4/20/2012 7:09 PM ET|
Should you pay for kid's college?
It’s not an all-or-nothing decision, and parental advice and encouragement can also help your student earn that degree.
Like virtually everything else about parenting, the topic of who should pay for college tends to bring out extremes of opinion.
At one end of the spectrum are the parents who declare their jobs are done when their progeny turn 18. "I've fed them, clothed them and kept a roof over their head," these parents reason. "If they want to go to college, they can pay for it."
At the other end are the parents willing to bankrupt themselves so Suzy can attend her dream college. They're the ones who ask me if they should take out a massive home equity loan, or withdraw the money from their retirement accounts, to pay the oversize bills.
Let me make the modest proposal that the best approach for many families is somewhere in between these opposites. You shouldn't sign your kid up for an education you can't afford. But even if you can't contribute a dime toward college -- many families can't -- you also shouldn't simply wipe your hands of the whole matter. Your kids need you to be an active participant and adviser if you want them to avoid a debt disaster.
Whenever I hear from young people with mind-blowing amounts of debt, like a woman who racked up a quarter-million dollars of loans for a bachelor's degree or a med student on his way to half a million dollars in debt, they're often kids from modest homes whose parents don't have college degrees themselves. The parents didn't or couldn't provide guidance on how much debt is reasonable, and their children likely will be paying for that for the rest of their lives.
It may be just as bad to let your darling think any education, no matter how expensive, is within her grasp just because you're footing all or part of the bill. If you won't have the full cost saved up before she starts -- elite private colleges run $60,000 a year or so now, and that cost will continue to soar -- then you need to start managing her expectations long before she starts applying to schools.
That means researching your options. You can start by checking out the net cost calculators of the schools you're considering. Not all net cost calculators are accurate, warned Lynn O'Shaughnessy, the author of the upcoming second edition of "The College Solution: A Guide for Everyone Looking for the Right School at the Right Price."
Calculators that ask only seven or eight questions won't be as predictive as those that ask 30 or more, she said. But you should be able to get a ballpark idea of how much the schools will cost your family.
You also can fill out the detailed expected family contribution calculator at FinAid. Using this calculator usually takes some time, but it can give you an idea of how much public and private schools will expect you to pay out of pocket.
You can match those expected costs against the amount you have saved for school and how much you think you can contribute from your income to see if a school might be affordable. If there's a yawning gap between your resources and your expected contribution, it might not be.
To pay for school, parents shouldn't:
- Cut back on their retirement savings.
- Borrow from retirement funds.
- Take on loans that would require them to delay retirement.
Borrowing against home equity is risky, too, because that's a financial cushion you may need in an emergency or to fund your retirement.
What's more, borrowing vast amounts of money or postponing retirement to pay for college isn't necessary, O'Shaughnessy said. Your kid has too many other, affordable options to get an education for you to bankrupt yourself.
"Don't sacrifice and throw your family into financial turmoil," said O'Shaughnessy, who offers a workbook for parents called "Shrinking the Cost of College" at her website, The College Solution. "People get too hung up on the grand name. Smart kids will do well, wherever they go."
For those of you who think your kid can just skip college -- your numbers are dwindling, but I know you're still out there -- let me give you a little context. Yes, these days there are college graduates without jobs. But people without college degrees have twice the unemployment rate as those who have them, and the picture isn't going to get brighter down the road as good union and manufacturing jobs continue to disappear. Some post-secondary education will be all but essential for those who want at least a middle-class standard of life. For more, you can read "Should your kid skip college?"
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When my two boys were born I bought each of them a prepaid tution program...it was to be an insuranc program for them. The cost was about what I would pay for a new automobile. So my wife and I made our old car last 9 years and paid for the program. As it turned out both boys went to instate schools so all I had to worry about was the cost of room, board, and books. Again no new cars until they graduated. I lucked out with the younger boy who got a scholarship that covered his tution...turned the prepaid into a mutually and it paid for all of his expenses.
Bottom line is neither boy has a loan..we didn't have fancy cars or long vacations but the boys were taken care of and our retirement funds remained intact.
In the state of NJ according to the law, if you are a single parent, you have to pay part of the childs college education. And if you are a married couple and your child wants to go to college you don't have to pay at all.
Also, lets streamline education. we could probably eliminate 1 year of courses for people who have already made their career choice. Why should students pay for courses they don't want, and won't actually help their careers?
If you have no debt...and the cash to do it then by all means help your kids go as far as they can in school. If you or them have to borrow a dime for school then they are not college material and need to look to tech schools & work...Period. Just think...If nobody applied for student loans and refused debt then the cost would fall to the point no loans are required.
BTW...I do not want to pay for other ppl's poor decision making by getting in over their heads for college. NO BAILOUTS for student loans on the taxpayers backs or moral hazard will crash the world as we know it. Get Bill Gates & Buffett to donate to the "Pay for other PPL's college fund".
If you can't go to college and can't find a job... join the service do something worth doing
I think if the parents are college educated, they are more likely to encourage their children to go to college and are more likely to help with the cost. On the other hand, if your parents are farmers (like my parents), they are less likely to see the importance of college, even though in my case my parents farmed leased ground and there was no farm to pass on to me or my brother. My parents never even bought me a bicycle, let alone promoted or financed my college education. I did that myself when I went to college as an adult and became the only person in my family to ever get a college degree.
That being said, I don't think parents are necessarily on the hook for the entire cost of the child's college degree. The child should have to foot at least part of the bill. But now, the issue is the return-on-investment for a college degree. In the current poor economy and employment mess, there are a lot of young college graduates flipping hamburgers and wondering how they will ever pay off their college loans.
DUH! This Liz Weston is one of the stupidest people in America.
Of course people should foot the bill for their kids to go to college---
The taxpayers sure as hell shouldnt...
I grew up in a sparsely populated area. Talked to a lot of old people that strictly beleive that college should be optional and that you should be able to have a good life without going. If the governement was to pay for it, it would make this option to work after HS, decrease to nearly nothing (and the people working would be the ones footing the bill). However, it would decrease the population and increase jobs as everyone will wait until they are nearly 40 to have children and then need fertility help, gene therapy, IVF, and what ever else which helps the economy...
I like the old way, and would have done that if our government hadn't become the leech it has.
Ron Paul 2012
The decision to pay for college is up to the family, but the aid application process needs to change to be more reflective to the times.
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