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Saturday, December 19, 2009

Incentive

Parshat Miketz offers tried and true savings advice recalling that the grain, during the years of plenty, was collected hand over hand, or in the interpretation of some little by little. Often people through up their hands and proclaim why bother savings as it is impossible to do so anyways with all of the numerous bills, etc.

What they haven't quite comprehended is the power or addition in conjunction with the miracle of compounding interest. There were periods of time when we were able to save money in major lump sums, or what I like to call before tuition or BT. Those days have seemingly passed. But, we are still able to see satisfying changes in financial position for the positive despite no longer being able to save the amounts of the past.

Just a few weeks ago I received my statement from my first 401k from my first job. There is something extremely satisfying about seeing that percentage of investment income earned is about to surpass the amount of money invested. I wish I understood this more clearly when I started this first retirement account. If I could go back in time, I would have invested more pre-tax income. At the time I lacked some incentive.

Speaking of incentive and the parsha, I think there is an important lesson to learn. From a basic reading of the text (I'm ignoring commentaries to the contrary so as to not loose my point), Yosef enacted a one-fifth (20%) tax rate on gross domestic product during the seven years of plenty and the land produced an abundance. He also stored the grains within close proximity of the taxed. Economic theory tells us that overtaxing decreases production, so I think we can reasonably conclude that the tax rate enacted by Yosef was not draconian.

When it comes to yeshiva tuition and tuition assistance, many would like to see parents take on more employment, higher paying jobs, more jobs, etc. It is fantastic that so many parents view tuition as their duty and will go to all lengths to avoid scholarships. But, others simply won't; the incentive is simply not there.

Should schools want to see parents who are on scholarship pay more tuition by increasing their incomes, they need to understand the underpinnings of incentive. If those on tuition assistance believe that if they change their earning situation that the school will nab 100% of the new earnings, they are unlikely to take on additional employment without heavy handed techniques that provide incentive through fear. But, if you only take a smaller amount of the new income and most of the new income can be used at the discretion of the earner, the incentive to earn is kept intact.

Of course, what makes economic sense might not be great school policy. I'm not quite sure how practical it would be to enact a tax on additional income of mothers that return to work, for example, while dual income families are charged tuition at a different rate. There are already plenty of hard feelings on all sides. And speaking of practical, schools really shouldn't be playing big brother any more than they already do. Additionally, when the marginal governmental tax rates (social security + medicare + the marginal federal rate + the marginal state rate) already takes up nearly a third of the income to say nothing of the costs of transport, childcare, and non-tangibles such as decreased family time and stress, there isn't much left for anyone else to grab.

Just some thoughts for this evening. A shavua tov.

68 comments:

tesyaa said...
This comment has been removed by the author.
tesyaa said...

I think you are missing a point. There are loads of people, apparently, who make too much money on paper to qualify for tuition assistance, yet are really strapped when it comes to meeting our expenses. Yes, we could economize more, but that would really hurt, as opposed to the lesser pain we're experiencing now. On paper, we're making good money between the two of us. And we have cut our childcare and other domestic help costs significantly, which is a strain. To a yeshiva, we look like we're doing more than OK. But after the AMT, we're left with about 60% of our nominal pay.

It's up to the schools to cut costs where they can. That may mean fewer administrators, or larger class sizes, or forgoing that new wing. But I think that yeshivas are viewed as a huge source of parnassa for people who either won't work outside of the community or don't have the skills to.

Orthonomics said...

tesyaa,
I'm not addressing that point. Just looking at the (lack of) incentive for those receiving tuition assistance to change their position. Many readers have commented that non-working mothers whose children are on assistance should go back to work. From an economic standpoint, so long as that assistance remains in place, the incentive is lacking.

Incidently, I agree with your comments about families being strapped and the fact that many schools seem to view themselves as employment agencies.

Thanks for your comments.

Disgruntled said...

A commenter on Rabbi Pruzansky's Blog pretty much summed it up:



As always, great article Rabbi Pruzansky. You hit the nail on the head that the biggest problem facing Modern Orthodox Jews in America right now is yeshiva tuition. Allow me to suggest what I think the biggest problems with all of our local yeshivas are: 1) Too many administrators. When I went to school, there was ONE administrator in the entire school and one secretary. I recently attended some open houses at our local schools and learned that some of these schools literally have five or six administrators, presumably making six-figure salaries. There also seemed to be a minyan of secretaries and other support staff mingling in the office. The purpose of our yeshivahs should be to educate our children, not make a few administrators rich and giving jobs to countless mothers of children who attend these schools. We all know that working at these schools allows your children to go for free or at a heavy discount. (Of course, it isn’t really “free, b\c I am paying for it.) Why not force the people on scholarship to each work a few hours a week at the schools thereby allowing the schools to cutback on the amount of secrataries they need to hire. Problem 2: Scholarship abuse – The local schools and Rabbanite do little (other than occasional lip service) to try and mitigate the abuse that goes on. The younger generation views obtaining a scholarship as they do shopping for a car – the idea being to get the best deal possible. There is no bushah anymore and no realization that I am paying for their kids’ scholarship. I have heard (young) parents openly brag at shul kiddushim about how they “hit the jackpot” with scholarship this year and that there kids are going at 50%-80%discount. It is not an isolated problem. I easily could rattle off names of at least 7-10 families that I know are on scholarship (b\c they have told me so) and who do some or all of the following: drive nice new cars, take frequent vacations, have cleaning ladies, go out to eat at local restaurants often, have huge flat-screen TVs etc…. The Yeshivas punish those of us who worked hard to obtain professional degrees and work very long hours while rewarding those who made poor decisions in life. (I always wonder why people are surprised that they can’t afford tuition for 4 kids when they chose to enter a career path where the most they can ever hope to make is $70-80k.) Why shouldn’t I choose to work a 9-5 job and make $80k and let the suckers in town pay for my kids’ tuition??? One final note, NNJKIDS is NOT the answer; giving more money to these schools is like giving drugs to a drug addict. Giving these schools more money will only prolong the current crises and delay real change from occurring. It will allow the current system (where the few support the many) to continue longer than it otherwise would. We need the financial burden on these Yeshivas to become even GREATER so that it forces these yeshivas to make radical and wholesale changes to the way they operate from the top down. Until that happens, people like me (who make too much to get a scholarship but not enough so that tuition is not a crushing blow to us) will continue to shoulder the brunt of this tuition “crises.”

Wishing you and your family a shabbat shalom and happy Chanukah.

– Disgruntled

tesyaa said...

The solution may be the polarizing suggestion of "full-tuition-only" schools, which anyone could attend provided they paid full tuition up front. Of course, those who couldn't afford it would have the option of raising the money privately through charities that would have no connection to the schools.

Orthonomics said...

Disgruntled-Thanks for the comment.

Tesyaa-I am VERY support of a full tuition only school. I think what you would see develop is an affordable school. There is a Christian school I pass regularly with a full fleet of busses. Finally I got curious about the school because my kids are always commenting and counting the busses there. It appears that the school has only 3 fundraisers and gives no financial aid. The fundraisers are nothing major (grocery store bucks for registering the club card, a something-a-thon, and something else small). The tuition is low, between $4K and $6K depending on the grade. Preschool is super inexpensive.

I think they are able to do this because they have low overhead: they share the church building and they don't overstaff (one principal through 8th and one secretary). The teachers must be happy. Each bio on the website shows they have been with the school for many years. Low turnover helps.

They can't be a totally stripped down school. . . . ..they have a fleet of busses.

We have a model that is too cost heavy: Each of our schools has its own building for the most part. Few schools are housed in shuls anymore. We have lots of administration and teaching staff. We believe that everyone is entitled and therefore have a scholarship structure that is hard to sustain.

Orthonomics said...

That should read supportive.

Anonymous said...

Two comments.

One way to incentivize people (BTW, I hate the word "incentivize" -- it didn't exist two decades ago) is simply to have minimum tuitions.

Second, the notion that more than one secretary is needed for a school is ludicrous in this day and age of computers and voicemail. When lawyers, doctors, judges, professors and others do their own typing rather than write things long hand, and check their own voicemail, there is no need for teachers and administrators to have lots of support staff. A friend teaches in public school. They are required to do all their own typing - lesson plans, report cards, IEP's etc. are all done by the teachers on line. If they need something "copied" they do it themselves or hit "print." BTW - they are given a limited quota of copy/printer paper for each semester so paper and toner isn't wasted.

Anonymous said...

Disgruntled: What do you mean "only 70-80,000"? A family with two parents making $80,000 are well into the top 10% of American families. Not everyone can be a doctor, hedge fund manager, CEO, etc. Even the median income for a lawyer is less than $100,000. Also, many of those $80,000 jobs require four year degrees, training and long hours. I would not be so worried about the people making "only" 80,000, as I would about the people making $30,000 or less because they didn't get a proper education/training or those families where both parents aren't working.

UAG said...

Disgruntled can answer, but I think what he / she meant was that 70-80,000 doesn't begin to meet obligations for 3 or 4 elementary school tuitions in the expensive areas like Bergen County where the average tuition (fees, obligations, etc.) exceed $15,000 per child. We certainly should worry about the 30k earners, but keep in mind that many might "only" make 70-80. As you point out, though 70-80 is a good living by national standards, in our warped cost effective schools, that salary will not cover the costs.

He / she also points out that the schools have morphed into these beasts of expense that "need" the high tuition to be adequately fed.

I second the motion: let NNJKIDS Die - and when the few become too tired of supporting the many who as a result of the culmination of their life decisions can't afford The Beast, let's make affordable schools for all children. Scholarships are by definition schools spending more than the students can afford and making other people pay for it.

This entire discussion about what is an incentive or disincentive is not what should drive scholarship decisions. But not wanting to live a life of begging for scholarships SHOULD encourage the right decisions along the path of life. The incentive vs.. disincentives of careers and part time jobs should be the individuals decisions. The problems as we now have in the current system all flow from the terrible idea of removing decisions from people by essentially saying, "don't worry if we have the right costs at schools, and don't worry if you can't afford it, someone else will pay for it".


Affordable schools would make Yosef HaTzadik proud.

Disgruntled said...

Anon at 11:21:

I think you missed my point. My point was that the yeshiva tuition system currently is so screwed up that up somebody making $80k - which is more than most of this country makes - doesn't have a chance of paying full tuition for even 2 or 3 kids (after paying taxes, mortgage, and other bills, one probably couldn't even afford to pay full tuition for just two kids on an $80k a year salary).

Regards,

Disgruntled

Disgruntled said...

UAG -

I couldn't have said it better myself.

- Disgruntled

Miami Al said...

Full tuition at one of these schools is $5k-$6k. Everything beyond that is involuntary contribution to the scholarship fund (done through tuition so as not to be tax deductible) and tzadakah to give charity to people in such a way as they think that it is parnasah and therefore should realize what they are doing.

$80k, able to pay $20k in tuition, that person is NOT a shnorrer. $30k, 8 kids on full scholarship, that person IS.

The person making $80k is paying their own way. As long as "full tuition" is 3 times the cost of educating the child, of course it's a game, why should anyone TRY to pay "full tuition," why suffer and not enjoy the fruits of your labor to support other people's children.

I have ZERO problem sacrificing to give me kids the best. I really don't care if someone else's kids have the best. Food on the table, opportunity to learn the basics of Judaism, sure, I'll kick in something. Private school education with my children? No thank you.

As a result, my 3 children are NOT in Day School/Yeshiva and that is unlikely to change.

Ahavah Gayle said...

Your advise is astute, as always, but you may be overplaying the "compound interest" thing a bit. Right now a $19000 savings account is making a whopping $.15 - yes, that's fifteen cents - a month interest. Interest rates for savings, money market, and other "safe" bank accounts are practically zero. And I do NOT recommend stocks right now - we're in a false bubble, the rising stock values reflect the growing worthlessness of the US dollar, not any true measurable increase in the value of the companies themselves via decreased debt or liabilities. Save, yes. But don't expect to get rich that way. That boat has sailed.

Anonymous said...

On this topic of simultaneously trying to lower costs of the schools and lower the tuitions, perhaps some of our economist contributors can comment on what tends to happen to costs when the consumers of a product (students) are not all the same payers (students (minus) those on scholarship or employee discounted children)?

It appears to me that there is a large segment of consumers (students) who think the day schools are perfectly cost efficient and wouldn't want to change anything to lower costs as they themselves don't pay the cost.

Can the Economists explain?

JLan said...

"Right now a $19000 savings account is making a whopping $.15 - yes, that's fifteen cents - a month interest. Interest rates for savings, money market, and other "safe" bank accounts are practically zero."

Ahavah- stop using local banks for savings accounts. They're nice for checking (or more precisely, for having ATMs), but while interest rates are low right now, you can do better than $.15 interest on $19k. ING Direct right now would get you about $20/month, for example. Is that a lot? No, but it's certainly better than $.15, and that interest range exists across a number of banks (Ally, Discover, and AMEX are all examples).

Offwinger said...

Ahavah,

Your comment demonstrates why the frum world needs more basic counseling about how to invest for retirement, and what compounding interest is.

No one who is saving money for the long-term should be using "safe" bank accounts!!! These accounts are meant to provide instant liquidity and access to cash flow. They are not for investment purposes at all. If you put your money in these accounts, then they will not keep up with the pace of inflation, so it's the equivalent of losing money.

Saving for retirement means creating a balanced portfolio of investments, mixing between lower growth/lower risk & higher growth/higher risk based on how many years away your retirement would be. When you put money in a balanced portfolio, it is earning interest that can be compounded because this is money that you can not touch right now. It is akin to you giving a medium to long term "loan" - you'll get your funds back, but not for a while. That's how investment planning works. The return you receive includes the fact that someone else could use your funds for a while when you could not.

Beyond that, no one is "getting rich" by saving for retirement by investing in equity funds, and if your goal is to get rich, you're doing it wrong (and probably embracing far too much risk). Good retirement plans seek to combine multiple risks & different kinds of investments to ensure a level of growth that will at least pace, if not outperform inflation.

SL is not "overplaying" anything regarding compounding interest. She's pointing out something young people often fail to realize - that by relinquishing your money NOW to get paid LATER, the amount you're entitled to grows FASTER than if you just stuffed the $ in your own mattress, a savings or checking account (or any other mechanism that allows immediate access to the $ without penalty), or if you - of course - spend it & try to save the same amount later.

Anonymous said...

Offwinger: I think you are over-reacting. Ahava's post does discuss the stock market, and the fact that she feels there is too much risk there now. I agree. I have reduced my equity holdings to less than 50% of my savings and am making do with cd's although they are only paying about 1.5%. It is hard to get excited about compounding at those rates, but someone younger could have more in the market. If you have a long-term perspective, you won't focus only on what's happened over the past two years.

DC said...

Why, again, does everyone miss the 2 obvious answers to our problems:
--pubic school education with talmud torah programs in the afternoon
--a real discussion on the number of children families are having \ the age (and career stage) that they are having children

Disgruntled said...

Dc -

I would consider public school plus talmud torah except for the fact that it would be unfair to my kids b\c too many ppl I know wouldn't want their "frum" kids associating with a public school kid. They would be too worried my kids would be a bad influence on their kids. The joke of course is that I grew up in an extremely "frum" town and, as a general rule, the more "yeshivish" school the kid went to the ruder the kid was and the less derech eretz he had.

- Disgruntled

Anonymous said...

DC- I understand the bind that you are in, but if the people you know wouldn't want their kids associating with a public school kid, then maybe its time to meet some new people. There must be some way for like-minded families to get together so their kids can have a critical mass in public school and share the cost of after school programs and provide their kids with alternative role models to those who focus on what kid a school goes to instead of whether they are a good kid.

ProfK said...

The only way that any financial sanity will be introduced into the yeshiva system is if there is a strict divide between those who supervise the studies--roshei yeshivot, principals, etc.--and those who are in charge of organizational administration. School boards and administrators are under the thumb of the educational head of a school, and basically buckle under and do what they are told. Only when the "money men" will be the ones to set up the parameters for attendance will there be any hope for change. When the money men will say "We have X amount of money and Y number of students--put together a program and you can't spend one penny more than X" that is when we will have a chance that yeshiva tuitions won't bankrupt parents.

Anonymous said...

ProfK: Are you saying that yeshivas should be run like non-profits and schools in the secular world -- i.e. under the control of an independent board of directors that sets the budget, sets salaries, is responsible for the hiring of the head administrator, etc?

ProfK said...

Yes Anonymous, I believe the schools would be better off if they were divided into two separate parts, with an independent board that actually had the authority and expertise to properly organize the financial aspects. Such a board would be less likely to bloat the school with excess administrative staff because it would hurt the bottom line.

Anonymous said...

It seems that largest number of commentators on this blog that have expressed concerns about yeshiva tuition costs are from Bergen County. Pardon my ignorance, but are tuition costs in Bergen County that much higher than Long Island, Queens or Central Jersey?

I'd be curious from a personal standpoint before we decide to move out of city. Someone recently had posted actual tuition costs at Frisch and they were staggering. I thought such costs were only at Ramaz. I'd be interested if parents would actually post what the "list price" of tuition & fees are at various yeshivas. Why not comparison shop?

Lion of Zion said...

"are tuition costs in Bergen County that much higher"

yes
if you want cheap, come to brooklyn. you won't be happy, but cheap is cheap.

Anonymous said...

Bergen County has the highest tuitions in the USA with the only exceptions being Manhattan and Westchester/Riverdale

RYNJ - about $15,000 for one child once all the phoney add ons are considered

Yavne and Noam have similar pricing

Think long and hard before you move here to Bergen County. Brooklyn and Lakewood are much more affordable - full tuition is $6,000 - but very few actually pay even that. If you are looking for a modern affordable alternative - I heard YCQ in Queens and JEC in Elizabeth are more reasonable.

Moshe said...

Out of curiosity, anyone have any figures for JEC/YCQ tuition?

tesyaa said...

I can tell you that JEC for high school is around $15,000 when all is said and done. That doesn't include busing, though. For elementary school, I'd guess around $9,500, but I don't have the exact figures. So Frisch is more expensive, yes, but I would not call JEC really cheap.

Dave said...

If I had to pick a single root cause, as an outside observer, I'd have to peg it as "low tolerance for deviation from group norms".

If any significant deviation from "what everyone does" merits ostracism, there isn't the ability for individuals or individual families to make changes that meet their needs without risking a very high price.

If bankruptcy is the price of social acceptance, people are going to spend unwisely.

Anonymous said...

Tesyaa, As a JEC parent, I agree overall, but differ with your 15k/student for HS. Please keep in mind the vast difference between a single student family, and multiple students in the same school. Per family JEC costs are b/w 1-2k (dinner ad, 5% of script, etc...). 1st through 8th is 9-10k per kid, depending how you factor in registration/book fees, etc... Not cheap, but outlandish compared to other quality schools in the NYC area. Be'er

tesyaa said...

Just saw this email from school:

Reminder: If you opted to pay your tuition in two credit card payments, the second payment is due January 15th. Thank you.

This gives me the impression that people are putting tuition on their credit cards ... I sure hope, but I'm doubtful, that these people pay their bills in full at the end of the month. It certainly appears to me that the school is not discouraging people from taking on credit card debt to pay for school, especially since the school probably incurs some fees from the credit card issuer. If so, it's tragic, given the high interest rates on credit card debt.

tesyaa said...

To clarify: if the school is willing to incur a fee of 1-2% to receive tuition payments by credit card, they probably feel that this is better than not collecting at all. That implies that some parents have no way to pay other than credit cards debt.

Shalom, Cherry Hill said...

To Disgruntled,

You are right about your concern regarding the ostracism by many of the religious (MO as well as black hat) of public school kids. As the father of 4 wonderful public school kids who grew up in Boro Park and went to MO yeshivot through 12th grade, I feel that it's the 'religious' kid's loss. My boys all wear kippot to public school & put on tefillin every morning whether I'm home to check or not. They may know less gemara than the yeshiva kids, but I see how many of them behave, and how my kids do, and I'm very happy with our decision.

Shalom, Cherry Hill said...

a follow up thought to Disgruntled:

My kids also are not sheep. They know how to think for themselves, and go against the flow.

Anonymous said...

Yes, Bergen County is an interesting intersection of bad concepts for yeshiva tuition pricing:
1) a long history of educators spending and then passing on the bill to the full tuition payers
2) modern orthodox beliefs of excellence in both secular and limudei kodesh studies to run up costs in both areas to the max.
3) concepts of chessed, don't worry other people will pay for you.
4) concepts of chessed, don't complain about subsidizing other people's lifestyle choices.
5) acting like sheep to "not be different" and do not consider alternative solutions to avoid massive financial ruin.

It should be pointed out that the Jewish Orthodox leaders both in the schools and shuls, have endorsed the above thinking and have reinforced the insane logic for their flock.

The combination as has been reported will continue as is until the entire community is broke or even broker than they are already. And funding the most expensive schools in the country with a bailout aka NNJKIDS will not do anything for change. It will just continue to maintain and expand the failing budgets.

Anonymous said...

7:28 am is the best, most succinct explanation I've heard for high tuition costs in Bergen County. It sort of reminds me when I was back in YU during the early 1990s, there was a Torah Umada crowd (largely from Northern NJ) who was fixated on being equally religious and secular. I found the crowd to be quite annoying and uptight.

I guess in elementary school in manifests itself in trying to have a secular program like Ramaz and Limudei Kodesh like a classic Lithuanian Yeshiva.

baruch said...

Bergen County Yeshivas

upper middle class families forced to subsidize the middle class and poor to the standards of the rich

how many admnistrators does NOAM, RYNJ and Yavne have ? and how much do they earn ?

baruch said...

I think 7:28 does a good job of explaining it in detail - I think this summarizes in in one sentence

Bergen County Yeshivas

upper middle class families forced to subsidize the middle class and poor to the standards of the rich

gavra@work said...

We are up to two families on my block homeschooling! (We are not one of them).

Besides, the yeshivas (I imagine) are all running in the red durrring this recession. One of the local yeshivos actually fired a couple of "second seder" rabbaim to cut costs.

To be fair to the one who suggested that yeshivos hire those parents in lieu of tuition payments, those parents will usually have a number of young children at home, and as such will not be able to help, other than stuffing envelopes.

As far as SL's point, if you have matching fund for your 401K, please contribute at least enough to get full matching. Its (not like, is) getting free money.

JS said...

Wow, a lot to comment on.

Here's why the current system is completely broken.

JEC, as was pointed out, is a lot cheaper than Frisch or Kushner (about 25%-33% cheaper). JEC is right of center, while Kushner and Frisch are center, perhaps even left of center.

Kushner and Frisch are perceived as being "stronger" with secular education, while JEC is perceived as being "stronger" with religious education (true or not, I don't know - just what I hear people saying).

If cost were the most important factor, you would expect a lot more kids going to JEC. In other words, if the parents were forced to pay in full, or were told "you pay this or your kids can't come" JEC would be the obvious choice because it is cheaper. Parents would send there even if the educational philosophy wasn't 100% to their liking.

And yet, JEC is hurting for kids and Kushner and Frisch have continued to expand in numbers.

Why?

Because to a parent on scholarship it doesn't make any difference, cost-wise, where you send the kids. The total cost is going to be roughly the same. Each school will run the numbers and tell you, "Based on your salary, etc we think you should pay X." So, for the same money, why not send your kids to the "better" school which is more in life with your hashkafa?

Anonymous said...

To JS:
From an economic standpoint you seem to be saying that the more you subsidize a good, the more you consume. (This is part of the reason why people overbuy a house, because the tax subsidies on interest cause people to buy more than they would without subsidies).
I'm curious about the schools' standpoint. If JEC costs 10K and Kusher costs 15K, would Kushner offer the same percentage discount as JEC? If so, this would create added incentives for a scholarship family to try to go to the most expensive school possible, within reason.

Full-Tuition Paying Sucker said...

I think it is only a matter of time before full-tuition paying families in Bergen County revolt against the current system and demand an end to the all the abuses and nonsense (which I have documented many times over in previous comments) from our local day schools or else these families will pull their kids out of the private schools. It really wouldn't take that many full-tuition paying families to put a serious hurt on these yeshivas thereby forcing them to make some serious changes. (And by "serious" changes I don't refer to silly band-aids like NNJKIDS). All kidding aside, full-tuition paying families need to form a "union" and act in a cohesive fashion in order that we get taken seriously by these schools. If 10 or 15 families roll into Noam's or Yaveneh's offices and demand change or else, that would be a good start.

gavra@work said...

To JS:

I have an idea based on your comment. Why doesn't Frisch, etc. "suggest" to lower paying parents that their childern would be better off in JEC? And if the parents ignore the "advice", charge full tuition.

(Note: I know nothing about the communities or other reasons why this can not be done).

JS said...

Anonymous.

I am unsure exactly how it works. My understanding is that you're simply told what you "should" be able to pay the school based on your finances. I believe this number would be comparable at different schools - i.e., Kushner, JEC, or yeshiva X would all give you a number within say 10% of each other after looking over your financial records. Thus, I suppose, the discount is deeper at more expensive schools. If anyone has actual information on this, it would be great to hear it.

Full-tuition payer,

I wish it would happen, as I will likely be in your boat in a few years. The problem is that the threat is empty. I mean, are the parents actually going to pull their kids out? If so, where will they put their kids?

I actually think public school + talmud torah is an attractive option in areas with good public schools and lots of Orthodox kids. There is bound to be problems, mix-ups, and issues in the first few years of Orthodox kids in the public schools, but I think the system exists nowadays such that schools want to be accommodating and want to be accepting - they just don't know what Orthodox families want or expect.

For example, public schools are all now well-aware of peanut allergies and other dietary restrictions kids may have. Making people aware of kashrut is just another dietary issue.

I know this is not ALL of the issues, it's just an example. I also am aware that yeshiva offers a lot more than just an environment where kashrut is taken care of. But, as a "next best" option, I think public school and talmud torah is overlooked too quickly.

JS said...

Gavra,

My guess would be that the schools would rather have the kid paying lower tuition than not have the kid at all.

I think when you have enough kids, an additional kid is just a marginal cost. The teachers are already hired, the building is already being paid for. If you can slip an extra kid into the classroom and it isn't so overcrowded that you need to make an entire extra class (with all the extra teachers and administrative costs that entails), then any extra kid is just extra money in the school's pockets - even if that kid comes at a reduced tuition.

However, this is on a "per kid" basis and assumes the added cost is marginal.

I doubt the school is doing an analysis on a system/school-wide basis to see how many kids are scholarship and if it really is a marginal cost to accept all these kids - i.e., would the school be better off not taking them.

My guess would be they actually would be worse off not taking them given the high percentage that is on scholarships.

Anonymous said...

Bruriah's secular education is equal to Frisch and Kushner

JS said...

I looked at Frisch's 2008 Form 990.

They say they have 645 students.

They say that 300 students receive scholarships.

They gave out $1.2M in direct tuition assistance (scholarships).

They say they collected $13.7M in tuition and other costs (building fund / dinner journal).

So let's do some math:

46.5% of students are on some form of scholarship (300/645).

If everyone paid, supposedly $14.9M would be collected ($13.7M + $1.2M).

The average scholarship received is $4000 ($1.2M/300).

Average amount per student (tuition + other obligations) being paid by "full tuition" families: $23,100 ($14.9M/645 - do the algebra).

Average amount per student (tuition + other obligations) being paid by "scholarship" families: $19,100 ($14.9M/645 - 4000 - do the algebra).

So, why turn away scholarship families? They only lose $4,000 per kid on average. Frisch would much rather accept $19,100 per scholarship kid, on average, than turn it away.

If anything, it would seem that most families at Frisch are paying pretty darn close to what the school is asking.

tesyaa said...

NB: Bruriah is the girls 7-12 division of JEC. Grades 9-12 attract a substantial amount of students from outside the Elizabeth area. And yes, it is a fine institution both academically and socially.

JS said...

Numbers for Moriah, an elementary school in Englewood, NJ.

They say they have 1,000 students.

They say that 111 students receive scholarships.

They gave out $1.07M in direct tuition assistance (scholarships).

They say they collected $12.76M in tuition and other costs (building fund / dinner journal).

So let's do some math:

11.1% of students are on some form of scholarship (111/1000).

If everyone paid, supposedly $13.83M would be collected ($12.76M + $1.07M).

The average scholarship received is $9639 ($1.06M/111).

Average amount per student (tuition + other obligations) being paid by "full tuition" families: $13,830 ($13.83M/1000 - do the algebra).

Average amount per student (tuition + other obligations) being paid by "scholarship" families: $4,191 ($13.83M/1000 - 9639 - do the algebra).

Here, there's a HUGE disparity between those on scholarship and those who pay in full. However, there are far fewer that are on scholarship.

Disappointed in our leadership said...

I don't think that there is uniformity in how the schools list discounts given to teachers on their financial statements.

For example, Moriah must have many children (maybe 50+) who are children of teachers and receive heavily discounted or free tuition.

When you put teacher's children into the mix, the subsidizing affect of the payers to the non-payers can jump significantly.

As has been written above, as long as there is NNJKIDS or other tear jerking appeal for more funds to the schools, and as long as full tuition parents tolerate subsidizing other people's lifestyles, nothing will change (except that tuition may go up a bit each year).

Disgruntled said...

A secretary at a school with 4 kids going for free (or at heavy discount) makes the equivelent of over $120k. Check out the math: If a school charges $15k a kid (which is about right in Bergen County) and a secretary-mother has 4 kids going for free, she is really making the taxable equivelelent of almost $100k-120k (on top of any actual money the school might be paying her in addition to her tuition discount). Note that my math, for tax purposes, assumes of course that the husband is making a decent living as well. I (sort of jokingly) tell my wife that instead of taking out loans and going to grad school, she should have not gone to college or grad school and should just have been a secretary at the local yeshiva day school. When you factor in the tax implications, it really is a no brainer. How sad it is that this is what modern orthodoxy has become.

Anonymous said...

I do not live in Bergen County, nor are my kids school age yet. But I'm wondering if anyone in Bergen County has approached their local Rav and spoken with them about the tuition burden, and what the response has been. I'd be thankful to anyone who would be willing to share their experiences.

Raving Fan of Disgruntled said...

The Bergen County lay leadership speaks about the terrible situation (woe is to us speeches galore), but short of encouraging mass begging via NNJKIDS and guilt trips to those of us already paying a hefty price to pay more, have not stepped up to call for anything meaningful to the Beast, we call Bergen County School system.

The leadership is driving the Modern Orthodox Bergen County school bus right off the financial cliff. They have robbed a generation of their retirement and unfortunately, it will be our kids and grandkids who will ask us what happened to the system. Where were the leaders?

They will not be able to afford any yeshiva education.

Anonymous said...

altough i live in bergen county - I will suggest to my children that they not to live in bergen county - so that they will have less of a yeshiva tuition burden and lower real estate taxes and lower housing costs - i know i will never be able to retire here

Joshua said...

Anon at 2 PM -

I have spoken to a local Rav several times about the tuition crises. I more or less got alot of hot air about NNJKIDS (plus an admission tha NNJKIDS will not really help the problem all that much). Although they will give a speech shilling for NNJKIDS once a year, I don't think the local Rabbis really care all that much. Most of them have bigger problems to worry about in their respective shuls. Besides, I am not so sure that any of the local Rabbis would be willing to rock the boat and do anything dramatic about the problems (like tell their congregants that it is OK to send their kids to public school if the day schools can't get their act together within the next year).

Anonymous said...

There is no magic bullet for the growing problem. The problem needs to be addressed by serious people who are actively involved in their communities.

Here would be some suggestions:

1) Less Administrators
2) Less Extra Curicular activities (especially those that cost large sums of money)
3) More volunteers in the schools.
4) Homeschooling options
5) Less money for kollels

Ahavah Gayle said...

JLan - yes, $20 is something, but is it worth putting more money into the fat cat robber baron's pockets instead of supporting local credit unions and banks run by local organizations? We have to get away from this "something for nothing" attitude about saving and investing. In real life, everything costs something and the question is who is paying the real price, not how much can I get from it.

For example: ING is not a bank, it's an investment company. The banking and investment industries were required to be separated after the Great Depression for GOOD reasons, but those laws were repealed in recent years and now we have an economic crisis from heck precisely because "banks" became investment companies and gambled on your mortgages and savings. I can't see any good reason to reward a company like ING with my business. They aren't going to do anything FOR my community - only TO it.

Avi said...

@Disgruntled,

I don't believe that your scenario exists any more - at least not to the same degree, and not in Bergen county. Schools have cut down the maximum number of free tuitions to 1 - 2 per staff member. These are not scholarships, they're simply a part of compensation, like health care benefits. Now, if you want to argue that teacher salary + benefit packages are still overly generous, that's a separate argument.

Glen said...

even 2 free tuitions - which schools, for some reason not known to me, do not tax as a "fringe benefit" under the Code - equals $50-60k in taxable comp. I would hesitate to make a blanket statement that teachers are overpaid (although I have no hesitation saying the same for administrators at these "not-for-profit" institutions). However, it would appear to me that a teacher's aid, w/o a graduate degree, who essentially just baby-sits preschoolers is overpaid if she is allowed to have two free tuitions on top of her salary, and on top of the fact that she only works 9 months a year and doesn't have to burn vacation days on jewish holidays like the rest of us. To be clear though, teachers salaries are really at the absolute bottom of my list as to why we have a tuition "crises."

JLan said...

"JLan - yes, $20 is something, but is it worth putting more money into the fat cat robber baron's pockets instead of supporting local credit unions and banks run by local organizations? We have to get away from this "something for nothing" attitude about saving and investing. In real life, everything costs something and the question is who is paying the real price, not how much can I get from it."

In that case, perhaps Alliant Credit Union at 2% APY savings? It's based out of the Chicago area (anyone in Chicago can qualify through residency alone), but there are any number of organizations that also qualify you, including being a member of any PTA (including the national one). I should note that I'm working off a list of nationally available things; you may find something in your area with as good a savings rate.

My point is that you don't need to stick with the same old "robber barons," but rather that there are a number of places that are accessible if you shop around.

Critically Observant Jew said...

Agree with JLan: my money is at Alliant as well. It has great customer service - I've been with them over 6 months.

Anonymous said...

The silver lining is how much your living expenses will decline once you are retired. You can live on 100K/year less once you no longer have to pay tuition. That solves the retirement dilemma.

As far as suggestions, what about rabbeim acting as teachers in the afternoon.

Ahavah Gayle said...

I'll look into Alliant.

I think, though, that investments simply are not safe right now - even though they appear to be. An article I blogged about recently gave this quote:

"Writing for Fortune Magazine, Nouriel Roubini predicts:

...Things are going to be awful for everyday people...For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments...It's better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It'll be hard and challenging enough..."

Preserving capital means not gambling with it - and the stock market is 100% gambling, as this rather famous analyst clearly points out - and many, many others. The stock market is not safe right now - it's "rise" is purely monetary, not based on business fundamentals. Don't put money into it that you can't afford to lose.

Dave said...

If you need the money within five years, you shouldn't be very heavily into equities anyway.

If you don't need the money within five years, trying to time the market generally leaves you much worse off than people who put the money in (well diversified) and just keep doing so.

Offwinger said...

Ahavah Gayle,

That article advice is clearly not meant to be about long-term investing or it is just flat out wrong.

The idea that the stock market is "gambling" and should be avoided is an often repeated comment that is terrible advice with regard to well-balanced investment portfolios. People who avoid long-term investment in equities are at risk that their savings will not keep up with inflation.

In fact, buying equities right now - when you know that they won't be sold for a LONG time - is actually very smart, because you can "buy low."

Again, this is only speaking about retirement planning for those who are *far away* from retiring. As someone nears retirement, the portfolio balance should be readjusted to reflect the need to reduce risk related to timing the market. You gradually shift out and into safer investments as you get older and retirement gets closer.

The original post is about retirement planning. Failure to include equities in your retirement planning would be a big mistake for young people.

Shevy said...

I think things must be much different in Canada. Here, the Ministry of Education pays an amount per child for the secular portion of their education (roughly half of the curriculum). So the tuition you're paying is for the infrastructure of the school plus the Judaic portion of the day. While costs are still high and many people need to receive subsidy, the school would still lose much more than just the amount the family pays for each child who withdraws due to an inability to pay. I have the impression that this is not the case in the US due to the whole "separation of church & state" thing. If I'm wrong, please correct me.

Orthonomics said...

Shevy-Here in the States, there are some government funds for buying books or technology, but nothing to cover a large portion of expenses like in Canada.