Paying for our kid’s college has been near the top of our personal finance goals list for a long time.
There are a number of reasons I personally feel strongly about this goal:
- I know what it’s like to have school loans (both my wife and I had them).
- I have a Biblical perspective on debt and I want my kids to have a debt free start when they graduate.
- My wife and I want our kids to focus on school when they’re in school. I don’t have any problems with them having a part-time job, but my preference would be for them to go to school full-time and not have to work full-time.
- I’ m not interested in going into school debt again. I would prefer to pay cash for their school.
I recently came across a Forbes article on the subject of paying for your kid’s college which sparked my interest. As you probably know, many students graduate college with a lot of debt. According to Forbes, some have debt up to 6 figures (for private schools). They also say the average undergraduate debt runs $20,000, but variable interest on loans can make that figure rise until the payments are impossible to make on an entry-level salary.
Having all this debt puts college graduates in a difficult position. Once they graduate they should be focusing on saving and investing and not paying on debt. Furthermore, they should be able to focus on building a career and learn more about the value of earning.
What is more concerning is many parents are sacrificing their retirement savings to send the kids to school. According to the article, they’re cosigning loans for their children who end up not being able to pay. It then becomes the parent’s responsibility to pay the lender. I would imagine many moms and dads work hard to get their financial house in order, become debt free and then end up being stuck with student loans all over again. It’s all quite disheartening to me.
What Not to Do
So, what are you to do? First, we need to look at what not to do. There are a couple of big issues that must be avoided. First, don’t sacrifice your own retirement to pay for your kids’ education. Doing so will result in a retirement savings shortfall and prolong the years in which you have to work. There would be nothing worse than not having retirement savings on-hand and having to then turn to your children to support you.
Second (and I feel strongly about this), don’t ever cosign a loan for any family member, or your child. First, it’s Biblical and I’m all about sticking to Christian financial principles. If your child chooses to get a student loan it must be their responsibility to pay. Of course there are alternatives to student loans and considering debt, and you need to help coach your child through those decisions.
Now that we know what not to do, there are really just two answers left. First, let’s take a look at minimizing college costs.
Minimize College Costs
Forbes mentioned a number of alternatives to help minimize college costs:
- Community college classes
- In-state public tuition
- College students continue to live at home
- Look for grants, jobs, work study programs and other ways to help pay for college
All of these are excellent ways to save on college expenses. Yes, I believe when the day comes we’re going to have to be at the top of our game researching and knowing college costs inside and out. And yes, there will be emotions at play to overcome.
If you’re struggling with college savings, community college is an excellent option. A 2- year college is cheaper and many of the prerequisite courses can be taken while Billy or Sally are still at home with mom and dad (minimizing costs further). After community college, hopefully there is further savings in place, and your child can move onto a 4-year school working on their chosen major.
Save Money
Minimizing costs is one thing, but you have to save a lot of money. The only way to save that kind of money is to knock out these three important goals as fast as you can:
- Build an emergency fund
- Get out of debt
- Max out your retirement savings
Accomplishing these three goals will get you to a point where you’re able to save for your kids college education. For most people, these goals are not achieved without serious focus and sacrifice. They are definitely achievable as I know many of you readers have already accomplished them. I believe putting college before any of these other goals will put your short-term and long-term financial situation at risk.
There are many ways and tips to save more money. You have to be creative about saving, so I’ll leave you with what I think is a good tip. Get Billy and Sally involved in saving for their own college education! As they get older and start working, have them start contributing some of their pay to savings. It may not make a huge difference, but it can definitely help teach them the value of saving and helping them earn their way.
In my opinion there is no question that you should pay for your child’s college education. It will, however, require a lot of work and you need to make sure to avoid the no-no’s mentioned in this post.
What are your thoughts on college savings? How do you plan to accomplish this savings goal? Do you agree that it’s a good idea to pay for you child’s education?
For another viewpoint on this topic, check out Pete’s post from last year: College Expenses: Should Parents Pay For Their Children’s Tuition?
I think I have a slightly different view on whether parents should pay for their child’s college education. In my article I linked above, I basically argue that parents should make a strong effort to get the children involved in paying for their own schooling whether it is through saving up via summer jobs, doing well in school to get scholarship and grant money, working part time – to considering less expensive schools as an alternative. I think having them pay for their own schooling (as I did) gives them a stronger work ethic, promotes responsibility, and gives them a better insight into the value of money – and education. If their schooling is just paid for up front, it doesn’t mean as much I don’t think. After all, which hurts more – to spend your own money – or someone else’s? Would you apply yourself more if you knew you would have to pay for it yourself with your own hard-earned money?
While I’m not for paying for a child’s entire schooling because of the reasons above, and because I think it can promote a sense of entitlement, I’m not against providing the child with help along the way. I do think doing everything you can to encourage the child to graduate debt free – and if necessary give a little help – is important.
I agree with Peter. My husband and I have staggering 6 figure student loans and while we would like to pay for our children’s college expenses, we are going with the above suggestions including the following:
* Community college classes
* In-state public tuition
* College students continue to live at home
* Look for grants, jobs, work study programs and other ways to help pay for college
While I love the experience I got at a private school for both undergrad and grad, it wasnt worth the loans we have now. Our kids will start saving towards this goal themselves early and possibly take out loans when they get to that point. There are plenty of options for paying for college which doesnt include directing money away from my retirement account to the hope that they will make good use of my hard earned money while in college. If they decide to drop out as many kids do then taht money is gone. It’s a risk that I dont want to take however selfish that may sound.
Pete, I respect your opinion on this subject. I think you raise some great points. I definitely want to guide my children along the way. I do want them to learn the value of earning and not take things for granted. Eventually, I would suspect I’ll need to provide a lending hand, but we’ll see how it goes. I defniitely want them to focus on school when in school and not having to work so much it takes away from their education. You’re obviously a great testimony in that it can be done. Well done, sir.
I like the idea that you don’t want your kids starting out their life’s after college with a mount of debt to crawl out of. It’s tough but it is possible. One of the best ways to do that is being frugal.
I agree that you shouldn’t hold off on building your retirement fund to build a child’s college saving fund. They say you can borrow for college, but you cannot borrow for retirement.
I also agree somewhat with Pete, in that maybe the kids should be involved in paying for college. If you educate them about the costs of college early on, and they see the value of a degree, then maybe you can influence them to pay at least a small part of it.
People put money into things that are important to them. So if the kids really want to go to college, maybe they’ll be convicted to earn some money before and during college through summer jobs, after-school work, etc.
Our oldest son is paying for his own community college education while living at home. We pay for all his ‘room & board’ costs, I do his laundry, etc. He works part time and goes to school full time (12 credit hours a semester). He pays tuition & books, his car insurance, gas, and $10/month for cell phone on our family plan.
We both paid for our own schooling with no debts as young people and know it is possible with hard work. We’ve also seen far too many of our friends with mountains of debt for their kid’s expensive education while the kids ‘play’ at school and don’t take it seriously at all.
We are blessed to live close to the local Comm. College – he commutes less than 10 miles to school. Classes are affordable compared to the public 4-year schools in our area (which run upwards of $22k per year w/ room & board).
Man-child sees the debts his friends are running up and is thankful for this arrangement – and has even said it’s pretty sweet to have his own room, all the amenities of home, and not be drowning in debt before he even graduates.
Deb, thank you so much for sharing your situation. That’s really ideal, isn’t it? Your son certainly appreciates his shooling and understands the implications of debt. Smart child and good job parent!
I am with Peter on this one. My kids (13 and 10) already know that they will be responsible for handling the bulk of their college expenses. I’ll help them out when and where I can, but I want them to take responsibility for their own educations.
I paid for my own college education and graduated with a degree in electrical engineering debt free. It CAN be done as long as you are willing to do some part-time work (both before and during college), and go to a reasonably priced state college or university. I was able to further reduce expenses by going to a JC for the first year to get my general education requirements out of the way.
All the best,
Len
Len Penzo dot Com
I didn’t get much help paying for school and it was extremely character building. I do plan on helping my kids with part of the cost as long as they stay serious about their studies. I certainly appreciated it when I got a hand from a scholarship or any other source. I don’t think it ruined my character that much by getting a helping hand now and again.
That being said, I will not contribute to a 529 in lieu of my 401K plan. 401K and IRA balances don’t count as assets when you fill out the FAFSA application, so you’re just hurting yourself by putting the kid’s education before your own retirement savings.
My kids haven’t even started school yet and their daycare expenses are $16K/year. I figure worst case, if I can swing paying daycare out of pocket, I can help pay some of the tuition as they go too.
Both my parents and the wife’s parents paid for our undergrad so I think it is something we are going to look into also. For the reasons listed above, but also as a “gift” to our child. They can then say my parents paid for my education – and hopefully instill the same goals down the line. Does paying for college guarantee that? NO CHANCE, but it may help!
Evan, I do like that approach. It is a gift, isn’t it? As I mentioned in the post, I’m not opposed to them earning and working toward their education along the way, but I definitely want to help them.
I was lucky to have my parents pay for my college and it is something I hope to be able to do in the future for my own children.
Good article. Hits home for me on many levels.
One thought: As important as our direct financial support might be for our 12 and 15-year-old kids (we do plan to help, and have 529s in place) I feel like the BEST thing we can give them is good advice. As much as my daughter loves art, for example, I have helped her understand that college is not an extended “camp” experience where you get to “pursue what you love.” You are training for an occupation and need to make decisions based on the economic realities associated with a given field. Can you make a living, raise a family, pay back your debts, etc, on the average salary in your desired occupation? Don’t give up your dreams, of course, but don’t cripple yourself financially to chase them in the first decade after high school… You’ve got plenty of time!
It seems to me that as parents we have an obligation to train them up and not just write checks for them.
I agree! I think my willingness to help my kids financially will be based on the intelligence of the major choice. I will not help my kids finance a degree in something other than math or the sciences. If you want to be an artist, so be it, find a sponsor (someone not me). If you want to pursue business, find a job you like and get your employer to foot the bill.
FYI, I put myself through state university earning an engineering degree with a ton of scholarships, working near full time, and some loans. I chose a degree that would allow me to pay back the loans. Our kids should also do the same analysis to determine if college is cost effective for them.
While having students pay for their own education can help them to appreciate the value of money and promote a sense of responsibility, having to put money first before your education can lead to a lot of stress. It is difficult to concentrate on school when you are worrying about how you will pay your bills or be able to afford groceries. I think that parents have a responsibility to assist their children while they are still in school, because school is a full time job in and of itself. This doesn’t mean paying for their entire education, but helping out if and when they can.
I hate this whole Biblical argument about student loans, which I blame on Dave Ramsey. If your spiritual authority is Dave Ramsey, you need to check yourself.
Anyway, in the modern world, anyone who isn’t from a wealthy family has to take out loans to go to college. Period. I did it, you did it. It’s no big deal. There are some exceptions. Merit scholarships. Athletic scholarships. Racial scholarships. Need scholarships. I am not sure whether Dave Ramsey thinks these are Biblical or not, and I really don’t care.
Today, for most students, the choice is debt free (no loans) or college. You can’t have both.
I think it’s reasonable to help out your kids if you can, but student loans are just not the end of the world if you can’t afford to do that. If anything, student loans put your kid’s skin in the game. At least, they did for me. It doesn’t mean you don’t love your kids or God or whatever. You can only do what you can, AFTER you take care of your own house, and to me that means retirement savings.
I do my best to follow God’s word on finances. Dave Ramsey is just a communicator of these truths. We know from scripture debt is something that limits our freedom. That being said, I’m all for hard work and saving so that one day my children don’t have to worry about debt. They can and should certainly participate in this too. :)
This post is 100% on point.
I would say that I thnk its possible to save for retirement while putting away for your childs’ education–as long as your meeting your retirement savings goals.
Great piece about not co-sgining also.
My husband and I had no idea how we would pay or help pay for our oldest son’s college education. When he was starting his senior year of high school, I decided to do everything in my power to help him find scholarships that he qualified to apply for. It was a lot of work, but by working together, my son won enough college scholarships that he is going to college for free. It is possible! Start early and apply for TONS of scholarships! :)
moneydup
When you go to college, you are an adult. How long do you feel entitled to having them support you? What happens when you finish your degree and can’t find a job? Should they be responsible for you til you find a job? It just makes me think of that 30 year old video game guy who lives in his mom’s basement and doesn’t work. Children have a sense of entitlement to their parents money that just doesn’t sit well with me. At some point you have to stand on your own two feet.
I personally worked 30 hours a week while in school and you’re right, it was not easy. My mom helped when she could but she did not have much to spare. But you know what? I also took school a lot more seriously than many of my friends who were goofing off and having fun.
I agree with you and others that you should definitely not hold off on retirement savings to save for college for you children. However, I feel that you should hold off on that new $42,000 Lexus and stick with the used $28,000 version instead – But that’s just me. Like others, I’m also all about having your children WORK for their education. I started working when I was about 13, cutting grass for neighbors, first real job was at 15, and have been working ever since, all through college.
Funny you post this; I just finished a two part series on “why you should work through college”!
$42,000 Lexus…..we drive a 1997 Dodge Dakota and a 1999 Oldsmobile Alero, praying that they pass inspection each year…who’s got any extra to put into retirement fund? come to think of it, that’s about what we paid for our home 15 years ago!
I’m always amazed at the number of parents who play the tough love game with their kids where a college education concerned. I agree with Jason. I’ve had over $50,000 in school loans and when I graduated, my job barely paid those loans. This is not how I want my daughter to start her life, overwhelmed in debt. My daughter picked an arts degree in music and yes, my husband and I are paying for her education. She is very grateful for our help. She worked full-time before going to college and bought her own car. She works part-time now and pays for cell phone, gas, insurance and maintenance of her car. I’d rather give her a good start on life, especially when we can afford it than to think my child will not appreciate an education because mom and dad paid for it.
My wife and I are debt free with no mortgage when our kid graduated from high school . We never saved for our kids college because we put every exytra penny to the mortgage and to become debt free. So now my wife & I can live on 1/2 of my salary and use the remainder 1/2 of my salary for our kids education. My company provideds a full pension and also a 401-K ( 5%). My kid will receive her Master’s degree with no debt. My wife & I will not be able to really enjoy life (travel, vacations)–atleast the Masters degree will be debt free.
I have about 16 years before my son will need college tuition, but it is something that I am already thinking about. Once I eliminate more debt, have a healthy (ier) emergency fund, and start putting more towards retirement…I will start researching which states offer the best 529 plans. Hopefully, I can start that within the next 5 years, and have at least 11 years of savings.
Also, something I wish I did when I was an undergrad….was to take the general electives at community colleges. It doesn’t make sense to pay all that money for general classes that will transfer.
I missed opportunities when I was in high school as well that I will make sure my son is educated about. I took AP classes, but didn’t apply myself enough to get the college credit…which translates into savings. If my son goes that route, I’ll make sure he knows the financial benefits.
As someone who is still paying student loans myself, I would love for my son not to have to start his career in debt…but I agree with a lot of what has already been said…I won’t be co-signing any loans either!