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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My parents were lucky enough to have my father's parents set up a trust fund for each of us (4 kids). We all finished a degree or training for a career. My parents brought us up to think of college as an automatic fact after high school. Yes, I was immature, but I knew I didn't have unlimited opportunities. I went on and did a master's degree in education that I paid for, and taught 38 years in public education. I have one step-daughter out of 4 stepchildren who showed promise. She has completed a degree in business and is now working on a MBA. She has a very good job with an accounting firm in human resources. Yes, she was spoiled and has no debt, but at 25, she is capable of following her dreams. My husband has a military benefit that is helping her with her master's. We invested in her undergraduate education, and I don't regret it. My siblings children have done the same as my generation, getting career training or degrees. This was partly due to a generation skipping trust my grandfather set up and contributions by my father, their grandfather, and their parents. This is a tradition in our family, now. Each generation helps the next get education and then helps the following generation if possible.
May I ask what you were thinking having 5 kids? I ask because I come from a large family. Why on earth do parents overextend themselves like this?
i paid for my daughter's education at a public university. She got very good grades in a tough major and a number of times acknowledged her greatfulness. i could afford it and she kept her end of the agreement. I would not have paid for Harvard and would have cut the financing if she had gone the party route. I did not go into debt or use retirement funds for the expendiures.
With today's situation, I would have funded an education savings fund at birth and had most of the costs covered by the time she was ready for college. This is something that most parents can do to at least provide some of the costs of school, but the sine qua non of any such funding agreement is that the student work to the limits of their intelligence and potential whatever level that is. Grades are usually the first indicator that something is going wrong, but reviewing his/her credit card bill is also informative. As RR used to say, trust but verify.
The old saying give your kids enough to do something, not enough to do nothing. How much that is only a parent can answer.
Second for all of those who said they paid for their own college. Well the rise in college tuition has been devasting to the middle class. It was posible to pay for tuition back in the 1970s. I went to a public school that cost about $1500 a year. It was affordable. Four years cost less than $5000. No loans necessary.
Now it is a tremendous financial drain for either the parents or the child. You can't pay for college by working in the summer. It will not even pay for a public school much less a private school.
Get mad. College tuition increases must stop. It has become an obstacle to upward mobility. The people running America's colleges should be bright enough to figure how to lower tuition.
Why does FASFA require the the parents to take loans or pay for a portion of their childs college costs. They should require the student to take federal or private loans to pay for their schooling, a parent can help but not bankrupt themselves to pay for school. My child has a 3.85 GPA and is finishing his sophmore year and he can not get any grants or scholarships, but a low income student with a 2.0 or lower GPA can get a free ride, whats wrong with picture.
The parenting spectrum to which you refer should also include the dads who are required to pay college/university tuition by the terms of divorce decrees. I have no idea whether this is a new twist (of the knife), but it seems quite imbalanced, and leads to an even greater sense of entitlement among the brats of current/recent generations.
We paid our own tuition by working each summer as well as holding an evening job during the fall and spring semesters. We had fun on weekends, kept our grades up, and graduated in a timely manner.
Mass-ignorance is only good for those who rely on scare tactics to get to achieve their own agenda.
I think it is the parent's responsibility to pay for college. I know many people would disagree but this is my view. No child asks to be here....people make that decision to have children. Before making that decision, think about the cost of those children. I have one daughter for whose college education I paid. I was a single mother who paid for my own college education. Not a single penny from anyone. No child support. When I decided to have my daughter, she was no where around. I made that decision. It was my responsibility to make sure she was well educated and had all advantages to make a success of her life. She started college at 17. During her years at college, I never bought anything for myself. I learned to recycle fashion and make do with what I already had.
When she graduated at 21, I cried. I knew she was starting life without the encumberance of a single student loan. Now 4 years later, she continues to make this black single mother proud. She bought a brand new house a few months ago and continues to shine. I decided to have her. I took on that responsibility. I was obligated to make sure she was equipped to make the 'best go' of life. I knew I could not afford to do this for more than one child, so I had one. Parents need to recognize their responsibility and their obligation.
Using home equity to invest in a college savings program is not a good strategy? Home loans are at 4%, college costs are rising at 14%, that is almost a guarunteed 10% return on money. Am I missing something? You can still make your kid pay you back for college when they get out plus 4%. They can pay your mortgage, plus they'll be living at home paying rent, so you can quit your job and retire early and live off the servitude of your children instead of have them indentured to a bank who takes all their money.
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