Parents can't—or won't—take on children's education debt

Parent Cafe
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<p>“i was trying to express my frustration with one of the types of students who were handed everything on a silver platter and then once they found this ultra-expensive college/university they wanted to go to and expected mommy/daddy to pay for every single thing, they get angry and think it’s “so unfair” that they have to work for something for a change.”</p>

<p>If the parents have the means and the student appreciates the gift and has demonstrated putting in the effort in K-12, then I would expect the parents to provide full or partial help. If the parents are well-off enough to help, then I would have expected them to teach their kids the value of money while they were growing up. I don’t understand the parents that live it up with their income and don’t save up for their kids’ education. Or that think that it will be okay if their kids get loaded down with debt. If you have kids, they should be your priority until they are self-sufficient.</p>

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<p>Dad II, I agree that sometimes savings seem to be counterproductive. (A few years ago, I wrote this: [Financial</a> Aid - Is Saving Penalized?](<a href=“http://www.collegeconfidential.com/financial_aid/ants.htm]Financial”>http://www.collegeconfidential.com/financial_aid/ants.htm))</p>

<p>But, if the savings are in the parent’s name, they will be “taxed” relatively lightly by FAFSA calculations. There is also an age-based exclusion for part of parent savings. </p>

<p>Let’s compare two families:</p>

<p>Family A - $200K in parental savings set aside for college
Family B - no parental savings</p>

<p>Assuming everything else is equal, the first year, Family A will see an EFC that is at most $11,300 higher. Depending on how rapidly the funds are depleted, that number will go down each year. Since family income is a huge factor in EFC calculation, if the incomes of these families are high they may both have high EFCs and the actual difference in grants may not be that big. It’s VERY difficult to plan when there are so many variables - income, assets, cost of college, availability of grant/scholarship money, etc. You can plan for years using one set of assumptions, only to find that things are different at college selection time.</p>

<p>In almost every situation, I’d much rather be Family A. Family A can pay for college with no loans. They may well be paying “sticker price” depending on their income and other factors, but also have the luxury of being able to afford any college the student is admitted to. </p>

<p>Will Family B get more aid? Assuming their income and other factors give them an EFC below the cost of attending, the answer is likely “yes.” BUT, there are problems:

  1. Some or all of the aid will likely be in the form of loans.
  2. Unless the family has high disposable income (i.e., income that’s not committed to housing, cars, etc. and can be applied directly to college costs), some colleges may be unaffordable. E.g., a $40K school that offers $20K in total aid - the family has to come up with another $20K.</p>

<p>The “benefit” of arriving at college time with no savings is ONLY the value incremental grants and scholarships. (Sorry, getting more loans doesn’t count as a benefit.) Many schools are notoriously stingy with grant aid. Offset that potentially minimal benefit with the certainty of a much greater loan load and, perhaps, the inability to attend some schools for financial reasons.</p>

<p>I recognize that many (or even most) families can’t afford to set aside enough money for the full cost of a college education for each kid. However, I’d never, never, never advise young parents not to save for that purpose in order to try to qualify for higher aid years later.</p>

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<p>Hear. Hear. It’s still a good idea to save for a child’s education, as much as that is possible for each family.</p>

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<p>“In almost every situation, I’d much rather be Family A. Family A can pay for college with no loans. They may well be paying “sticker price” depending on their income and other factors, but also have the luxury of being able to afford any college the student is admitted to.”</p>

<p>Absolutely. Financial peace of mind can greatly reduce stress in a household too.</p>

<p>“You can plan for years using one set of assumptions, only to find that things are different at college selection time.”</p>

<p>Laws and rules change. I sometimes wonder if the tax rates will go way up for retirees or if the government will raid 401Ks in the future just because there’s so much money there.</p>

<p>“I recognize that many (or even most) families can’t afford to set aside enough money for the full cost of a college education for each kid. However, I’d never, never, never advise young parents not to save for that purpose in order to try to qualify for higher aid years later.”</p>

<p>It’s not just saving the money though that’s very important (and builds discipline in the household). It’s investing the money wisely and it takes some work to learn how to do that. Because you’re investing in the same shark-infested waters that the student loan industry plays in.</p>

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<p>Because CC is an unusual place in that the kids here tend to be heavily concentrated in the top colleges, there is a category that we do see posting here that is not seen often in general. That is the high achieving student who is gets into a top school that is very generous with financial aid. For such students, there is an inequity in that the families who have saved for education and put it right out there will get less. If the other family has the money in qualified pension vehicles, it is even a bigger hit, as the family who specifically saved for college is penalized over the other.</p>

86

<p>“If the parents have the means and the student appreciates the gift and has demonstrated putting in the effort in K-12, then I would expect the parents to provide full or partial help. If the parents are well-off enough to help, then I would have expected them to teach their kids the value of money while they were growing up. I don’t understand the parents that live it up with their income and don’t save up for their kids’ education. Or that think that it will be okay if their kids get loaded down with debt. If you have kids, they should be your priority until they are self-sufficient.”</p>

<p>exactly! hit it on the head of the nail :)</p>

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<p>We are that middle class family who saved and ended up paying sticker prices for 2 kids’ education. However, I’d rather have the money set aside so we have better options and we’ve shown our children a way of living below our means and that we place a high value on their education.
When my kids admire fancy cars that parents of their peers drive, I remind them that I could have bought a brand new BMW or MBZ for each year of their college education that I funded.</p>

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<p>My parents refuse to pay for college mostly because they forgot to set up a trust for it. So they made up the excuse that we are supposed to get a bunch of debt to appreciate our education. And I don’t think my family would qualify for need-base scholarships either. Oh and they don’t want us to work during college either cause it’ll interfere with our studies… so the whole paying it off while in college is out of reach. I think that a parent should at least pay for half. It teaches the kid to appreciate their education without being in a life long debt(like I will most likely be in)</p>

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<p>I look at saving for college the same way as I do paying for term life insurance. With our big family, and one bread winner, we felt that both H and I should be insured. So we paid that premium every year, and it was not an easy hit for us some years. We could think of many things we would have preferred to do with the money. And this is was a lottery ticket that we did not want to have cash in for obvious reasons! Now we are at the age, and the kids are at the ages where we will not need the insurance as much as we have more assets built up. However, to regret having paid those premiums is crazy. It was insurance. It was just in case. With college savings, you have much more flexibility. If your kid wins the big lottery ticket of a school that would pay full need, and your need is lightened or eliminated because of your savings, you still got your prize. It was the additional security of having funds to pay in the much more likely scenario that your kid’s choices are not schools that are going to pay out much. It gives you so much more flexibility. We needed every cent that we saved for our kids and more.</p>

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<p>Have you ever seen any research backing up that parents who pay for their children’s education have children with either a higher level of education or a greater benefit of having well educated children when old? I am skeptical that paying for a child’s education will make their either better educated or a greater asset to anyone (society, themselves, their parents, etc.) as adults.</p>

<p>My ride through college and graduate school was completely paid for by my parents (actually, my aunt and uncle gave me free housing in a penthouse corner apartment overlook the Intercoastal Waterway as they preferred someone to use it since they only used in one week of the year during a medical conference, but the tuition all came from my parents) and I’ve been a “princess” all my life - it would be hard to find more of a bum than I am (mind you, I got all A’s and one B in grad school in a program that flunked people, something hard to find today it seems, and also graduated college with honors, but I went out every night of the week and have always had a “life’s too short not to enjoy it” attitude, largely due to my mother dying when I was 17). Meanwhile, my husband didn’t get one penny from his family for college and figured out how to get a high paying job while in college (doing programming for a hospital and a faculty member back in an era where few people knew how to program) to both pay his tuition (though he also took a loan for some amount that his scholarship didn’t cover as he felt the loan rate was too good of a deal to pass on the low interest rate) and cover his rent and food and car insurance and such (oh yes, I should also note that he bought himself his own car while in college - his parents never put one penny toward his car either, where I was given a fairly new Cadillac to drive while in college and graduate school) and he has always had a good work ethic. I’d like to see research on the outcomes of those who pay for their own education by having a job versus have it handed to them (be it from merit or athletic or other scholarships or from family). I know those who actually graduate are more likely to have had a job working (but under 20 hours per week) than those who didn’t work in college during the school year (or who worked over 20 hours per week); I know a professor who did that research over a decade ago. And I can’t imagine that those who didn’t have to pay for their own education would feel <em>proud</em> of that fact where plenty who did pay their own way feel a point of pride there, so paying for a child’s ride can actually deprive them of a certain amount of pride, so even while parents who make their children pay their own way are often seen as stingy or mean, I think they actually might be the ones doing their children a favor.</p>

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<p>I wasn’t sure if that was the meaning or that if the children weren’t well educated, they would still be living off mom and dad as adults. If the poster meant the children would be their retirement plan, I agree that is very risky, especially if the child grew up in a country where children typically aren’t seen as financially responsible for senior citizen parents (as I feel is the case in the USA, though certainly plenty of American born offspring <em>do</em> pay out for their elderly parents’ retirement homes and such).</p>

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<p>Well, unless some kids would kill their parents to get the inheritance and then it might be an investment into the parents having a future, but hopefully rather few children would commit murder for this reason (though it has happened that children have killed or hire people to kill parents, it hasn’t been college cost motivated in any stories I can recall, but I guess it could happen). Overall, I see it as you - a child’s education is an investment in the child’s future and not the parent’s, though again, it could also be and investment in the parents’ future if the parents are going to house the offspring as adults due to their not being able to get self-sustaining employment down the road. That could cut into the parents’ assets, time to retirement, etc. and thus affect the parents’ future.</p>

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<p>I love that “TheAnalyst” posted that - so fitting! Seriously, we showed our son spreadsheets back when he was three years of age and deciding what sort of loan to get for our house (we went for a 10-year and were glad we went for a relatively short-term as we’ve enjoyed living in a paid off home) and decisions on which mutual funds to buy and how much to invest where and keeping our son keyed into financial decisions has also worked very well for him so far. Establishing what the “game plan” is early in the game is also helpful, though the plan might need modifying along the way (like we were saving to have a child start college at 18 and not 9, but also weren’t counting on merit scholarship money paying him to be there after he switched from PT to full-time). When our son was I believe all of 4, he heard Harvard was where a lot of smart people go to college and said, “Oh, so that’s where I’ll be going to college” (which sounds snotty, but for a kid who had yet to meet a child who seemed smarter than himself, it wasn’t such an odd conclusion for him to make) and I told him he’d better find a way to start saving money very young if he wanted to go to Harvard as we certainly weren’t going to pay Harvard’s tuition costs (this was well before Harvard started having aid even for families earning $180K or more). Now we have a kid who won’t entertain the notion of us contributing to an M.B.A./J.D. program even after he went to a state U using scholarship money and a fully funded M.S./Ph.D. program and has been financially independent from us since age 13 (such that I feel he has “earned” some sort of educational cost gift from us, not that his father agrees with me), but I suppose this is better than having a child who feels the world (and his parents) owe him everything he wants on a silver platter.</p>

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<p>how else are you gonna get 53k a year?</p>

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<p>I guess I’ve never really understood the “skin in the game” argument, at least when applied to a kid who has been a good academic performer in high school. A kid like that today has already had to show a willingness to work hard to get the kind of grades and other qualifications to get into a competitive school. My parents paid for my education, and helped me buy a house, and I have always been very grateful to them, and I still care very much what they think about the way I spend money. I don’t think things would be better for me if they hadn’t helped me so much.</p>

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<p>We first decided to require “skin in the game” after watching a neice and nephew get upset with how unfair (in their eyes) it was that their parents paid for an expensive private school for one child and a public for the other. </p>

<p>By telling our kids they would be charged a small percentage (it’s only 10%) of the cost of their education, we felt like it would balance that sense of fairness should one of our kids pick a public and the other a private. 10% of the cost of a private is a lot of money to a kid but if they really felt strongly about the school, not so onerous that they couldn’t swing it. We also thought it would make them think a little about the cost/benefit of public versus private for themselves because I think money should be a consideration in all major purchase decisions.</p>

<p>We have also tried to remain flexible. For example, when our oldest decided to live off campus next year in an apartment that will cost more over the course of a year than a dormitory, he agreed that our cost share should be based on the dorm cost, not the actual apartment and utilities. It is his decision to consume more housing than is strictly required for a college student. However, in return, we agreed to pay the equivalent of 90% of the full meal plan even though he will cook for himself at the apartment because we would have offered him that option in the dorm. He thinks he can cook for himself at a lower cost and use those savings to offset the extra apartment costs. </p>

<p>We will fund a percentage of grad school, we match 100% of their earnings every year with a direct deposit into a retirement account (which incents them to work since every dollar earned nets them $2), and we have/will provide other financial perks over the years depending on their level of maturity. In other words giving them skin in the game for college is purely a teaching tool. </p>

<p>Would our kids be just as financially savvy if we simply paid for college? Probably. Learning how to handle money wisely is something that is imparted over dozens of years, not just suddenly at age 18. It’s no big deal if parents want to pay 100% of college. I’m sure they teach financial prudence in other ways, as do we. (See cc discussions on giving your child a credit card, for example.)</p>

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<p>lol you wanna know how my parents justified it
since i went to a 53k a year school and my brother is going to a 18k a year school, my brother is getting a brand new Benz</p>

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<p>What would your parents do if in the future your brother makes less and needs monetary support from your parents, do they give him $30K and then to make it fair, buy you a brand new BMW?</p>

<p>I always tell my children, life is never fair, learn to live with it.</p>

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<p>My mom is paying for my education, but I’ll pay her back when I’ve established myself financially. It’s like a loan with no interest, and no penalties for late payments :)</p>

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<p>My mom, never well off or one to save, paid my first semester at comm. college, but ever since I’ve been on my own. I agree that there’s value to investing in ones own education and future. It also makes it very easy to scale back to 12 credits and work the remainder of the time. And for many that’s necessary.
I appreciate the fine stories of someone’s mother or father paying their way through college. They’re great stories of sacrifice, dedication and self-reliance. But tuition increases has outpaced the minimum wage many times over since then. At today’s prices, unless you have a significant scholarship or attending an in-state public, a student will have a hard time paying for school without private loans or secondary support.</p>

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<p>It’s very amusing to read about Americans’ irresponsible attitudes toward their children’s education.
I was born in China, and my whole family: father, mother,uncle, aunt, are all expected to contribute when I go to college. My father is willing to sell his house in China for few thousand dollars just for my education, while my grandfather is willing to pull out his savings to help me out on my interest rate. I’m glad that I have so much supports, and I will work hard to provide my children and my family financial support to the best of my ability. Those parents who paid nothing towards their kids’ education think otherwise, they justify their irresponsibility by supposing that their kids are downright evil, whom would revenge parents’ generosity with apathy and laziness.</p>

<p>Let’s do a comparison here: in china, the best university only requires kids to pay like 20000 rmb, 2000 dollar, a year. This price is very affordable to chinese families, yet, all family members, even the entire village, in some cases, are expected to contribute. For instance, since I’m here in America, I promised to my two cousins that I will provide financial assistance and support to the best of my ability if they ever come here.
ON another hand, America, with the most ridiculous tuition rates in this planet, parents here are proud to leave an empty check for their children. I find it very ironic that some parents are willing to go to restaurant to eat for like 4 times a week while refusing to contribute a cent towards their children’s education. Being a U.S citizen, I feel much ashamed that my country, with a negative saving rate and trillion dollars of debts, has so many of its matured inhabitants act so immaturely in terms of their financial obligations.
Some would criticize me for being a collectivist or saying that I have Asiatic cultural biases. But I ask you a question: what if everybody acts like you? What if everybody refuses to pay for their kids’ education? Kids in Europe have their governments handling them free college education, kids in Asia have families watch their back, and some kids in America today are expected by their family and government that there will be an invisible hand, pushing them, like God, through impassable obstacles. I personally admire such an evangelical spirit.
Seriously though, I don’t find an in-state public university student who goes to army to pay for his debt any better than “low wage labors” working in factories back in my hometown. </p>

<p>Thousand of years ago, the mother of the great sage Mencius moved her house to the campus just so he can study well.
I personally know some parents that moved their house to ivy league campuses just to save the money. They never threat their children with the heavy burden of financial difficulties, and they are more than willing to believe in their children’s passion rather than dismiss their children’s individuality.
People talk about passions all the time, yet, when the time comes, they chicken away, crying:“OMG, it costs so much money.” and then indulge themselves in the insipid mentality of mental mediocrity and economic conformity.</p>

<p>I’m just very frustrated with parents that are sooo freaking irresponsible. :(</p>