I’d like some input from you on how we might handle college expenses in terms of budgeting, cost caps, etc.
We have three teenagers. Two will have four years of private school. The middle child chose to stay at public school. We will not qualify for any financial aid.
Child #1 has applied to a public Honors College with a yearly cost is $25,000. Also several private colleges with costs of $65-$75,000 per year, and some others in-between.
The questions we are beating about are:
Should we cap family contribution to each child?
If we do cap it, do we reward a decision to go to a less-expensive public college?
Should we reward the child attending public school with a larger budget?
Right now we are thinking along these lines:
A. We will cap yearly family contribution at $60,000 per year for the kids who attended private school. If the child chooses a more expensive school, they will have to take out a loan from the family, to be paid back. If they use less, it will accrue for graduate school.
B. The child attending public school will receive full value of the private education towards college, plus the amount above, allowing them to attend undergrad and grad school fully paid.
Only problem is - we haven’t found any other families that have set budgets like this.
Can you comfortably afford 60K a year in cash for each kid for 5 years (assuming the worst with transferring or major change, etc)? If so that sounds great.
This is so individual it’s hard to make recommendations. We’re a full pay family with 2 kids, oldest is a senior. He is in at our flagship honors program which requires pretty close to ivy stats and application. I can’t see too much being worth twice the price. So he has applications into other schools, but at the end of day schools within about 5-10K of the flagship’s sticker may be realistic. Some people don’t have state options that will work well for their kid’s goals. I guess we could afford a full price private if we had to. But my spouse is approaching 60 and we have a freshman coming up behind. We live in a HCOL area. Getting good stats is what may open some doors for oldest. Having a healthy retirement account and options really benefits your kids too even if they don’t see it that way at 18.
I would NOT loan my child money. Do you really want to be chasing your adult child down for loan payments for years following graduation? I’ve heard many stories of that not ending well and affecting the relationship. I would allow them to take up to the federal limits to be responsible for that on their own if they pushed really hard for a higher priced option that would be bridged by that amount. After sitting them down with a post college budget showing them what payments will look like over 10 years while trying to maybe free lance or start a business or start a family.
My own mother borrowed my brother some money in a divorce situation so he could keep his house. Which is way too much house for him anyway. He is not making payments to her at all and she’s now afraid to stir the pot. I have to say it hasn’t exactly endeared me to him either as the years go on as a sibling watching a parent age and wondering about resources. Gift relatives all the money you can afford. Don’t become a bank.
$60,000 per year may be able to afford the list price of College X when the first kid goes to college, but may fall short of that when the third kid goes to college some years later. So that could be seen as a fairness issue if the first kid can attend College X but the third one cannot due to “the same” price limit.
It sounds like you have enough money to be full pay at any college your children are accepted to, but are questioning what is fair and what value you might put on the education. Many families decide that they will pay $70k per year for Harvard but not for U of Pittsburgh or UCLA. That’s up to each family.
I had two children the same age. They had different academic needs and abilities, so each chose the college best for her. One picked an OOS public but that was very inexpensive, about $20k per year, while the other picked a STEM school that started at about $48k but ended at about $58k COA. The one at the more expensive school got a lot more in scholarships and aid, so it turned out to be cheaper OOP for our family. I didn’t look at it as Kid A cost $X and Kid B cost $Y, but as each was getting the education she wanted and needed.
No, I did not give the one who ended up costing less the difference. No, I’m not adjusting my will so that one gets more. It’s just life and how it worked out. Right now, neither is going to grad school but if they do, she’ll have to pay.
I tried to keep things ‘even’ when they were young, but that didn’t mean it always cost the same. One played hockey, one played lacrosse, but the cost wasn’t always the same. One liked to travel with friends, the other to visit family. Cost wasn’t always the same.
The do, however, get identical Christmas and birthday presents.
Doesn’t sound like finances are really and issue. Let each kid go to the college of their choice. Encourage them to get scholarships, summer work, etc. Even them out after they graduate. So if kid 1 goes $70,000 private and kid 2 goes to $20,000 state U, at some point give kid 2 the $50,000 difference. Could all be done as part of estate planing. Good luck.
I would be happy to keep the money in my pocket if one of my kids chose a college that cost less. I don’t understand handing the extra funds to the kid, he/she didn’t earn it, I assume you and your husband did (unless it’s an inheritance). It’s really interesting to me reading these forums how people decide how to spend money on their kids when there is more than one headed to college. I personally don’t think that the money needs to be spent evenly if the kids go to different schools with different costs.
There are some good thoughts here on how best to handle your situation.
But for the benefit of other parents who may be reading this thread and thinking about how they may want to handle similar situations in their own families, I suggest that some of these issues could more effectively be addressed at an earlier time point.
If the decision about whether a child will attend public or private school will have an impact on the amount of money the parents will later contribute for college expenses, it might be best for the family to decide this before the public/private decision is made. And because the kids would be quite young at the time of that decision, I don’t know whether it’s reasonable to expect them to have a meaningful input into the decision making.
Another issue that’s applicable to a larger number of families: If you’re going to cap your contributions to college, the most effective time to make that decision is before the child applies to any colleges – and preferably, before the child starts seriously looking at colleges. Students can make better choices about which colleges to apply to if they have all the facts before they apply.
First off, don’t worry about what other families are doing. The only thing that matters is what feels comfortable for your own family. (And no one needs to know what you decide to do!)
That said, I have a close friend with three kids too. They gave them each a set dollar amount for college (roughly the equivalent of an instate public) and told them that if they wanted to go to a private school, they would need to chase merit money or take out their own loans. One child went to the instate public. The other two to private LACs where their grades/ACTs got them enough merit to bring down the tuition to instate levels. All three had great choices on the table.
We are also a full pay family and our daughter chose a school about in the middle of range of cost (she had full tuition at one of her safeties up to an expensive private with a COA of $70+K). She choose an OOS public honors which fell somewhere in the middle. We are not giving her the extra $30K /year we “saved” by her making that choice. The $160k investment in her higher education is enough of a gift and she already knows how lucky she is to not have any loans. Again, though, that’s just our feeling. You do what feels right for you. There is no right or wrong!
Do what you’re comfortable with and to heck with what anyone else is doing. If you are struggling, however, it might be worth reframing your thoughts.
Rather than thinking in terms of how much money, perhaps think in terms of giving an education. If you’ve framed the situation as providing an education vs. providing cash, you don’t need to feel guilty about cost differences. You can always say, we will provide you with the means to earn a bachelor’s degree, up to $60K a year. If it costs more, better find a merit scholarship or take the direct loan/ask us to cosign a private loan.
Normally, I’d be against private loans as you could wind up stuck with them, but since you could lend the extra yourself anyway, the situation doesn’t seem risky for you. AND, this has the benefit of keeping you out of the position of having your kid owe you money.
If one child picks a less expensive school, or gets merit that brings the cost down, you are free to consider the cost of study abroad or living expenses for an unpaid internship part of providing an education for that child, as long as the cost doesn’t exceed your annual cap.
The issue with trying to keep everything absolutely equal is that you can’t, and that can create conflict between the children. So state school kid gets grad school paid for. Private school kids may not see dollars but instead see you paying for more school for a sibling. Or state school kid gets the extra and buys a condo, and private school kids see only that state school kid got a condo and nobody else did! You can talk about how all of this is equal until you’re blue in the face, but the 18 year old brain will smile and nod and agree to anything to get to dream school right now only to be upset about things later. Also, keeping things equal never seems to end.
Kudos on being in a terrific financial position to be so generous to your children.
If you have honest conversations with your kids, and have taught them that the way to make good decisions is generally to make them using as much information as possible, they will understand you are doing right by all of them.
As for making loans to them should they decide on a more expensive option, this doesn’t bother me. I have cousins who are very well off, and my aunt/uncle decided on a similar approach going in to their college choice time (this was years ago, and their “cap” was $25K per year, which was generously above the cost of some state schools, and it would cover many, but not all, private schools at the time - but the concept is similar) . One cousin decided on a private school and “borrowed” roughly 5K per year while the other (two years older) had taken merit at a state school… Aunt/Uncle’s financial situation improved dramatically during their last year of paying for school, so they were happy to have the younger child repay 1/2 of the loan to the sibling, instead of paying it all back to the parents.
Since both kids understood going in what the deal was, they avoided what could have been a source of discontent. Both of my cousins like and respect each other, and they have a great relationship with my aunt/uncle - which I am sure helps. If there are other family problems, then family finances can often be an easy way to bring them out.
I personally would not want finances to influence my kids’ college choices IF I had the money. There are many reasons for focusing on fit. Penalizing a kid who needs a small private and rewarding a kid who can thrive at a large public doesn’t seem fair to me, but that’s me. I would pay for college costs for each, regardless of what the costs are, and give each kid the same amount for books and expenses-if that is what your family does (some kids work for expenses).
We let our kids chose between affordable options and the one that chose the in-state public did not have to take any loans. The others just took the minimal direct student loans. That offer did not include full-pay prvate. Our kids are also fairly spread out in age, so there was a built in escalation of costs from oldest to youngest so it wasn’t possible to set a specific number that was the same for each. If graduate school was a factor, I might offer to help for grad school is one spent significantly less for undergrad, but otherwise my attitude is that each got to choose and they are not entitled to payment for the difference in cost.
I just attended a fascinating conference on incentives (targeted to recruiters/human resources/comp and benefits professionals but the research is widely applicable).
Create an incentive targeted to the outcome you want. Do you want to reward all your kids for picking the cheapest school? Do that. Do you want to reward all your kids for figuring out the optimal fit/best cost option? Do that.
It seems from your post that you are ok somehow “punishing” the kids who went to private HS. Presumably, you signed off on that choice.
I’d be less concerned with the level playing field/equalizing/etc. if your stated goal was 'the right education for each kid". Once there’s an incentive for a kid to go low to get a big payday at the end, be careful of shooting yourselves in the foot. Most smart kids can figure out a way to get a BA on the cheap (U Phoenix at your kitchen table? Nothing wrong with that, IF that’s what’s appropriate for the kid). But if you think one kid could be a dynamo aerospace engineer and the choices might be Cal Tech at full price or your state flagship at instate rates, don’t set an incentive that encourages a cheapie online degree (an inferior option for any engineering/scientific discipline IMHO).
Full pay parent here. I think distributing money is a matter of need not of equity. We’ve always emphasized that principle.
The cost of the two schools my 2 Ds went to was different. Not quite as different as a state vs private, but nonetheless D2’s college ended up costing less even through it was 3 years later. We didn’t discuss it with them, we just paid the bills. We made clear that in their college choices, cost would not be a factor.
During the time D1 was in college and D2 was in high school, we left the expected remaining cost of D1s and D2s college in payable on death bank accounts with each as the beneficiary. This was to be equitable in case we both died and had spent tuition for one but not the other. Then in the summer before D2’s freshman year we prepaid 4 years of tuition at D2s college and got to keep the freshman year tuition for 4 years. At that point, we had paid 8 years of tuition so these POD accounts were no longer necessary. We ended up getting some money back because of the medical withdrawal and the less than full-time last semester.
They are both in grad school, D1 having worked at a high salary for 2 years and saved a lot of money, and D2 having gone right to grad school from undergrad having saved no money. They both live on stipends in cities where they can afford to live safely on those stipends. We pay D2’s car insurance - I want her to have a car and have good insurance. D1 has the money for car insurance and has been paying for that since she graduated undergrad. D2’s student health insurance is fantastic and has no copays. D1’s student health insurance is not as good and has 20% coinsurance which can get quite costly. We pay D1’s co-insurance because we don’t want to discourage her from going to the doctor over money. She also has chronic pain from an athletic injury and we want her to feel empowered to get treatment. We pay for both Ds car maintenance. We want them to get used to having their cars serviced without getting deterred by the expense and learn the importance of getting your car serviced regularly. We pay for both Ds to fly home for the holidays. We even offered to pay for their partners (who are also in grad school) to fly with them but were turned down in both cases.
We will likely need to help them buy houses when that time comes (especially if they want to move back to the totally unaffordable Boston area - Obviously that would be for us :-). We would probably give them the same amount but we’ll cross that bridge when we come to it.
I have never heard complaints from either kid that we paid something for one and not the other.
Keep in mind that other expenses might arise. We are a full pay family. One child chose a slightly lower cost school where she got a substantial merit scholarship. Her sister chose a more expensive school with no merit money. The older daughter comments on what a good deal she is for us - I keep biting my tongue about our out of pocket expenses for the counseling she has been getting for the last 2 years. We are paying in full for both kids and need to come up with a plan about grad school - all we’ve said is that they cannot count of full parental payment for grad school.
Best advice I got when my kids were little was: Fair isn’t always equal and equal isn’t always fair.
You have a spare 750k to fund all this? I personally don’t think a 17 year old should be responsible for predicting the future. Many families agree to pay the cost of the instate flagship and their kid needs to earn the rest in scholarships.
If one’s college costs less than others’, so be it. You wouldn’t want one to choose Nowhere State just to have cash in hand. Nor choose based on whim and perceived prestige, just because Mom and Dad have $$$.
Many parents encourage wise choices to prepare the kids for adult responsibilities. That includes no family loans. The fed student loans, ok.
Our three kids are so different in their interests and skill sets there is no way to equalize what we are spending on them. Kid #1 went to a local technical college, lived at home and we spent maybe $12000 on his degree. He was offered a great job before he graduated so we helped him with a down payment on his first home. First kid - launched.
Second kid wants a career requiring 10+ years of education beginning an at expensive OOS college. We are paying for that too though undergrad. After that he will be on his own.
Third kid is in the running for a full ride for her undergrad. The career she wants is not known for generous pay but will require a masters at least. She knows if she gets the full ride she will get an allowance from us and we could also fund her masters - enabling her to get her education and launch with out any debt.
Bottom line is that our goal is to help each one get what they need dollars notwithstanding.
We put our son and daughter through college without benefit of financial aid. We could do this for three reasons. 1) We had saved money for years for this (before the tax-deferred college savings plans were invented); 2) Each kid was given support (Federal Savings Bonds!) from their grandparents, equivalent to about 1/3 of the cost-of-attendance at a good private college; 3) we had a good current income flow to make up for any gaps.
We did not put any restrictions on the type of schools they applied do – public or private. They focused on programs, fit, and location.
Our kids did not apply for need-based financial aid. One of them did receive merit award offers from two colleges.
We wanted the kids to be able to attend the best college for them that they could get into. And we did not want them to carry any debt when they graduated.
This worked very well. They both graduated in 4 years from private colleges (UChicago and RISD). No debt. We felt that our contribution to their upbringing was completed. It turned out, however, that the second kid decided – after working several years in the economy – to go back to school for an MBA. That was not in our plan, and initially although we paid the rent she covered the program costs via federal loans. After she graduated, with prodigious loan debt, we came to the rescue and paid off that debt.
Through all of this, I recalled something that my parents told me and my 4 sibs a long time ago. “We are not rich. We can’t promise you an inheritance. But we CAN make sure you have the best education possible.”
@LookingForward, I like that line “Fair isn’t always equal and equal isn’t always fair.”
We’re looking for fair. We budgeted for four years of private college @ $75,000 per year. Other variables include any graduate school costs, and the incredible inflation rate of college expenses. It’s conceivable $75K won’t cut it by 2026.