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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However, I keep seeing comments making the argument: "I paid my own way through college back in the day and I did just fine". Please, reread the article and recognize the state of our economy right now. This is very rarely possible today. The price of college has risen exponentially within the last 10 years and, to be blunt, minimum wage sucks... miserably. For instance, in no state can an individual work 40 hours a week at a minimum wage job and afford rent. If you cant afford a place to live, how do you expect to handle a $30,000 per year tuition bill?
Parents, communicate with your children/teenagers early about college. Be involved in their planning and help them out by educating them about finances. I feel like this education can be more important than whether or not you decide to pay for none, some, or all of their college. I have seen many students, regardless of who is paying for their education, make awful decisions leading to debt because of the lack of knowledge they have about money.
From a recent graduate (Class of 2010)
It is difficult to say whether or not parents should be liable for their children’s higher education. I don’t think that there is a correct stance on the issue; however, I’d like to shed some light on my experiences and what I have gained through my parents support. It is generalized that parents who fully pay for their children’s educational costs are less productive members of society; however, as a product of these types of parents, I have managed to become that productive member: securing a full-time job with benefits, paying for my own expenses, and now, saving so that I can get my MBA. I think a lot of my productiveness can be associated with how my parents have taught and raised me, that through hard work, you can accomplish many things. So why are parents giving up on their children at 18? Do parents really believe that their son and daughter are well capable of living in this current world at their age, in this economy?
I read that your pre-frontal cortex doesn’t fully develop until you’re 25 which is why insurance premiums go down after this point. Your pre-frontal cortex is responsible for helping you make all the right decisions. However, I know a lot of individuals who are well beyond 25, but still behave and think like a 16 year old. So I don’t think you can necessarily associate age as a cut-off point between irresponsible/responsible. I do think that you can raise your kids to be responsible, to be liable for their own actions, and to understand that there may be consequences to their actions. Perhaps my stance has been influenced by my Asian heritage. I’ve been raised to believe that since my parents are supporting my higher education endeavors, that I will support them when they become less productive members of society (through old-age). It’s a cycle in my family, where my parents raise us and we will take care of them when they’re older and that won’t include a nursing home.
Lastly, I’m reading a lot of comments from parents who say if I can do it, so can you. This is such a general statement that can’t be applied to everyone. I grew up in a neighborhood where academics were everything. A lot of people were motivated and exceeded in AP and honor courses. Now, how do you determine which of the lot should get that scholarship to help pay for college? My graduating high school class had 40 valedictorians. Is there any one person in the group that is significantly better than the rest? Also, let’s talk about rising costs and lower wages. How can someone working full-time at $10 an hour pay their way through college? I suppose it depends on the type of school but my public university alone was about $4200 a quarter (3-months). So if you do the math, you’re still broke, hungry, and trying to study for your exams. The world of higher education is not the same as 30, 20 or even 10 years ago. We can’t necessarily compare our experiences from one generation to the next. Attending a University is surely becoming a norm, where you’re not just competing within your own high school but with the entire country. Soon enough, having a B.A. or B.S. will become the equivalent of having a high school diploma.
I took about 2 years off, got a job, saved some money, and enrolled in a wonderful university in my home town. My grades were off the charts and made the Dean's List almost every semester.
Although I did accumulate a small amount of student debt, after I finished school with such good grades, my folks took over most of my loan payments.
Lesson: You don't have to finish is 4 years (or less), you just have to finish. WITH good grades.
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.
My mom did not give me a dime for college and I thank her for it. She was on her own raising me and worked all the time. My entire life she told me if I wanted something I would need to work for it. This rule applied to everything from movie money to a car to college. When it came to college, she pretty much said, study. I did and got a darn good scholarship because of it. She was supportive and helped me figure out which loan packages would work best for me but was unable to provide any financial support beyond quarters for laundry. I worked two jobs in the summer and part time during the semester so I could continue my education. It's because of her that I really appreciated what I had. I didn't miss a single class because I knew "I paid for it" and wanted to get my money's worth. By the time I graduated, not only did I have a degree but several years of solid work experience on my resume.
So, wanna guess what I tell my kids?
I paid for my college education. I first went to the 4 yr college that I thought I would be transferrring to and made sure that any credits I take from a 2 year Community College would transfer over. So, I attended Community College for 2 yrs to get all of the bs electives out of the way. Then, I went to a state school for the remaining 2 years for my core courses and received a BS in accounting. Did this while working at the Acme 25 - 30 hrs a week on top of cutting grass for a guy for his rentals a few days out of the werek. Paid for my own car and insurance as well. Mom and Dad never charged rent as long as I was going to school and working. So, stayed home till about 25 and saved enough to pay down my debt and to have enough for a down pymt on a house. I most likely will do the same for my kids. As long as they are being productive, there is no rent. And if you don't want to go to college then you need to take up a trade. My Dad always told me to take up a trade. Never thought working in computers would be my destination(although it's not over yet).
As for college degrees being considered "Paper'" degrees:
I have a few certificates - BS in accounting, Computer certificates. Even though I would say that I rarely use my BS in Accounting, it still shows a prospective employer that you set a goal to better yourself and you completed the work - hence the degree.
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?
Maybe as a parent you might want to reconsider giving every 12 year old a cell phone with unlimited text plan and then buying them every video game. Think how much money you could have saved for their college!
Instead of having"your 17 year old baby" check in with every hour for your peace of mind on that cell phone and rather than making your child read books (like they will must in college) you let them play video games. Now your child as no sense of self reliance and ends up dropping out because it too hard and expensive!
Think about this when your child at age 35 and still leaving at home!
It's just too bad that the kids have no say so in being born into this "hell" of an Earth in the first place. Dead beat parents, massive debt, soaring prices, cruddy educational systems, etc.. It's a shame that any fool can become a parent while suckling at the government teat.
It's the hard-working, decent ones that you won't find leaving comments here. They're too busy working to provide for their families.
Parents should give the responsibility to the child(ren) to look extensively for scholarships, grants etc. so it teaches the child to be responsible for their own future and themselves.
It would be smart if they parents had a backup fund, but only for emergency purposes.
i decided to take out some modest loans at a state school to pay for my education, a chemistry degreee. loaded up on credit card debt too, mistakes- you betcha! i regretted it cause it dawned on my tiny evolving brain that i would paying out almost 100 bucks/ month for the next ten years on student loans after i graduate. so i took some time off, got a second job, and paid off alot of student loans and eliminated the credit card debt. now i pay as i go working a close to fairly good wage job, live with mom and dad, and pay out of pocket to finish college with a very low amount of debt, at least when compared to others. i explained to my parents the situation with the debts i owed and incurred and they agreed that i should finish after getting the debts under control. no scholarships since i was homeschooled ( public education hates people like me).
now, well im proud of what im doing. im in my late 20s by the way. living with parents is ok since we had a good relationship in place from the homeschooling. your not homeschooled i guess, but paying for college and figuring out to avoid student loans is just a another set of walls. there's always a way around walls, its just a matter of you figuring out how to do that. if i can do it, anyone can cause i certainly am not the sharpest knife in the drawer!
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