What are the best strategies for sharing college costs with your children? I’m especially curious about families that are full pay but where parents think their children should chip in.
Our oldest is now half way through college and our second is a year away from college. Here’s the strategy we’ve been using so far:
- Add up all costs (tuition, room, board, books, living expenses, fees, travel, etc.)
- From that, subtract any merit aid or scholarships.
- Remaining total is paid 2/3 by parent and 1/3 by student (with savings, summer employment, work/study and loans).
- Parents bridge gaps with loans on generous terms.
I’ve heard of the following alternative strategy from a couple friends:
- Determine the all-in costs of the best public flagship school in your state or for which your state has reciprocity (tuition, room, board, books, living expenses, fees, travel, etc.)
- Parent pays 100% of that amount but no more.
- Student can go to that flagship school at no cost to them. No need to work in the summer or at school. Their high school savings remain theirs. However, if they want a more expensive school, they need to pay for any difference in cost through savings, summer work, work/study and/or loans.
Thoughts on these strategies? What are some other strategies?
Yes, our young adults contribute to college costs.
First of all they applied to schools where they were above average in stats and got merit aid.
Then they applied to all local scholarships they qualified for in senior year of high school.
They attend instate publics where they qualify for a state grant.
They take some student loans and work to earn their spending money.
The rest of the expenses we cover.
My kids were told that I would contribute the cost of a SUNY education. All of my children opted for SUNY schools. They earned their own spending money.
Other strategies? We promised to pay 100% of undergraduate college basic costs at any college. But to cover incidental costs (including entertainment) the kids were supposed to earn some income from summer jobs and part-time work during the school year. We said that if the kids were really qualified for grad school they should be able to cover >80% from scholarships/fellowships and loans.
There was no stated standard or base amount. The kids could attend public or private schools, anywhere in the country. Nothing akin to the standard of “cost of a SUNY education.” We knew the kids were unlikely to qualify for need-based aid. We SAVED money for many years to be able to cover these costs; the grandparents also made a nice substantive contribution; and we deferred certain spending at home (e.g., no new car for 6-7 years; limit to 1 car).
Both kids graduated in 4 years with no debt for them or for us. They both attended private institutions. One of them got a small merit scholarship.
The older one did not attend graduate school, but went into a decent-paying job within a few months of graduation and has remained financially independent since then. The younger one did attend graduate school (MBA) after working in the economy for about 7 years. We partly subsizied the costs; the rest was covered by federal direct loans. Except that paying off those loans, at the usurious rate that the feds set (`7.5% apr), was extremely burdensome. In the end, we paid them off. Why? Because we could.
We were a full pay family. Our strategy was similar to the second one.
- We used our state flagship cost of attendance as our base amount. Our kids didn’t have to attend it, it was just our guaranteed contribution amount.
- They could go to a more expensive school, but should plan to fund the difference. We would be available for guidance and possible financial help.
- Or they could go to a less expensive school on us...and we might gift them the difference upon graduation. (We qualified this with “might”.)
Also any scholarship money was theirs at graduation if it made cost of attendance less than our flagship. Our children chose to attend our flagship, UIUC and we gave them their 4 yrs worth of scholarship money at graduation. Yes, it made them very happy. And it made us happy that they would start off with a financial cushion...that they earned.
2/3. As for refusing to pay no more than UIUC’s cost of attendance is where it gets tricky. We told them that my husband and I would use our discretion and pay the full cost or some percentage of a more costly university if it made sense to us.
For instance, if during high school one of our kids developed a demonstrable passion for something and got into a school that would foster that passion we would carefully consider it. We did this, because we believe being fair to our kids, is not the same as treating them exactly the same when it comes to funding their undergraduate degrees. In fact we would use their older cousins as an example. My kids could understand why cousin A, might deserve an expensive undergraduate education, while cousin B might not.
Real life examples worked for us. We even told them how their aunt tried to get her parents (their grandparents) to give her the difference since she went to a cheaper directional school. That’s where qualifying expectations with “might” gift the difference in COA was illustrated to our kids. It’s a long story, but basically it’s an example of parents’ discretion.
Lastly, we did use “our money” and “your money” when it came to non-school costs. They had to use their money when it came to Spring Break trips and similar things. The goal in college was about learning to be self-sufficient. Graduation came with the expectation of being self-supporting.
We told ds from the beginning that price was one of the main factors in choosing a college, and he would need to choose the school with the best value.
He’s headed off to a state school this fall. We’ll pay tuition, fees, R&B, and he is expected to pay for his computer, books, and spending money.
We have 7 (soon to be 8) kids to put thru college, and we do not plan to help our kids with grad school.
Our 2nd child in line wants to go to med school. We’ve already told her she must choose a very inexpensive undergrad school (maybe even commuting from home) if she wants our help with med school.
I told them I’d try to pay the amount of instate costs, or about $15000/yr. They both made it work by either (D#1) picking a school that has a low COA and getting the cost to under $15000 or (D#2) picking a school that had good merit and that was instate to use the state aid.
We really did it as a team effort and I paid what I could and they borrowed what they had to, worked, got scholarships. If I had the money, I would have paid 100%.
We are covering tuition, room and board. D is covering books, her study abroad, club fees, and any other costs that come up during the year.
We would have been full pay and told our son from the time he was little he was expected to go to college (somewhere) even if he planned to join a garage band and drift for the rest of his post-college life. We would pay the full cost of his undergraduate education and expenses but anything beyond would be on him. He chose a service academy, and the government will be paying for grad school, too, so our strategy became moot.
Don’t loan your kid any money you can’t write off as a gift.
There is a whole science to incentives-- how to use them, how to manage them, the best way to structure them.
Do NOT reward your kid for choosing the cheapest school, unless you, in fact, want your kid to attend the cheapest school. Do NOT reward your kid (even inadvertently) for saving on things like books at college, unless you want your kid to do without a critical textbook for half the semester, not being able to do the reading, etc. because he’s waiting for a $3 textbook he ordered online from Mumbai.
I have seen so many of these “share the savings” schemes backfire on parents. Kids are surprisingly shrewd economic animals when incented to be that way. Which is great if your goal is to save money at all costs. But if there are other objectives at play- watch out for these saving schemes. And ANY scheme which essentially rewards a kid for not working is a bad plan in my book. Work is a good thing, and you shouldn’t offer perverse incentives. Kids who don’t have work experience are at a huge disadvantage in the interviewing process for fulltime jobs.
We were pretty transparent with our kids about finances, but didn’t go in for the “here’s a pile of dough if you pick a cheap school” program. Our goal was for the kids to find a college (and a life’s path) which met their own educational needs and objectives, within what the family could manage financially.
Sometimes that means a more expensive school. Sometimes that means graduate school with parental help, or no parental help, but allowing the kid to live at home to save money. Sometimes that means kicking the kid to the curb if a college grad is happy to live in her old bedroom, eat free food, use the Wi-fi, and see her friends every night. Sometimes it means encouraging the kid to move halfway around the world for a fantastic professional opportunity even though in your heart of hearts, you want them to live around the corner and suck it up at a boring job.
YMMV.
Paying the whole thing for UG after that it just depends.
We were full pay or almost all 8 years my kids were in college. Both kids paid for the following:
- Books. In spite of the dire warnings above, my kids always had the books they needed. Prime delivers in 2 days. Nobody is ordering from Mumbai, or the equivalent, any more. And I think they were quite prudent in their spending for them (nothing like using your own money to focus the mind).
- Spending money
- Expenses related to any internships they took for the summer, paid or unpaid. One of them was in a field where unpaid internships have historically been the norm, and was able to fund a shared apartment and her living expenses.
- If they’d joined any activities with fees (sororities, etc), they’d have had to pay those extra fees themselves.
- Both knew I won’t cover grad school costs, and they had to be able to support themselves once they graduated. One got a good job (started in August after graduation, she came home for a few months). The other got into a funded PhD program (with health care, too!). Making that expectation clear is pretty valuable. I told them they could major in whatever they wanted to, but it was on THEM to put a roof over their heads and food on the table once they got out of school (a few months at home for transitioning was fine).
- I told them that the bank of Mom was only good for 4 years (8 semesters) of undergrad, and they MUST graduate in that timeframe. No switching majors partway through and losing credits, no not keeping track of requirements, etc. Of course, if they’d become ill or something, I’d probably have covered an extra semester of two - but I kept that info to myself! Both graduated in 4 years. My dad had a similar message for me as an undergrad, and I think it did me a lot of good - kept me on track when some of my friends meandered.
It has been a huge blessing for them to come out of college without student debt. A lot of their peers are struggling with debt post-graduation. I’d suggest that if you CAN give that gift to your kids, do so.
There are all kinds of full pay families. Some can easily pay for college, some really need to pinch pennies or even borrow and need their kids to contribute. It all depends on one’s financial position.
My parents paid for college for me and my siblings. None of us had student loans. It was a gift that I greatly appreciated and gave us a huge leg up in life and starting our journey into adulthood. We all had/have a good work ethic despite the help.
I see my job as a parent, one that thankfully can afford to do so as we definitely prioritized it when saving, to pay that forward to my own children. Therefore, we paid for all - 4 years of undergrad tuition (would make an exception and would pay for longer if due to illness but not to slacking), room, board, books, and even some allowance for personal items like toiletries and the occasional meal out. Like me at that age, my kids work during the summer, had part-time jobs during the school year, have a good work ethic and have much appreciation for graduating not only debt free but with money in the bank. In a competitive world economy where governmental safety nets seem to be increasingly at risk, we’re glad we can ensure our young adults are off to a solid start. I’d personally bust my hump - and I did - to give my kids that opportunity. I wish all young adults had the privilege of the same and I fight and vote for opportunities for them as well.
We set a budget. The budget for our older daughter was set at a level that we were confident we could also match for our younger daughter. We insisted that they stick to the budget with no loans. The budget was a bit higher than the price for our in-state flagship, but significantly less than “full price” at many private universities. We also lied just a little bit and set the budget so that we would not be in really bad trouble if either daughter went five years instead of four.
One daughter has graduated barely under budget. The other is on track to graduate way under budget. We will let her use what is left for graduate school. Both are very happy with where they ended up going for university.
One problem that I see with a student taking on loans, is that a 18 year old really does not in most cases fully understand the implication of taking the loan. I understand that sometimes loans are a necessity. However, I would avoid them if it is possible while still getting an academically very good and appropriate education.
I only have one in college right now, but the plan is the same for both.
Pay full cost of undergrad, from tuition to books to spending money, but they are expected to apply for scholarships and/or seek out merit awards, and spend mindfully. No merit awards from #1’s stingy state school, but she did very well in winning outside/local scholarships. She is taking out the subsidized student loans, and we will help her pay them off.
With #2 (incoming HS junior), her current major of choice is at state schools so that helps a lot, but the same rules apply.
Whatever money they make during the summer is their nest egg, ideally not touched for anything until it is time to buy a car or get an apartment after graduation.
I have learned to love my 20 year old kitchen with its stained sink and builder-grade flooring, lol.
My family’s situation isn’t a full pay, but I just took a job with a pretty nice sized salary leap and I can see us reaching that level at some point (Wife and I are still in our early 40’s). The promise to our kids is similar to your 2nd option (we offered full tuition, R&B, fees, and books at in-state flagship prices, but minus the state incentives for top students in GA, so our expected costs would range between 17-25k for a kid adding in inflation by the time my youngest graduates). I do believe kids should chip in for college costs, but we have encouraged that it come from looking for merit aid to lower college costs because I personally believe that students who only have to worry about academics and finding work/internships that are related to their major have a distinct advantage to students who are actually working to supporting themselves. So I am philosophically different in some ways from @blossom, (the incentives we have given so far has worked), but I think everything also depends on the kids involved and their personalities.
Daughter (rising sophomore in college) ended up with a full ride scholarship so we are giving her some perks. We were sending her spending money monthly, but she told us to stop sending it when she started making her own money in a research lab. My wife and I will pay my daughter’s income tax burden for R&B/summer internships each year. Her savings account will receive a 10K gift by college graduation and we will help her max out her Roth IRA contribution yearly once she starts Grad school for a fully funded PhD or MD/PhD program.
Son is a rising senior in HS with a similar offer of help. My son is pretty frugal and understands how important it is to finish college debt-free so I don’t believe he is going to make a choice to go into debt for his undergraduate studies. Both of my kids have always known that we would let them pocket a portion of any savings in our deal, which has made them both hunt for institutional and outside scholarship money like their own finances depend on it. Helping my kids understand that their future finances do depend how they handle choosing a college is one of the of the best things we have ever done as parents.
I’d say we are closest to option 2 (full pay for flagship or equivalent). This has been a good baseline to eliminate some schools quickly. DS is also looking at ROTC and service academies. I have really negative memories of trying to get through school, piling up loans and credit card debt, sometimes not sure how I would afford to put gas in my car. I’m not saying that in a “woe is me” way; I truly had no idea how to manage a budget at that point in my life. Part of how we have been trying to educate DS is how to budget, set priorities etc. I don’t want him to be in the same place I was in. There has been an unintended consequence of almost excessive frugality on his part…so I need to adjust the message a bit that it is ok to have fun and spend some money as well.
My kids knew how much we had saved for college. It wouldn’t/won’t quite cover 4 years of an in-state public, but we would commit to paying that. Any $$$ left over when they are done is theirs. Their contribution was getting good enough to grades to get into the school with possible scholarships. Both did pretty well with that. So, we cover tuition & fees, room & board, books. They take care of fun $$$ with their work study and jobs. They also buy almost all of their own clothes and have for years. I take care of insurance and car maintenance.
But neither of mine just HAD to go to an expensive school or whined that they wanted more than we could afford. It was just what was practical and without our budget. Historically, neither of them have been much for asking/begging for anything.
I should add that my full SUNY costs include books, school supplies and transportation. I don’t expect my kids to pay those costs. I also supply them with the things they need for living like soap, detergent, Q-tips and the like and replenish their stocks as needed. In addition, I pay for educational things like theater tickets for school performances. I tried to incentivize them by telling them that I would pay for an Ivy or equivalent school but none of them had the motivation for that. D did get into a private college she wanted to attend but when she balanced out the monies over the 4 years, she opted for the SUNY. She’s 5 years out and travels around the world on vacation, unlike her friends and colleagues who are paying off student loans.
We didn’t have parents who were able to help H and I with our own college costs, let alone those of our children. I lost my job shortly after my 2 oldest entered HS and it took me 10 years plus to get back to the same level of earnings I had before then, so that negatively impacted our ability to save up for college.
Right now, my youngest is taking 12 credits over the summer and is planning to graduate a year early. In exchange, I am paying for him to have a single room for the next year at the nicest dorm on campus (he has a merit scholarship that requires him to live on campus) and for him to do a study abroad program next winter break. The tuition for the summer and winter courses he has taken (at his own campus and the local CC) will total to less than one full semester at his school so I am saving over $10K on his education. As parents in our 60’s, looking to retirement sooner than later and still somewhat responsible for a parent in her 90’s, that type of savings is so helpful.