tuition and home buying

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  • #869148

    Csar
    Member

    Huh? Lakewood parents generally all pay tuition, while Flatbush, Boro Park, Chicago and LA parents don’t? I don’t believe this is accurate.

    #869149

    popa_bar_abba
    Participant

    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.

    #869150

    popa_bar_abba
    Participant

    Huh? Lakewood parents generally all pay tuition, while Flatbush, Boro Park, Chicago and LA parents don’t? I don’t believe this is accurate.

    In lakewood there is nobody to shift the cost to.

    #869151

    squeak
    Participant

    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.

    #869152

    squeak
    Participant

    fbf- so you are saying that lakewood is not an option because your current situation is better than moving to lakewood. Good for you, so stop comparing. If you like it where you are, like it warts and all.

    #869153

    fed ben fed
    Member

    popa bar abba,

    By inherent nature of the CR, i know nothing about you. i think we can agree that we’ve made assumption on behalf of the other, some accurate some not-so-accurate. I can address the points you mentioned but it would simply cause this topic to snowball into a technical discussion of collateralize debt obligations.

    While this would actually be quite enjoyable, it is not for this thread.

    lets conclude: that with the Abishters help we should all make life decisions that are consistent with the derech of Hashem

    #869154

    Csar
    Member

    In lakewood there is nobody to shift the cost to.

    And low-income Lakewood parents pay more tuition than low-income Flatbush, Boro Park, Chicago and LA parents?

    #869155

    popa_bar_abba
    Participant

    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.

    #869156

    squeak
    Participant

    So…. CDOs, SIVs, yeah. Fed, everything about you in this thread screams recent college graduate, young married with kids just starting school. You say you oversaw 4 trillion in securitized debt? And it didn’t occur to you how ridiculous the idea of collateralized tuition payments was? Yeah. So while it might have sounded like fun when you learned about them in school but trust me, in most cases packaging debt is insane.

    It makes me wonder what kind of understanding people who study this market in college in the post-financial meltdown world will have. I suppose it’s like every other period in history, it can’t be represented properly except by living through it.

    #869157

    fed ben fed
    Member

    Squeak,

    I’ll reiterate,”By inherent nature of the CR, i know nothing about you. i think we can agree that we’ve made assumption on behalf of the other, some accurate some not-so-accurate. I can address the points you mentioned but it would simply cause this topic to snowball into a technical discussion of collateralize debt obligations.”

    he’s a quick snapshot of part of my resume.

    i started working in the RMBS world in 2006, the housing bubble was alive and well. my teams main client was Bear Stearns and JP Morgan. (i later worked on many Homebanc, Wells Fargo and Greenpoint deals as well). i had a front row seat at the rise and fall of the market.Talking to investors who were crying on the phone and watching the cash flows ,or lack there of, deteriorate earns me a little understanding of the severity of this topic. needless to say i had tons of business contacts at Bear Stearns who were let go.it was a difficult time for many and i had box seats…

    In 2010, I had numerous lengthy conversation with a board member of the FCIC (Financial Crisis Inquire Commission http://fcic.law.stanford.edu/) during their interview/research phase, we spent many hours discussing structured finance, he found my insights and knowledge helpful and useful during the interrogation of CEO’s and board members from the across the financial sector.

    Again, lets disregard the securitization idea and focus on other ideas. I agree that no one would buy this bond, and i hope no one would be so crazy to ever create such a deal.I also agree the default rate would be close to 100%

    lets get back to tuition’s.

    is the current tuition model broken? yes/no

    is the current tuition model sustainable? yes/no

    do you have any ideas suggestions to improve the frum economy? Fixed fee tuition that everyone must pay? shared sacrifice?etc…

    #869158

    squeak
    Participant

    Yes it seems broken because the model is rising costs, coupled with additional cost shifting as parents are priced out, compounding the rise.

    No, it is not sustainable indefinitely. I can’t guess how long before it falls apart though.

    No, I have no ideas to fix “frum economy”. Especially the parts of it that I have no negius in.

    #869159

    squeak
    Participant

    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 🙂

    #869161

    fed ben fed
    Member

    I like how you casually inserted Healthcare costs into your post, opening the door for another topic

    3000% increase in forty years is certainly a recipe for disaster.

    #869162

    dullradiance
    Participant

    How about setting up a kehilla.

    #869163

    dullradiance
    Participant

    FedFed

    How would you determine the default rate for you TBS (tuition backed security)?

    #869164

    dullradiance
    Participant

    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.

    #869165

    fed ben fed
    Member

    Dullradiance,

    The kehilla idea has merit and may be the ultimate future for many communities. One of my accountant friends has been singing this song for twenty years. He also has done extensive research and knows of the tremendous tax benefits of this model.

    What concerns me is that its

    1. difficult to enforce

    3. Most communities don’t have a central body of Rabbonim, often communities are divided over what is considered worthy of this communal support

    its a good idea though; keep ‘um coming.

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