I have a good authority to speak here. I consider myself quite frugal and make getting the best deals my job since I don't work outside the home. I don't expect a dual-income family to do such, at least to the same extent, and therefore extra costs must be built into the budget for sanity.

$1700 most likely will not cover the rest of the living expenses (food, gas, transportation, clothing, insurance, medical, and utilities) for a dual-income family in a major metropolitian area. And, that is with the car(s) paid for. Well, as we all know, even if the cars are paid for now, if you aren't saving up for when your car bites the dust. . . you will end up with a payment.

Oh, and don't forget professional license fees. Not every employer pays these. We get a $400 bill for my husband's license every year. Yet another NECESSARY expense to budget for.

Chances are, this hypothetical family of 5 is not paying off its credit card bill every month and is racking up a good $100 a month in interest charges.

Anonymous said...

My husband and I have decided that we need to do what our other frum neighbors do - buy a house twice what we can afford and work like crazy to try to pay for it, then borrow like mad against it to constantly have guests, an impressive car, and spend $50,000 on the wedding of each of our children, including the last one which required taking out a second mortgage so the house is now mortaged for more than it's actually worth. Why? Because she had to have what the other ones had of course! Then we'll get financial aid because we have sooooo many expenses...The only problem is we could never live that way. Why? Because we are fiscally responsible. We live on $32,000 a year, my child in a half-day program has had maybe 2-3 new outfits his entire life; usually I get "nearly new" stuff INCLUDING SHABBOS CLOTHES AND SHOES by scouring the thrift store. We eat meat once or twice a month and are still paying off student loans at $800 per month. What did we get for financial aid? $200 - almost the amount of the application fee. The retirement money we've been trying not to touch did us in. I guess we're supposed to run through it and then become one of the tzedakah cases that come in the mail.

And don't let me get started on people who get tuition deductions for working at the school, but they get away without paying taxes on the benefit because the school lists it under "scholarship" instead of "employment benefit."

SephardiLady said...

Hi Anon-I have heard your sentiments before: Those who are frugal just get to pay more.

Sorry to hear about your situation. And, the subject of tuition benefit is really complicated. I wouldn't even know where to start on that, even though I've done some research on this subject.