A prestigious private high school has made available to local

Question

A prestigious private high school has made available to local families a tuition prepayment plan to ease the burden of paying the school’s hefty tuition when a student matriculates. The plan allows parents of children under three years old to reserve a spot for their child at the school by making a payment of one-fourth of the current annual tuition for the high school. The parents then make an identical payment every year for the next 15 years, and the student’s full four-year tuition is considered paid in full, regardless of how much the regular tuition payments have risen in the intervening years.

Under which of the following circumstances would taking part in the prepayment plan NOT be advisable for parents?

A. If the tuition at the school has risen an average of 4 percent per year for the last twenty years

B. If the child in question is particularly talented at math, but the high school is more known for its advanced humanities programs than its math program

C. If the parents of the child in question are uncertain that they will reside in the state for more than 10 years

D. If the school has an arrangement with the local university whereby students can take courses at the university if they have surpassed the level of courses offered at the high school

E. If the school offers athletic scholarships to a small number of talented athletes

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Vivek1707 · Answer

A. Rising tuition actually makes the prepayment plan more attractive, since the parents lock in today's rate.
B. The strength of the math program is a separate issue. It doesn't tell us whether the prepayment plan itself is a bad financial decision.
C. If the parents might move away within 10 years, they could end up paying into a plan for a school their child never attends. That's a pretty big risk.
D. The university arrangement could actually make the school more attractive. It doesn't make the prepayment plan a bad idea.
E. An athletic scholarship is uncertain and applies only to a small number of students. Parents shouldn't base the prepayment decision on the possibility of getting one.

counterclash1 · Answer

Correct Answer : C

The prepayment plan requires a 15-year financial commitment to lock in 4 years of high school tuition. For this plan to make financial sense, the student must actually attend the school when they reach high school age.

Option A: Tuition inflation makes locking in current rates financially beneficial.

Option B: Academic focus is a general school choice factor, not a direct flaw of the financial plan.

Option C (Correct): If the family relocates out of state within 10 years, the child will not attend the high school, making thousands of dollars in non-refundable prepayments completely wasted.

Option D: Adds value to the school's curriculum; positive feature.

Option E: Small-scale scholarships do not invalidate the general tuition payment structure.

SKP220292 · Answer

Can anyone please explain this?

Essentially we are looking for a situation where parents end up paying 4x but won't consume 4x worth of service, to put it simply.

But the education course is of 4 years which is significantly fewer than 10 years. I rejected C because if the kid uses all 4 years, that means 100% of the service has been consumed. From year 5 onwards where the family stays should have no bearing on whether the parents should pay what they owe, right? For example, if the family moves in year 6, they still got their child the entire 4 year course for which they should keep paying the (x/4) amount for the remaining years of the term to ensure they pay the full 4x amount, right?

Keep in mind that we do not know (without an external assumption) when these 4 years would start for the child. Will it be when he is 7 years old? 10 years old? now itself? "High school" is not a universal term that covers a universally accepted age bracket. In India, people to this day debate on when or which standard is considered the beginning of "high school". My point is the "high school" definition is not a worldwide one - and without knowing when the 4 year period starts, how can we evaluate the significance of the family moving within 10 years?

If option C said that the family might relocate within the next 4 years, that for sure makes it inadvisable for the family to enroll into this payment plan, right? b ut for anything else we need to know at which age high school begins

What am I missing here?

egmat · Answer

Hi SKP220292,

Your logic about "paying 4x but not consuming 4x of service" is exactly the right test. The slip is  when  the relocation happens on the timeline - you're picturing the move as landing after the child has already finished high school, but the numbers force it much earlier.

Anchor the timeline

Read the stimulus dates carefully:

- The plan is only for  children under three years old .
- Payments run for  16 years  (the first payment plus "every year for the next  15  years").
- The tuition is only "paid in full" at the  end  - i.e., when the child actually reaches high school and matriculates.

So the child is at most  3  now. Ten years out, the child is around  12 - 13  - still years away from starting high school. The  4 -year course hasn't begun; nothing has been "consumed" yet.

Why C bites

Both Vivek and counterclash flagged this: if the parents are "uncertain that they will reside in the state for more than  10  years," they may pay in for ~ 10  years and then move  before the child ever sets foot in the school.  Your "move in year  6 " example is the key - in year  6  the child is only ~ 8 , so they got  zero  of the  4 -year course, not all of it. That's the wasted-money scenario the question is after.

On "we don't know when high school starts"

You don't need the exact age. The plan itself tells you high school sits at the  far end  of the  16 -year payment stream (child under  3  - payments for  16  years - matriculation). Any real high-school age ( 14 +) lands well past the  10 -year mark.  Therefore  "move within  10  years" reliably means "move before matriculation," whichever exact age you assume.

You were right that a move  within  4  years  is clearly inadvisable - the answer is simply that a move within   10  years  is inadvisable for the very same reason, because  10  years still lands the family out of state before the child ever enrolls.

Answer: C

SKP220292 · Answer

Any real high-school age ( 14 +) - where are you getting 14+ from? Is that common sense? Are you willing to bet that every country's education system recognizes 14 as the starting cut-off for high school? because if not, then you're bringing not common sense but external assumption that a GMAC grade question would never need you to.

Remove this 14+ assumption and option C breaks!

guddo · Answer

A prestigious private high school has made available to local families a tuition prepayment plan to ease the burden of paying the school’s hefty tuition when a student matriculates. The plan allows parents of children under three years old to reserve a spot for their child at the school by making a payment of one-fourth of the current annual tuition for the high school. The parents then make an identical payment every year for the next 15 years, and the student’s full four-year tuition is considered paid in full, regardless of how much the regular tuition payments have risen in the intervening years. 
 
Under which of the following circumstances would taking part in the prepayment plan NOT be advisable for parents?

The plan is useful if the child is likely to attend this high school later. Parents pay many years in advance, so  the main risk  is that the child may never use the prepaid spot. In that case, the plan may not provide its intended  tuition benefit .

(A) If the tuition at the school has risen an average of 4 percent per year for the last twenty years

This would make the plan more advisable, not less. If tuition keeps rising, locking in the current tuition level is valuable.

(B) If the child in question is particularly talented at math, but the high school is more known for its advanced humanities programs than its math program

This is not enough. Being better known for humanities does not mean the school is unsuitable for a strong math student.

(C) If the parents of the child in question are uncertain that they will reside in the state for more than 10 years

This is correct.   If the family may move out of state before the child reaches high-school age, the child may never attend the school. Then prepaying for that school would be risky and not advisable.

(D) If the school has an arrangement with the local university whereby students can take courses at the university if they have surpassed the level of courses offered at the high school

This makes the school more attractive, especially for advanced students. It does not make the prepayment plan inadvisable.

(E) If the school offers athletic scholarships to a small number of talented athletes

This is not enough. The child is not said to be a talented athlete or likely to receive a scholarship.

Answer: (C)

quamaliquam · Answer

what if student reside in hostel away from parents when he or she hit the perfect age , by this plan still hold

egmat · Answer

Hi SKP220292,

You're right, and I'll drop the  14+  claim entirely. It isn't in the stimulus, no GMAC question should need you to know when high school begins in any particular country, and C doesn't depend on it. So here is C without a single word about age.

The plan runs 16 years. The parents' certainty runs 10.

Count the payments the stimulus hands you: one payment now, then  "an identical payment every year for the next 15 years."  That is  16  payments of one-fourth the annual tuition, which comes to exactly  four  years of tuition. And the stimulus is precise about when the benefit lands: the full four-year tuition is  "considered paid in full"  only after that entire run of payments.

Now read C against that. The parents are uncertain they will stay past  10  years. The plan asks for  16 . They may walk away six payments short, having handed over roughly two and a half years' worth of tuition for a spot that was never funded and never used. That is the whole case for C, built only from numbers the stimulus states.

The first sentence does more work than it looks.

The plan is made available  "to local families,"  and what it reserves is a spot at  this  school. Move out of state and the purchase loses its point regardless of when the child would have enrolled. Residence is precisely what the plan is buying against.

And CR is decided among five.

A has tuition rising, which makes locking today's rate  more  attractive. D adds university courses, which makes the school  more  attractive. B tells us the school leans humanities, not that it would fail a strong math student. E offers scholarships to a few athletes, and nothing marks this child as one. C is the only choice that puts the money at risk. Even granting every objection you raised, C still wins on comparison alone.

One last thing, since your real question was where the timeline comes from.  It comes from the plan, not from a calendar. Sixteen years of payments have to fund a  four -year school, so matriculation sits near the end of that stream, whether the payments finish as the student enrolls or as the student graduates. Either way it lands well past year  10 .

Answer: C

TheAdmissionHub · Answer

A prestigious private high school has made available to local families a tuition prepayment plan to ease the burden of paying the school’s hefty tuition when a student matriculates. The plan allows parents of children under three years old to reserve a spot for their child at the school by making a payment of one-fourth of the current annual tuition for the high school. The parents then make an identical payment every year for the next 15 years, and the student’s full four-year tuition is considered paid in full, regardless of how much the regular tuition payments have risen in the intervening years.
 
 Under which of the following circumstances would taking part in the prepayment plan NOT be advisable for parents?
 
 A. If the tuition at the school has risen an average of 4 percent per year for the last twenty years
  Wrong:  Maybe this trend will not continue.
 B. If the child in question is particularly talented at math, but the high school is more known for its advanced humanities programs than its math progra
 Wrong:  It doesn't tell us whether the prepayment plan itself is a bad financial decision.
 
 C. If the parents of the child in question are uncertain that they will reside in the state for more than 10 years
  Correct:  If the parents leave the state within 10 years, they could end up paying a school their kids never attend.

D. If the school has an arrangement with the local university whereby students can take courses at the university if they have surpassed the level of courses offered at the high school
  Wrong:  this shift the focus to university and woulf make the prepayment plan more attractive. We need to find the opposite.
 E. If the school offers athletic scholarships to a small number of talented athletes
 Wrong:  As D, it’s a positive thing. Even though scholarships are adressed to a small number of talented athletes, it’s worth enrolling to that school. It doesn’tget us thinking that enrolling kids at that school in not the right choice to make.

Bunuel · Answer

Official Explanation

If the parents are uncertain that they will be in the state in 10 years, then it does not make sense for them to prepay tuition for a high school that the child may not be able to attend.

Answer A  says nothing about the future rate of tuition increases, and does not provide other relevant financial information, such as the rate of inflation and the rate of return that the parents could get if the same amount of money were invested elsewhere.

Answer B  is a reason for the child to perhaps choose another school, although the mathematics program might still be better than all local alternatives; in any event,  B  does not relate to the advisability of taking part in the prepayment plan.

Answer E  is incorrect because it would be inadvisable for parents to make financial decisions based on the assumption that their child would win an athletic scholarship.

ANSWER: C

A prestigious private high school has made available to local

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