How to get a "rich" kid to be thrifty about college choices

Parents Forum
1

<p>After seeing the recent news about dozens of colleges costing more than $50,000 per year, I know I can't be the only parent with a dilemma about instate U versus exclusive, private U. How do you get your kid to really think about the "value" of each choice, particularly if family finances make all schools financially possible. This seems like a bit of whiner question when many on CC are faced with severe financial constraints (I am not downplaying these concerns), but it is a dilemma for us, although it may seem trivial, perhaps to others. My apologies in advance if this question is seen as offensive or insensitive to others on CC. </p>

<p>How do parents provide appropriate incentives for a student who will not qualify for FA to spend tuition money wisely? My h and I are trying to come up with a formula of incentives so that our son doesn't treat the choice between private, exclusive school at $50,000 per year versus decent state school at $11,000 per year as a simple decision on which is the "better" school in terms of academics/lifestyle etc.. We want him to take the cost into account when he weighs his decision, but right now, the cost for him is really hypothetical (comes out of our bank account) and there is no incentive for him to choose the cheaper alternative. He says he wants to save us money, but it is hard for him to see the real cost of the expensive educational choice because it doesn't really impact him. </p>

<p>Obviously, we are not so wealthy that the expense of $200,000 is not a drop in our bucket -- it will definitely impact our retirement but we can swing it without taking out loans or reaching into a 401K. Also, gandparents have put aside 529 money that will cover 4 years instate or one year of the expensive school. Last, he won a merit scholarship that also would cover a lot of instate costs or a small part of a year at exclusive U. </p>

<p>We want to provide incentives to continue to seek out merit aid and to work part time to pay some expenses. We both managed to put ourselves through school and continue to work hard and be thrifty...we want to pass these values onto our kids. We have always told kids that we would pay for undergraduate but not for graduate school...this was done before we imagined we may face $50,000 costs--s has applied to several of these schools.</p>

<p>So..the possible options are:
1. Pay for whichever undergrad program he chooses. No help for graduate school. Use his 529 and merit award as far as it will take him, pay the difference and make him work to pay for all entertainment and travel expenses.</p>

<ol>
<li>We will provide S with (let's say $30,000) per year for college education. Put it in the bank each year. He can use this money, his 529, and merit aid in whatever mix he likes for whichever shool, and he can bank what he doesn't spend. If he chooses a school that is more than $30,000/year he can use his 529, loans, merit aid and work for expenses beyond the $30,000. He can use his savings for grad school but no extra funds from us.<br></li>
</ol>

<p>Other ideas?</p>

2

<p>Our college consultant suggested telling S that we will pay the amount per year that his safety school will cost, and if he wants to go to a more expensive college, the extra cost will be his responsibility. We explained that to S, and it makes sense to him.</p>

3

<p>We had great discussion about the value of the undergraduate education with a child who has always planned to get an advanced degree. She decided to take the merit money at the school that was less prestigious and she is happy (and challenged). I know that she acquired a better education than her peers while she attended public school and a better education than her peers in her prep school. I think the trend will continue because of the way she approaches and loves learning.</p>

<p>The whole college search procedure was a bit sobering for our family because like you, we have lived very conservatively, saved, and really thought that our children would be able to go to any college that they chose. Many schools are approaching $60K, so the decision gets more and more expensive and in our minds more and more ridiculous. To me, both of your options look good. I threw in that attending the high $$$ school would impact her inheritance. Sort of a joke.</p>

4

<p>This is something that we did as the kids were growing up so that they inherently knew how hard it is to make a living. They saw all of the hours that I worked and we taught them about finances and economics as they were growing up. They’ve had a lot provided for them and haven’t had to worry about food and shelter but they haven’t been demanding.</p>

<p>I’ve had discussions with other parents about raising their kids in a way that assumed that finances were tight so that they would not have any entitlement issues when older.</p>

<p>It’s harder to fix that when they are older and when peer pressure kicks into overdrive in high-school. I’ve seen some nasty fights between high-school kids and their parents over what parents will pay for college - some in person and some here on CC (from one side of course). I think that laying out ground rules as early as possible helps. That provides more time for the acceptance (acceptance of lower resources) in the change process.</p>

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<p>We were in a similar situation a few years ago. Son cast a wide net with applications and was accepted to all with the exception of a wait list at one. He received varying amounts of merit aid and made the choice to go to the school with the highest tuition and smallest merit scholarship. We fall in the category of being too “rich” for FA and not quite rich enough to afford the tuition with out it being a stretch. The economic collapse didn’t help much either.</p>

<p>We made a deal to have him work every summer and contribute the earnings and spending money and most clothing are his responsibilities. He has a part time job on campus for that.
He also will be graduating (keeping my fingers crossed) a semester early due to AP credits and the colleges fairly lax gen ed requirements. That’s a $25000 savings.</p>

<p>Although it is a stretch and the rest of the family doesn’t go out to eat as much and I’m giving hair cuts at home to younger siblings and the dog, this school does seem to be the perfect fit.</p>

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<p>It’s hard for a high school student to realize that it’s a lot of money. I know my daughter recently said she never realized what we paid is a huge sum, now that she is working at a minimum wage job.</p>

7

<p>I know several people in states with good state flagships who say to their kids, “I will pay the cost of the state flagship. Whether you use that at the state flagship, or use the equivalent amount towards another school and you make up the rest, is up to you.”</p>

8

<p>D1 was faced with that choice 2 years ago, she went for the full pay and offered to pay $10,000 of it herself. I think she made the right decision. She will have her UG degree/education all her life. It will matter a great deal when she is ready to get her first job. She is in the process of getting a junior year summer internship. Most companies she wants to interview for are all recruiting at her school. A lot of those companies also accept applications online. I asked my firm’s recruiting dept on what’s their priority in hiring. They said they would always hire students from target schools first, then go to their online applicants. We want our kids to have a good liberal arts education, but at the end of day whether they’ll be able to get a job upon graduation will be very important. </p>

<p>I have seen a lot of parents post about their kid’s school career center is no existent. I think it’s important to check out each school’s track record in placing their graduates, may it be a job or graduate school. Cost should not be the only deciding factor. It’s never an easy decision to pay that much money for education(or anything).</p>

9

<p>We’re kinda facing this too. We’re already paying $50Kish a year for DD, who didn’t even apply to an instate school. She could have gone a few places where merit aid would have made things a lot cheaper, but chose the full price, most competitive school she got into, which has been a perfect fit. With DS, his most competitive school applied to is the instate flagship U, but he’s not particularly interested in going there. DD does cover her own entertainment and extras beyond rent, food and the same allowance she had throughout HS. The OP might consider the decreased costs of living off campus (DD is costing -$5K this year over last and will, hopefully, live in a sorority next year (which would be an additional -$8K). </p>

<p>One thing we’ve considered as incentive to go to a state school (there are two on his list–he has even less interest in #2, but higher likelihood of admittance) is to let him take the “third family vehicle”…aka “his car” to school. (The problem with that is it facilitates returns home on weekends, which we discourage for a couple good reasons.) So we’re not sure we’re going to “go there,” but maybe it’s an option for the OP.</p>

10

<p>I think your option 2 is the best. As another alternative, I had a friend in college whose parents told her if she wanted to go to XXX university (ours) she would have to pay it herself.If she chose one closer to her parents or with more financial aid, they would pay. She chose XXX and worked and obtained financial aid. She graduated with a high-GPA and did this all herself. Seeing this, her parents, upon graudation and to her total surprise, paid her and the loans back 100%. I remember the day she opend this gift. So emotional and amazing. </p>

<p>So she learned a lesson, showed dedication and a willingness to take this one herself, but in the end was not burdened with student loans and had money that would have gone to her tuition paid back to her for the amount she put in from her job. I thought this was a clever and wonderful way to approach this. Granted she was stressed during college a bit due to finances, but it never stopped her. In the end-no debt, stong work ethic and a ton of self-esteem and belief in herself!</p>

11

<p>OP,</p>

<p>We let our S1 turn down a full ride offer from a very good public school as an out-of-state student, and let him attend a private school as a full pay student (minus some one time external competition award money he “earned”). We are like you. We can afford to pay this tuition without taking a loan, but certainly, this kind of money is not a drop in the bucket for us either.</p>

<p>In our case, since we clearly saw the value of the private school he is attending now, we did not even bother the go into the mode of providing incentives or trying to persuade him to choose the full ride option. </p>

<p>He is a freshman now, the overall “gestalt” I am getting from his phone calls and emails is that he has found his intellectual home, and I honestly believe it would not have been possible in the full ride school. He actually mentioned it the other day, and was grateful that we enabled him to attend his current school. </p>

<p>He called us happy and bubbly, reporting to us that he got a scathing one-on-one criticism on his B+ term paper from the professor line by line (though that was the best grade in the class). He skated all four year in a top magnet high school known for toughest academic competition getting top grades without ever making an effort, and being treated like a minor wonder for his ability to do so. To see him being happy to get a full assault :wink: from a top faculty for his work is priceless. This has never happened before, and he is totally energized and excited about it. </p>

<p>I am certainly NOT saying that private schools are by nature better than public schools. I am saying, if your financial ability can allow your son to choose that one school that is just perfect for him, should you or should you not try to persuade him to attend a more financially “responsible” school? </p>

<p>It could very well be the case that for your son the difference between the private schools he has in mind and the in state public school is not so stark. In that case, I think choosing a financially responsible school is the right way to go, and how to help the son make that decision - I will leave it to good advice from other wise parents here on this board. </p>

<p>Good luck. Either way, your son is lucky to have that option, and a fortunate young man to have parents who are in the mind set of inculcating sound values in him.</p>

12

<p>“How do parents provide appropriate incentives for a student who will not qualify for FA to spend tuition money wisely?”</p>

<p>Easy. You say something like: “We will provide you with $XXXXX a year for 4 years of college. You are expected to take out the rest in loans or by working or getting merit aid.” You also educate your kid about what’s optimal to take out in loans, and how much it will cost each month to pay back the loans. </p>

<p>Our sons didn’t qualify for need-based aid. This is what my husband and I did, and what many parents did whom we know who are in similar financial circumstances. </p>

<p>We also didn’t pay for applications or visits to colleges that we knew were expensive and didn’t provide any merit aid that our kids would qualify for.</p>

13

<p>I think you may have to decide this yourself. If you have the money, it may just be impossible for the student to see the choice as you do, or as you’d like them too.</p>

<p>I don’t mean you’re wrong to want your student to understand what the money means. Obviously that’s ideal, but the context may just have to grow naturally.</p>

<p>My kids had no idea of this until their father’s business failed – a combination of 9/11 and other factors. Our finances became severely compromised, and they learned quickly.</p>

<p>They had always planned to go to an elite private and couldn’t really “wrap their heads around” our instate publics, but they did apply and try very hard to make finances their primary consideration.</p>

<p>In the end, a combination of great FA, great frugality on their parents’ part, an extra job for me, work/study and great luck made their dreams come true.</p>

<p>Both have expressed gratitude for their work/study jobs. They’ve earned all their own spending money which has given them some small experience in providing for themselves.</p>

<p>My point is, emotionally healthy kids will learn when they must but MAY not learn before that.</p>

14

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</p>

<p>We will probably tell our D something like that. Except that $XXXXX will be equal to the full price of the most expensive college she is admitted to. If she chooses to go to a less expensive college, we will deposit the difference in a bank account and give it to her when she graduates from college.</p>

15

<p>In our house the kids know that they are responsible for first and second dollars at the colleges they attend. It goes like this:</p>

<ol>
<li> They borrow unsub staffords.</li>
<li> They get merit scholarships</li>
<li> We pay annual equivalent of instate tuition (from savings) to the school of their choice</li>
<li> We pay out-of-pocket up to $12,000 per year</li>
</ol>

<p>If they can’t afford college on those terms, they’ll either have to borrow more or choose a different school. Further, they can avoid loans altogether if they go instate. </p>

<p>(They don’t know it yet, but we have a plan like North2South’s friend. We’ll pay off the stafford loans when they get that diploma.)</p>

<p>I think I failed to answer the OP’s question about incentives. Sorry about that. I guess I’d like to think that being on the hook for those loans is enough incentive.</p>

16

<p>Wow - I could have written this post. Thank you, Fineartsmajormom for bringing this up. It’s an issue that has been on my mind a lot recently.</p>

<p>We’re still trying to figure this one out. Most of the $50,000 yr colleges son is applying to are high reaches for him - (there’s one or two high matches in the bunch). All the other schools are academic safeties and will offer him some measure of merit aid, some will be almost free for him.</p>

<p>We’ve talked at great length about this with him. Like Hyeonjlee, if son gets into one of his reaches that we/he feels will be a good intellectual fit, we will probably ante up the $200,000. We won’t, however, guarantee we will pay for graduate school.</p>

<p>If he get gets into one of the reaches that we feel is only a so-so fit, we will probably try to persuade him to take one of the safeties and guarantee full payment of grad school and maybe some money for a down payment on his first house.</p>

<p>Even though son goes to a school that is mostly upper-middle class, a lot of parents require their kids to stay in state because most of them will have 2-3 kids in college at the same time and at $50,000 per kid per year, it’s just too much. We only have one child so it is easier for us to pay that kind of money but it’s still money out of our pocket that could go toward retirement, etc. Son is beginning to see that a lot of his friends are going to go with the lower tuition for UG with parental help for grad school. We’re hoping he will choose that option.</p>

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<p>Our 2 kids are extremely fortunate in that their grandparents have set up trusts for both of them for college and beyond. They can choose to attend any school they would like. Before the economy tanked there was enough money for college and beyond, but since then its been reduced by 1/3. Before our D opted for her private school in 2008 (before the economy fell, unfortunately), we laid out a spread sheet with all of the expenses and possible scenarios of good instate vs. private. We explained the implications to her of spending $200000 on college vs. $100000 (ability to buy a home, travel, etc). She though a lot about it and opted for the private, which has an excellent school in her major, and internships and job opportunities galore. She has been very happy with her decision. Our S, now a senior, will no doubt opt for a public, though OOS, and will finish college with more money in his pocket but a degree from a less prestigious school. Each situation is different.</p>

<p>One thing I would caution against is using retirement money to pay for college. Every financial planner I’ve ever talked to or heard speak has strongly advised against this, explaining that its easier to borrow money for college than for retirement.</p>

18

<p>I just want to say that technically we are like many of you who could afford to pay but with 2 kids in school for 3 years together we knew it would be a big hit. Also factoring in was that both my husband and I are graduates of a state school and have done quite well for ourselves as have many of our fellow alumni. That being said we never set specific limits but definitely we discussed the cost of each school they looked at. I think you have to have those kinds of discussions even if you can afford it. In the end one picked a smaller state school and one picked a very large state school. Both seem to be good fits for them. We have one friend who we graduated college with who is now a company president and could afford any college in the country. He sat his d down and said I have $70,000 in your college fund. You can spend that whatever way you choose. If you don’t spend it all (which is doable in their state) the balance is yours to keep. In the end she was accepted to a number places including some out of state schools that would have cost over $120,000 over 4 years even with it being a state school. She chose the in-state public universtiy where she will graduate with zero debt and about $30,000 in her pocket. Not a bad way to start out! By the way she LOVES it. One thing I would add is that although we didn’t need to do it, we have had both kids take out very small loans for each semester they are in school. When they graduate we may pay them off for them, we’ll see. But having gone to college with a number of kids who never saw a tuition bill or cared about one, both my husband and I wanted them to have some ownership in their education. They tell us all the time of friends of theirs who will graduate with many tens of thousands in debt so they are grateful that we have done what we do. I just want them to be aware of how fortunate they are.</p>

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<p>Great thread! </p>

<p>Here’s a slight twist to the original question. Our family income essentially precludes any need-based FA. My child is interested in going to med school after undergraduate studies. With a perfect GPA, near-perfect SAT scores, Siemens semi-finalist and NMSF status, methinks merit aid is a reasonable possibility from some of the top 20 private schools as well as the in-state top-50 public. </p>

<p>The most likely scenario is that there will be some gap between what the in-state public costs and what the privates cost (after taking all merit aid into account). Any experience/thoughts on how to handle such a situation?</p>

20

<p>It depends on the kid and the family’s history with money, but I’m not sure specific incentives are needed to make the kid to appreciate the value of college and contribute what he can. You might want to set it up as a collaboration; you do your part and he does his part, and together you can make it work.</p>