Lance and I got into a spirited debate in the comments of a recent post about whether or not parents should shoulder the costs for their children to go to college. Now, this issue is moot for me for a couple reasons:
- I’m not having children, and
- Jake and I have $100K in student loan debt – APIECE – so between funding our retirement accounts (we got a late start on that, too, since we were already about 30) and paying off our own debts, there’s no way we could afford to send our kids to college even if we had any.
However, it does deserve consideration as a thought experiment about what you value, if nothing else. Plus he encouraged me to do a separate post on it, so here you go!
Now, of the student loan debt mentioned above, I’d like to point out that none of it is for undergraduate education. Jake took out a modest amount of loans as an undergrad and paid them off before going to grad school. I was a National Merit Scholar and people basically threw buckets of money at me the entire time I was an undergrad (yeah, like DD, I don’t believe in modesty when it comes to academics). So since both of us were able to get at least the BA without any help from our parents, it seem to me that paying for college on your own is pretty obtainable. But in the interests of laying everything out, here are the main reasons I wouldn’t pay for my child’s education upfront, and what I would be willing to do instead.
The Tuition Bubble
I have worked in higher education for over 10 years, and I strongly, strongly believe that tuition is the next bubble. Tuition has been rising significantly faster than inflation for some time now, and because of the recent financial/economic crisis leading states to cut back so much on public institutions, lots of universities all over the country are going to raise tuition for the next academic year between 25-33%. This is because we didn’t really resolve what happened with housing, we just pushed the debt around and now it’s going to come out somewhere else.
This tuition bubble is going to have some significant consequences. For example, I anticipate that lots of universities will fail when the tuition bubble bursts. Public universities will start exhibiting problems first (because they rely on state dollars to run), but private universities are also going to go under because once their endowments are gone, there is noplace for the money to come from. But there is also the possibility that private universities will become a bargain once tuition rates at public institutions surpass theirs and they’ll do great. There’s a lot to consider. But I can almost guarantee that within 10 years there will be a HUGE, devastating meltdown of higher education in the U.S., so what is clear is that if you pay to send your children to college now, right before the bubble bursts, you’re buying at the top of the market. Any economist or personal finance expert will tell you is the opposite of what you should be doing with your money.
Things To Think About Before College
First of all, skilled labor is at least as good of a financial decision, and sometimes a better one, than college. Lots of trade schools work with the industry to offer paid training and job placement upon graduation. I’ve only worked at 4-year universities so I’m less familiar with this option, but if I had it all to do again I’d investigate this with a lot more seriousness, and would definitely encourage my kids to do so. If my children were interested in college (which is not an assumption I’d feel comfortable making in advance, hence no opening 529s for me), then they would have to prove their interest was sincere by taking the hardest courses they could and getting the highest grades they could while still in high school. Also, AP courses give credit by examination and some high schools partner with community colleges so they could earn college credits in high school.
The cost of tuition can be controlled, albeit in a limited way, by only applying to institutions in their home state (don’t pay out of state tuition), going to a public institution (don’t pay private college tuition), and working full time while attending a community college for their associate’s degree and then transferring to a four-year institution. Also on the finance/preparedness side, I’d also recommend that my kids visit their guidance office starting in spring of their Junior year of high school, asking what scholarship organizations they have on file, and applying for everything that they’re eligible for. But I wouldn’t stop there – I’d have my kids get onto Google (or Bing or whatever search engine is around at that time!) and start searching and applying for every scholarship they could find. I’m not just talking about the huge competitive ones that everyone knows about, there are TONS of little-known scholarships that are one-time and for lesser amounts of money, but every $500 scholarship my children earn is $500 out of their pocket that they wouldn’t have to spend themselves.
Things to Think About In College
Again, lots of opportunities here that most people don’t think strategically enough to take advantage of. Work-study is a FANTASTIC opportunity I wish I’d taken advantage of – you automatically get a job, you work on campus, and they’re obligated to work around your school schedule. Plus I know lots of people who were work-study while they were in school who got offered full-time jobs with benefits in the same department they’d been working in upon graduation.
As soon as my children were in college I’d also have them investigate whatever pre-professional organizations there were for their major/field and encourage them to start doing internships – they may not be paid at first but some are, and even an unpaid internship early on usually equals lots of connections and better PAID job offers later. I’d want my kids to declare a major their first semester – even if they end up changing later, having any memberships or internships on their resumes is never a bad thing, plus the sooner they start trying to get involved in a specific field, the sooner they can find out if they aren’t enjoying it (and get an idea of what they really want to do).
In other potential cost-cutting/cost-controlling measures, lots of universities are offering degree programs entirely or partly online, so if my children could adjust their courseloads such that they were available during business hours, then they could work full-time while they were taking classes (though I wouldn’t recommend this right away, since I’m sure my kids would want to get an idea of how much they could handle – and full-time work AND school is too big of a load for lots of folks). At the very least, they could get a more lucrative and/or relevant part-time job than something like retail or food services.
There are also sometimes positions open at universities that are full-time and benefits-eligible that only require a high school degree (reception, groundskeeping, maintenance/janitorial type work) and one of the benefits that universities frequently offer is tuition assistance. At the university where I work I can take up to 9 credits per semester for a flat fee of $25, for example. Actually, my spouse and any of my dependents get the same deal I do, so if I did have children and they went to the university where I work, their education would be practically free — I’d be happy for them to use my benefits although I’d require them to pay the $25 tuition and any fees out of their own pocket.
Finally, I’d expect them to line up full-time employment for summer and winter breaks (when they’re not in school) so they could pay for a lot of expenses with their own hard-earned money. Or, if that didn’t sound appealing or feasible, they could take coursework in winter and summer sessions and aim to graduate in 3 years instead of 4 (plus if they were taking coursework during the breaks, then they could still do work-study). Graduating in less than 4 years is also nice because tuition gets reset (read: raised) every year, and the quicker they could graduate, the more tuition hikes they wouldn’t have to worry about.
Things to Think About After College
My biggest fear (as I alluded in my comments on Lance’s post) would be that my children would be using my money to avoid working/”the real world,” that they would be using my hard-earned money to live large without acknowledging my sacrifice or intending to pay me back. I’m not implying that they’d do so out of greed (though some young adults do this, and it’s not always the result of bad parenting), but lots of young adults are scared and will grasp at any straw to avoid the plunge. So I’d encourage my children to use all the methods of paying for school above (which I think would help make them a lot more responsible and hard-working than students who get a free ride from their folks), and require them to take out student loans to pay for anything they couldn’t cover. However, I would be open to other types of financial help.
The first would be charging them rent during summer and winter breaks, and putting that money aside in a high-yield savings account for them (if they wanted to live at home while going to school, I’d be willing to do this throughout undergrad). Then when they graduated the money could be used for something like a deposit on an apartment (since after they graduated I wouldn’t allow them to live with me), or buying a decent used car outright, or some other financial goal that was prudent but that they couldn’t afford as a new graduate. Of course, I wouldn’t tell them in advance that I was going to do that, since they’d work harder if they believed everything was their own responsibility.
I’d also be open to making their student loan repayments for them provided they had full-time jobs. You have a 6-month grace period after you get out of school to find a job before you have to start repayment, and if you haven’t found a job by then then student loans can be put into forbearance until you do. But as long as they were proving to me that they were using the education that they worked so hard for, then I’d help them however I could. Again, I wouldn’t tell them in advance that I was planning on doing that. If they wanted to make their own additional student loan payments out of their salary, then any money they contributed would go straight to principle and drastically reduce the lifetime of the loan – for BOTH of us.
Basically, I think that if I can teach my children how to think critically and outside the box, be aggressive and motivated, work hard for things that are important to them, and take responsibility for all their own actions, then I’ll be doing them a far greater service than I would by throwing a giant pile of money at some faceless Registrar.
If you enjoyed this post on paying for college, you might also enjoy: