Another Sign of the Times

An Engineer friend of mine sent me this article. Personally, I would just make the (spoiled?) kid attend the prepaid Public Institution...

Anyway, I thought the article accurately illustrated the state of America: Debt strapped middle class families, livin large and stuck with very difficult choices... ooh, but wait, maybe they aren't so difficult... America's lending institutions are here to the rescue.

Synopsis: As a result of demographic trends (people having children later in life) and in many cases poor financial choices by their parents, kids may start to suffer. On the other hand, of course, there are bankers willing to let middle class families go even further into debt to finance their children's dreams.

Some Parents Let Children Choose College, and Pay

By JONATHAN D. GLATER

Published: April 10, 2006 Alexandra Baldari and her parents have talked a good deal over the past year about how to pay for her college education, and the upshot is this: If she enrolls at the University of Miami in the fall, she will bear much of the cost, which could total $40,000 or more a year, on her own.

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

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

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

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

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

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

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

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