Should your child have some "skin in the game".

Paying for College
101

I appreciate the rant. But nobody is pointing fingers- we are answering questions from the OP who CAN afford college but wonders why he should pay for it if he can make his kid bear the burden. And we are pointing out that sometimes that burden comes with unanticipated consequences. If you are comfortable with your kid passing up an unpaid research position being directly supervised by one of the “names” in the field because the kid is spending the afternoons stocking shelves at Target- then great. If you are comfortable with your kid moving back home after graduating because by the time the college loan is paid plus bus fare to get to work there isn’t enough money for rent and laundry and food- then great. If you are comfortable with your kid choosing the job with campus catering serving big-wigs at an alumni affair (which pays cash) instead of a lower paying job with a professor fact-checking a book (which will get the kid a publication credit for having sussed out an important piece of primary data that the professor missed) - then great.

But you can’t sit on your cash, make the kid take out loans which you could avoid, and then complain that your kid is 28 and somehow never got the professional opportunities that your neighbors kid- who did the research and the internship and the fact-checking types of roles- is getting. Doesn’t work that way.

Everything has a price- and an opportunity cost for an 18 year old can be a very expensive lesson to learn.

102

As a number of posters have pointed out, even state universities aren’t as affordable as they were in the '80s- or even just 15 years ago. [url=<a href=“https://www.uky.edu/IRPE/benchmarking/tuition/undergraduate_resident.pdf%5DHere%5B/url”>https://www.uky.edu/IRPE/benchmarking/tuition/undergraduate_resident.pdf]Here[/url] is a table of a selection of public university’s price increases over the 10 years between 2000 and 2010- and for all of them tuition at least doubled during that time. UK (which put this list together) found out yesterday that their new Governor has just had it’s state funding cut by 4.5% for the second half of this year, and 9% for next year. Tuition increases will inevitably follow.

103

This is how it worked for us and DD - not so much “skin in the game” as ownership of the process and results. About 5th or 6th grade, we started talking about what college was, what careers are, and how it all works. We showed her how we were saving for college with 529’s and other investment vehicles. She also knows that our home state university system gives nearly free rides to good students and we have a very good big state U and a top engineering/science school.

High school comes and about junior year she starts thinking about choices. We develop an overall cost number using the college savings and our ability to monthly cash flow her out of our family budget. DD is a saver, not a spender, and has accumulated about 5K of her own money also. She also understands that there are part time work opportunities for college students.

So, with a cost number in mind we start touring colleges. She knows she is going to graduate with honors, high test scores, and several hooks. She knows she wants to go out of state to a big metropolitan area. So we tour reaches, fits and safeties in each of three major cities. We tour both performing arts schools (theater), and regular schools. Whenever she can, she talks to the financial people. At one school, she actually speaks with the director of admissions and negotiates her scholarship! It becomes a top choice.

She winds up applying to 7 schools. None of her reach schools really turned her on and/or were overly expensive (NYU), so we really had half fits and half safeties. She is accepted by all of them and takes her top choice, a suburban big State U. which gives her a very significant academic scholarship. We tell her that any money left over after she gets her degree is hers to keep for either graduate school or just as a nest egg.

This is where the story usually ends, but not for her. She decides performing arts is going to be the rat race of all rat races. We just tell her, “find what you love and do it”, and she takes the default major of psychology and is Dean’s list. Mid spring semester she decides her school isn’t really a fit for her after all (which its really not, but I thought she would adapt to it). She and her high school boyfriend, who have been having monthly visits all year, concoct a plan. He wants to go to a large urban state university out West for their top engineering program. She is going to go with him because she can be “a psychology/biology major anywhere as I figure out what I want to do”. We just tell her, “you know your numbers, make it work”, and “that’s a big relationship step”.

Well, she can’t really negotiate anything as a transfer student. She’s going to pay out of state tuition until she meets the requirements to be declared an in-state resident, which include among other things enough gainful employment to pay state income tax. She has enough barely enough money to complete her degree, but since its “her” money, she’s going to steward it and try to get in-state tuition. She gets a 20 hour a week job with the university in her major, and also volunteers once a week in her new major/possible eventual career.

Sophomore year comes and goes. She and her boyfriend are as happy as they can be. He likes his school and major. She, however, wants to transfer yet again. Her biology program is essentially pre-med, with all the baggage that carries. Everybody who works where she volunteers got their specialized degree from little State U just up the road. Once again, “you know your numbers, make it work”. The school offers in-state tuition for non-residents during summers, so she takes a full course load summer semester. . For Fall semester, she dutifully provides the laundry list of requirements to prove she is a state resident and they grant her in-state status.

Her new school, schedule and commute cause her to change jobs. She works part time for the county/state in a job even closer to her career goals. She is doing well and is looking at Senior year internships, particularly where she has been volunteering since the start of sophomore year. She and boyfriend are planning on getting married once they graduate. His extremely lucrative job offers will come in one of four cities. They are already looking at employment/entrepreneurship opportunities in those places.

Wow, that was a long story. Here’s the bottom line, which has proven successful for us:

  1. College savings and costs were made transparent to the student from a young age.
  2. Student was given ownership of the college choice process and understood the financial constraints ahead of time.
  3. Student was given complete latitude on academic and career choices.
  4. Carrot at the end for both completing school and stewarding her money.

This worked out well and the student is focused on completing school early and starting her career and life.

104

My kids needed no monitoring from me to do well in high school. I never had to push because they were hardworking kids. But there are some kids who do well in high school only because their parents coach them through it. For kids in this category, it might be wise to make them take out loans or make your continued support conditional upon their maintaining a certain GPA. Under no circumstances should a parent pay for their kid to party and flunk out. If your kid is in danger of this, then by all means, make him have some skin in the game so that he will learn the value and the cost of his education.

105

I think kids should contribute, the question to me is at what point the contribution is crippling. I think for almost all kids around $3000 is completely reasonable, $5000 is doable, but $10,000 is unreasonable unless there is absolutely no choice.

106

But the OP has though addition posts explained that he is taking the bigger share of the expense, $13k for r&b and leaving tuition, $10k, to the student. The student has more control over that because some schools offered the student scholarships, loans, work study.

The first post I thought was unfair, but further explanation showed the OP was just giving the student a budget, just like many of us have done. I don’t think the OP has the ability to pay more as this is child #1 and he has more coming down the road. There are many posts on CC that it is ‘no big deal’ for a student to take the federal loans and have a job. That’s all OP is asking his son to do, take the $5500, get a job, or pick a school with a scholarship. All three easy to do for his son. It is not the $10k plus loans, it is $10k including loans. Not outrageous.

107

I think $10,000 including scholarship and loan OR large work contribution is fine, but I don’t like the large work contribution AND loan if there is another option. That’s just me, though, because two of my kids had great unpaid opportunities early on that led to high paying options in later years.

108

@daddyoffour, my parents had the same attitude (I don’t mean that to sound rude) and I went to a school and ran up manageable debt. I couldn’t find work in my field for several years and the loans ballooned to $140,000. Owing that much took some years off my life. Eventually I changed fields and found a good job, and then a second good job and got them paid off. This was back when the government wouldn’t help at all. I always vowed that my kids would never take out student loans. My attitude has changed a little bit over the years, $20-25,000 is the price of a car, so I figure that much for an education won’t be too bad.

109

I don’t think making the kid take out loans is skin in the game at all! Kids (and many adults) painlessly take out enormous loans without the slightest idea of the burden it will be on their lives later when it’s time to pay it back.

It literally means nothing to them, and feels like nothing-it’s not a motivator since they’ve never experienced the sensation of having to pay back loans.

@Dramadaddy I don’t know how you kept your cool with your daughter changing her mind so much. I would not have been so sanguine about the whole process, but I bow down to how you handled it, and it’s good to hear she figured it out. Wise words, thanks for the story.

110

It’s so completely individual to the family (and it’s financial circumstances) and the student (what motivates them, what their academic/professional aspirations are, etc). And, as another poster noted even what you call ‘skin in the game’ matters.

In business ‘skin in the game’ is seen as a way to insure that everybody has enough of a stake in the outcome that they will pull their weight/deliver the objectives. It sometimes has a slightly negative connotation- an assumption that the person won’t deliver without some external motivation. But, a motivated student who is overall working to potential (allowing for some wobbles!) has lots of ‘skin’ in the game.

It can be important to have a motivator, but assuming that one is necessary may not be fair or the best approach to discussing the financing of college- it’s starting with an implied negative.

111

@daddyoffour

I paid for most of my college in the 80s but that was when tuition was $1200 per semester. I worked weekend and summer jobs that paid $7.25-$7.50 / hour. That was my skin. But $10,000 / yr seems like an awful lot for a student.

My daughter’s skin is agreeing to live at home, get a Nursing degree in 3 years from community college, and get a BSN in year 4 from the local state U, debt-free. The nursing program discourages students from working so they can focus on the curriculum, so I don’t expect her to work. I just want her to get good grades. Her first year was covered by Pell grant and state grants, so my contribution is room, board, and transportation for 4 years.

My son’s skin is to earn college credits and an Associates Degree while in HS, and go to the school that offers the best combination of academics and financial aid/merit aid. Right now he has at least one full-tuition offer in play.

So to me, both my kids are making a valuable contribution toward their education, but neither involves them going into debt, or working a low-paying job that hinders their studies. Skin doesn’t necessarily have to translate into dollars and cents.

What are your son’s SAT/ACT scores? $18K debt might be manageable, but it would create problems if he wants to do grad school or has trouble finding a good job after graduation.

112

What we did is have them take out the allowable student loans and told them if they keep their GPA above 3.0 we will pay them for them.

113

My parents told us they would pay for UG but graduate school was on us (and we were expected to get graduate degrees). We had to do well in undergrad to go on to grad school. So for us “skin in the game” - defined as money - came later when we were more capable and had more choices (work then grad school or grad school then work) but it depended on our UG performance.

For my own child, we gave her a budget and simply said, this is what we can pay. If you go an in state public, this will cover everything and maybe a car. If you want to go private or OOS, no car and you need to make up the difference. No loans. She was not a high stat student. She did not have 3.8-4.0. She had a decent ACT score but not the magical 32 (she had a 31). So, competitive merit scholarships were not realistic. We did end up looking at schools that give merit “like coupons” because in the end, 22K a year knocks quite a bit off the COA (the real key is to find schools with a COA far lower than $60K). In the end, she had several choices that met our financial constraints.

I think parents really need to ask themselves, especially if they can easily afford the cost but the child cannot, what lesson do they want to teach? Asking a child for “skin” can take other forms other than demand money paid by the child at 18-22 when they have few options to earn money. I’m also not sure I want to teach my child to pay for the unaffordable with loans. Asking that they earn spending money and find funding for extras (study abroad) is more reasonable.

114

This. Absolutely.

Especially when that lesson, and debt, is not even necessary for their child going to college.

115

Mrs. Dramadaddy is a paralegal for a bankruptcy attorney. Worst part of the job is having to tell somebody that their student loans are not dischargeable and their garnishment can’t be stopped. They are worse than the IRS.

@MotherOfDragons I’m a control freak, but we made a conscious decision around 7th grade that we were not going to micromanage DD. Nor were we going to nag, do her homework for her, enable, excuse make, or otherwise diminish her acceptance of personal responsibility or growth as a person. It was actually very liberating. As she has made her college choices, she was smart enough to leave herself options to find out what it is that she really wants to do. I changed majors and schools myself, and also did some non-traditional studenting. My parents and wife did graciously provide the opportunity for me to go full time during the day for my senior year. I think it was $500 a semester back then.

116

@daddyoffour I believe college contributions between student and parents needs to be balanced with ability rather than the myth that parents or students can pay for everything. The students can do their part to hunt for big $$$$ scholarships at colleges by doing well on their ACT/GPA and (more rare though) get those private scholarships. If the student did an honest effort to go to a school with a huge portion of their tuition covered with scholarships or to a low-cost college, then negotiate with them a boundary you think is fair for paying the rest of the costs. Your idea of covering their living expenses and that they pay for tuition and fees has good intentions, but be careful. By letting them foot all the educational expenses, they may avoid different options and depending on your location, may severely limit them to one or two colleges. Am I saying you should foot the bill for an expensive private school with tuition at $40,000+ a yr with no hopes of merit aid? **** NO! But be more specific as to maximum support you would provide if they get scholarships for college or willing to work. It may actually save you money doing it that way while giving them “skin” you want.

I respect your opinion @daddyoffour to make them value the dollar for the college expenses. Throwing them towards borrowing debt and stress of working unreasonable hours to cover tuition puts a lot of pressure on your kids to succeed. The reality is the good ole days of kids being able to work reasonable hours with a reasonable wage to pay tuition is over, without scholarships or parental support or hefty loans. Instead, set a reasonable bar of expected contribution you expect them to get to cover college (merit scholarships, work 10-15 hours/wk, work full-time summers, etc). That way they are doing their part they can and you are too without either one slacking.

In my experience my parents gave me two options since I received a full-tuition scholarship for college…option 1 would be to work 10-15 hours a week during school and full-time during summer and they do a dollar for dollar match on contributing towards all my other expenses that I earn through work. Option 2 would be to take a gap year, work full-time for the dollar for dollar match so that I would not have to work part-time during the school year since I made my contribution with my work year. I took option 2 and my parents already matched me $30,000 pledged for my expenses from the work I have already done. If you want them to make a contribution with work, I would consider my experiences if you’re interested. Ultimately no parent wants their kid to have to go through more than they did, but at the same time not give them a free ride on their dime. Family is a compact that can rely on each other. Food for thought :slight_smile:

117

Given the current cost of tuition, room and board it is unrealistic to imagine they can cover tuition on their own. Create a spreadsheet with a detailed list of all tuition, fees, living costs in one column and then create an income column: parent’s contribution, student’s earned income, colleges’ contribution (merit, grants), loans … What’s the difference? This is what I did.

When I attended university a very long time ago, tuition was a fraction of what it is today. I was able to manage on work, grants and loans without help from my family. That is not possible in the 21st century except from that small fraction of students that get a ‘full ride’.

118

In our case, “skin in the game” is $3000 cash in hand on September 1st of each year and the ability to pay for her own books and spending money during the school year. If there’s anything left over, she is free to do what she wants with it. If the finaid package changes, she’ll have to take the difference in student loans, I’m maxed out on my contribution with the original COA. She knew this going in and it has worked fine this first year. I know she has managed to save quite a bit from her work study earnings as well. The wrench may be low-paying summer internships/research opportunities which will diminish her earning power. We’ll look at that as needed.