tuition and home buying

popa bar abba,

To answer your question; the costs of a child from k-12 (which is thirteen years) generally for most yeshivas will probably cost the parents a lot more then 80k.

We can proceed with this discussion with the assumption that I understand the securities market.

I have no idea what you are trying to say. Your suggestion was that the parents borrow all the money upfront, and then pay it back with interest over 13 years. You think it will benefit the schools more than the amount the borrow, since the schools will have the time value of the money all that time (of course they will, and it will be coming from the parents).

Your idea boils down to three points:

1. Making parents borrow the money on the market, to place the responsibility on them.

2. Combining them into securities so that the ones with better ability to borrow will effectively subsidize the ones with lesser ability to borrow. (I guess your purpose here is to hide the subsidy.)

3. Giving the schools all the money upfront, so that they can charge less because they will get the time value of the money.

Point 1 makes sense only if you think the problem is parents avoiding their duty, and not that parents simply don’t have the ability.

Point 2 makes no sense, since you are simply shifting the subsidy from one way to another.

Point 3 makes no sense at all, and is what I was attacking before. There is no reason to give the creditors a piece of the action, by borrowing from them at higher rates than the school itself could borrow.

Squeak thought you meant they should borrow on a 30 year loan, which would sort of make sense, since then you’d spread the cost of education past when your kids leave school. This would make sense if you think that parents get more ability to pay later in life. I am not convinced this is true.

To popa’s analysis:

1. Makes no sense to do just to shift the burden on the parents. Only makes sense if it is to amortize over a longer period of time and therefore be more affordable.

2. Securitizarion makes sense when the default risks in the group are not obvious at the outset. Time will tell who defaults but at the outset all borrowers seem able to meet their obligation. Obviously, in the tuition world this is not the case.

3. You missed the point, the money the school gets each year from the kundergarten class will fund the entire school for a year. Not reasonable to think of it as an endowment for the school, they will spend the entire amount immediately and then run year 2 off the next kindergarten. Idiotic of course, because what if class sizes go down or a school is forced to close? Endowment makes sense but we wouldn’t trust the schools to manage real money.

The idea of my local rosh yeshiva being the borrower on 10 x $8 million bonds (one for each kid) is simply laughable. Think subprime risk, raised to the power of 613 factorial.

squeak:

3. I got that. I had assumed there must be some purpose to making the entire payment at kindergarten, instead of yearly. I supposed it was to give the school the time value of money. Which in turn made no sense.

In any event, I agree with you, that it makes no sense, and might only make sense if the purpose was to spread it over 30 years.

fed ben fed: Why not, it’s a good a thread as any for this.

Sorry for the double post. If I get this in during the edit window, I’ll add this to my above.

The rising cost model is at an unsustainable rate. Obviously in a modern economy costs do have to rise over time. However, the rate needs to be contained and in the case of tuition payments- from what I understand – the rate of increase outpaces every possible metric except possibly healthcare costs. This means that it is broken (so is healthcare btw, for the same reason). It may not collapse for a long time, but we are well past the point where we should start lookung for ways to fix the system.

From what I know, the MO schools (e.g. those in Teaneck) have it worst, as their prices are a good few thousand more than the RW schools. Therefore, they are likely to be the pioneers of solutions. The RWers would do well to watch them and even participate in their current problems because what MO is living with now is the future of RW.

And ftr, fed ben fed, it is an unspoken rule in the CR that every topic must go off topic so don’t try to derail a good derailment 🙂

How about setting up a kehilla.

This past year, one yeshiva restructured their tuition for full payers. They “reduced” the tuition by 15% (or so) and “requested” a donation of that amount.

Basically, their accountants said that since full payers have been subsidizing tuition to that extent, let the payers get a deduction for it.