We took the same approach as @rickle1 and our S19 (youngest) had the same choice. He choose
How did we come up with that amount? That was what the school put in his financial aid package. S19 did get federal subsidized and unsubsidized loans which he’ll take out. So he’ll come out with 27.5K in loans. It’s possible that we’ll have him just take out the subsidized part. We haven’t 100% decided on that. Also our calculations involve making sure the college money we saved covers him for 5 years. Hopefully he is done in 4, but I don’t want to get in the situation of him needing to take out a big loan if he needs a 5th year.
Our middle kid got a big merit scholarship and she did not take out any loans. We cover 100% for her–since her merit scholarship covers half her education. She covers her own personal expenses however from her job at school.
Our eldest took out about 20K in loans. It was definitely tough for him to pay those off and he lived like a church mouse in his 20s.
I’ll add that the scenario made sense for S based on his area of study (finance), his skills, his outstanding school including job placement, etc. So his debt will be quite manageable and easy to pay off quickly.
For D, we will encourage her not to take on any debt (which means likely attending a less expensive school) because she is a performing artist looking to do a BFA in theater. Debt could kill a kid’s options when they’re not working (at least steady work).
We fully covered the cost. Our goal was to keep it at cost equal to in-state (approx 100k over 4 years each). Oldest went to more expensive LAC but with full tuition scholarship so we covered R&B. She had work study jobs for 2 of those years and worked summers as camp counselor. We also paid for year and summer masters while she lived at home. Still came out than less than full pay for 4 years in-state.
D2 followed money to in-state honors where she combined two scholarships for full ride. She also worked a bit over summers but she scored with paid research grant and she received overage refunds each semester. She had healthy savings when she graduated. The masters degree had a full tuition plus a grant that helped with living. We covered remainder of expenses and flights. She did extended masters year where we paid half tuition for her. She is now in doctoral program and off our books except for flights home. We have asked her to dip into the savings for a few things but mostly have had the attitude that the 100k budget was for Ds. D2 has still not used that.
They are both appreciative and know they are lucky. It was definitely a goal for them to not have school debt.
Since this is the arrangement you’re had in place with your oldest for the last two years they’ve been in college and what the second kid would expect, why change it now? If I was your kid and you up and changed the financial agreement mid way through my college years I would be pretty upset. If you want to contribute more just pay off some or all of the loans for them or gift them them cash and let them decide how to use it. I won’t worry one bit about how others handle college finances with their kids. Do what works for you, be clear with your kids about your financial expectations from the beginning and for goodness sake don’t go off and change your expectations after they have started college!
Our fiscal arrangements were not one size fits all.
Our first attended a school which offered her full tuition at a LAC so we paid room, board, and other costs. She worked for spending money on campus.
Our second chose a school where she received 1/2 tuition at a LAC (she could have attended the same school as her older sister for the same scholarship but chose not to). She took regular student loans for the first two years but then had some department level scholarships she received which filled in that amount. So ultimately we paid almost 1/2 tuition plus room and board. D2 got a job to pay for incidentals. We paid interest on her loans while she was in school.
Our last is about to head to college this fall. He did not focus as well on his academics as his sisters and will attend an in-state public. He will be taking regular student loans and we will pay the rest. If he gets some department scholarships down the line we can negotiate like his sister. And we will once again pay the interest on his loans while he’s in school.
When it comes to kids having “skin in the game” for college, you need to realize that the kid has to want to go to college in the first place. If a kid flunks out or just parties all the time, do they really need to be in college? If the kid is motivated to do well and grateful for his or her parents paying for them, then you should have no problem!
We are getting them through undergrad with no loans. We have been paying tuition room and board. DS will move off campus this fall and off of the manadtory meal plan so he will have to pay for his own food now, in addition to electricity, books and technology. Paying for his tuition and most living expenses has freed him from working during the school year so he is taking 18 credits usually and will graduate early with a double major.
DD threw a monkey wrench in our plan in the best possible way by getting awarded a full ride. Since we are saving so much on her undergrad we will likely fully fund her masters or PhD. While at school she will have to purchase her own laptop, books and spending money so she’ll be working full time over the summer and saving that towards expenses and study abroad costs.
The OP’s plan has the student paying 1/3 of the COA after all merit is considered. The parents get the benefit of the student’s hard work to get that merit, or get the benefit if the student chooses a very inexpensive college.
Child #1 picks a school that costs $40k, earns a $20k scholarship = $20k COA with parents paying ~$13.4k and the student paying $6.6
Child #2 picks a school that costs $60k, nothing in scholarships. The parents pay $40k and the student $20k.
Parents have to decide if that is fair. CC has a lot of complaining that it isn’t fair when the schools take away need based aid when the student earns a scholarship, but that’s really what is happening here. The parent is taking 1/3 of the merit award away from the child. If the deal was to split the COA by 1/3, but the student could meet his 1/3 with merit aid, that would seem more fair to the hard working child.
Child #1 COA= $40k, 2/3 parents = $26.7, student’s portion is $13.3, which is 100% paid with scholarships and parents actually pay less too, only $20k because the student has an overage in scholarships.
Child #2 COA= $60k, parents pay $40k and student pays $20k.
@blossom luckily the fully stocked 24 hour grocery store is a block away. Kids hate the cafeteria with veggies doused in oil and the repetitive menu. D1 is a great cook and an incredible baker. I’ve asked what the Uber driver thought when she hopped in with two friends each carrying a decorated layer of a 3 tier Bday cake.
Classes and labs are not always conducive to cafeteria hours. Some evening classes include dinner and there are many local ethnic venues. They do not need to cook every evening. Learning to cook for yourself and hosting events as undergrad will make a much healthier like/work balance during the longer PHD years.
We aren’t sharing costs with our dc in the same manner the OP is sharing costs with his, but I don’t believe there is anything unfair about the OP’s plan as the merit money reduces costs for both parent and student.
Two kids in college…they both have merit aid…then we pay 100% of the remaining tuition and room/board (both have stayed in dorms).
They’re expected to then cover everything else themselves…outside food, entertainment, clothes, whatever. The problem is that both work and they have very little overhead so they spend pretty much 100% of the money they make on ridiculous things like a 4th pair of gym shoes or (in the case of my daughter) expensive haircuts and crazy amounts of make-up, for example. They spend like they/we are millionaires.
I’m not even sure how we got ourselves into this situation…and to make it worse, they sometimes get in over their head and my husband will then deposit more money into their accounts (“I can’t not have them eat”) but the reason they don’t have the money is because of their crazy spending. He literally won’t stop sending them money.
It’s been insanely frustrating.
Next year, though, we’re trying to change it…D1 is starting grad school and, after merit, we are paying 100% of tuition but she’s responsible for 100% for everything else. She really needs to live on her own economy.
In the case of S1, he’s moving out of the dorms and we’re also looking at a way for him to pay his own monthly rent and food costs.
But we have absolutely set them off on the wrong path.
Agree that the actual OOP cost is a fine place to begin with dividing the cost rather than sticker price.
As for us, the plan is for the kid to cover as much as possible and choose a school in which they can cover most of it through savings, working, merit, and scholarships.
My oldest is only a rising high school freshman, but I’ve heard and read about enough painful college finance situations that a few years ago my wife and I came up with a plan for our kids. It’s not set in stone, but I’m gratified that it’s similar to what some of you in this thread have come up with.
Basically:
We're saving enough money for our state flagship (UIUC) -- probably $150k or so by the time my S23 would enroll. Whatever UG college they want to go to for that amount, we'll cover it.
They can't take out UG loans other than the $23k that's federally subsidized. If that makes a college too expensive, it's out. (This cuts most OOS and private schools without merit aid. I'm fine with that.)
If they spend less than $150k on UG, they can use anything left on grad school.
If they have anything left after grad school (or they don't go to grad school), we'll give them half of what's left...but only for an IRA, a down payment on a house, or something else suitably boring to a college-choosing 17-year-old as not to give them the wrong incentive.
I’ll keep reading this thread to see if there are ideas I can steal to improve on this plan.
Learn something new – I was thinking the governmental student loans were all subsidized. I see now there are two different levels of those student loans. See – this is why I’m starting years early!
What I was really trying to say was: no Parent Plus loans or private loans.
I wanted my kids to “have some skin in the game.” Both had to pay for their book and lab fees. Neither got spending money, since both had work-study jobs and worked during the summers. Husband and I paid for for everything else.
@mdpmdp there are direct loans from the government at lower interest rate (~4% now, it goes up and down). For freshman the max is $5500, and of that $2000 is never subsidized. If the student qualifies for some or all of the remaining $3500 to be subsidized, the government will pay the interest on that amount until the student is no longer in school plus 6 months.
One of my kids did take the whole loan, so $2000 x 3 years (didn’t take freshman) = $6k. She just got the bill to convert it to repayment status. and the interest accrued over those 3.5 years (she took one extra semester) is just over $400.
It depends on what that 1/3 works out to and if it’s reasonable for a student to earn from work. I’m personally not a fan at all of saddling a student with debt so they have “skin in the game.” Requiring some contribution from part-time (10-15 hours) term time work and summers, that’s perfectly fine. But if the family is comfortably full pay, I don’t think they should require the student to have loans. I don’t see any value in that.
“Our eldest took out about 20K in loans. It was definitely tough for him to pay those off and he lived like a church mouse in his 20s.”
To each their own but if I am comfortably full pay, I wouldn’t want my young adult child to live like a church mouse for years on end.
“DD threw a monkey wrench in our plan in the best possible way by getting awarded a full ride. Since we are saving so much on her undergrad we will likely fully fund her masters or PhD. While at school she will have to purchase her own laptop, books and spending money so she’ll be working full time over the summer and saving that towards expenses and study abroad costs.”
Since she earned a full ride saving you tons of $$, did you consider coveting things like the laptop, books, etc? Her earnings, as one example, could then be plowed into a Roth or traditional IRA setting her up nicely on her financial course in life.
I would say we followed Strategy #4. We told all four kids that their job was to get into the best* college they could, and that we would handle the costs. We stipulated that each kid will owe us parents $10K to be paid back, interest free, when they are settled in career. That’s their ‘skin in the game.’
All four kids opted for expensive privates. Fine by me – this is what we saved for all these years. Each received some, but not too much aid from the colleges.
My parents treated me to a similar deal and I think it is one of the best gifts one can give their kids. However, I am very aware that many families are not in such a position.
(* by “best” I mean fit, quality, and love of the place)