<p>One other thing we did with our daughter last semester who didn’t seem very motivated to apply for any extra scholarships when she knew I was paying for the tuition was to carve out a portion of the tuition that she would pay -in her case it happened to be $1500 - and for every scholarship she applied for I would take off $250 from that total. She applied for 6 scholarships, and ended up receiving one that was for about $1600. Without that little motivator I doubt my daughter would have gone looking for those scholarships.</p>
<p>An alternate way of giving the student “skin in the game” is to say that you will pay $x total, where $x is approximately the total eight semester price of colleges being looked at (be sure to consider estimated cost increases) minus the eight semester subsidized direct loan amount. And if the student spends less than $x, offer to contribute the leftover to post-graduate professional school.</p>
<p>The “skin in the game” then gives the student incentive to gain and renew merit scholarships, consider less expensive schools, contribute summer earnings, and/or live frugally. This will also give incentive to graduate in eight semesters (or choose a lower cost school if there is significant risk of needing extra time).</p>
<p>Thanks again! There is no doubt that my D will receive a nice merit aid package as she is applying to UA and meets the criteria for the presidential scholarship. So, she will be able to evaluate any other offers and make a decision based on the 'Bama offer. I agree that keeping the merit scholarship is a huge motivator. Once again, I’m not really concerned about my D’s performance in college. Her motivation is self-driven. She holds herself to a pretty high standard. I was thinking more along the lines of her having a financial stake. I’m wiling to concede that this whole notion was off base. </p>
<p>I think working and contributing toward books and sorority fees may be the best alternative.</p>
<p>Yes, I think you’ve come to a good conclusion. Most of us know very early on if our kids are internally or externally motivated and we judge accordingly.</p>
<p>If she does choose to attend UA on the large merit scholarship when you would have been willing to pay substantially more, then it appears that she already is careful about the money aspects. In addition, she would already have “skin in the game” because the scholarship stops after eight semesters and requires maintenance of a 3.0 GPA.</p>
<p>Not sure if it was mentioned, but subsidized loans are need based. If you do not qualify for need based aid, all the loans would be unsubsidized with interest starting immediately. </p>
<p>For instance, of the max $5500 for a freshman up to $3500 *may *be subsidized if there is need based on the EFC and the school’s COA. If there is no need, the whole $5500 is unsubsidized.</p>
<p>We’re obviously in the small minority here…
We didn’t have son take Stafford loans as a motivational ploy. He was an excellent student with passion for his goals. Completed masters on full tuition scholarship.</p>
<p>For us, it was a way for DS to contribute toward HIS education. Believe me, his 18K was a very small % of the total amount of his schooling. We are middle income with a special needs D at home. It was a major deal for us to cover what the Staffords did not.
Had we had more resources, our family might have handled it differently.</p>
<p>BTW, son stopped in today to ask help selecting 403b plan and investment options…so we’re happy he can and will be doing more than just paying off his student loans. He knows he is fortunate.</p>
<p>Just for clarification, as I have never understood the phrase “skin in the game”, “skin in the game” is having your kid take out loans so the develop financial responsibility?</p>
<p>The idea seems to be that your kid will take their education more seriously (finishing on time, possibly choosing a more employable major) if they know they have loans to pay off after they graduate. Thus they won’t want to spend that “borrowed” money on partying, etc. to the exclusion of actually getting an education. Not all parents on this thread agree that this is what actually happens when the students take out loans, but that is the premise of the financial advisor the OP was talking to.</p>
<p>We decided to have our dd pay $1,000 of her tuition each semester and cover her own books and fun money. We are paying the balance of tuition, all room and board, personal expenses, travel, etc for her. We wanted to give her a fixed amount so that she would understand the great sacrifice that is required for college education. It gives her an investment in her own future and we are still covering about 90% of the total COA. She decided to take out a $500 per semester stafford to give her some breathing room. She saved the money from her summer job for books and the other part of her tuition. Interest while in school will be very small, and payments reasonable after graduation.</p>
<p>I realize that in many cases students have to take out loans because the parents can’t afford to cover the costs. But the problem I have with the “skin in the game” philosophy for tuition is that you’re asking your 18-year-old to take on a responsibility that won’t really bite back until 4 years later. I don’t think most 18-year-olds can comprehend the effect that debt repayment will have on their lifestyles and options 4 or 5 years down the line. How could they? It’s just too abstract. </p>
<p>If you want your child to have a concrete understanding of financial issues now, why not make her responsible to a certain degree for her current expenses, such as spending money, books, clothing, or even transportation to a limited degree? If there’s no money to come home for a short break or go out with one’s friends, sitting alone in one’s room concentrates the mind wonderfully on the value of a dollar.</p>
<p>To me there’s something weirdly punitive about making a student go into debt simply to prove some kind of ethical or moral point. Debt should be avoided unless it’s really necessary to make the education happen.</p>
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<p>The better way to give the student “skin in the game” is to lay out the financial parameters before application season. Go to a school more expensive than the parents can contribute to => student has to find a way to pay for it (work earnings, scholarships, loans up to direct loan limit). Go to a less expensive school (perhaps due to scholarships) => parent offers the leftover money for post-graduate professional school.</p>
<p>Forcing the student to take loans regardless of the net price of the college can actually give the reverse incentive – the student may then choose the most expensive college without caring about the price, and may not look all that hard for scholarships or work.</p>
<p>Our kids did NOT take out any loans for college, but as you see, every family is so different. Our kids did their best anyway and we didn’t feel having them take out loans was a good idea. </p>
<p>My folks let us take out loans as desired and gave us the repayment amount as an unexpected graduation gift. When I graduated, my
Loan balance matched my savings account, but my folks gave me an amount equal to that balance, to be fair (tho my sibs grad schools cost tons more).</p>
<p>Most of the kids I know who dropped out of school for a number of reasons had skin in the game, and it did not come inot much consideration at all. Usually, some emotional, psychological, behavioral problem that was so overwhelming that the fact that they borrowed some money or put their summer work funds, savings in there was not the issue at all. Maybe it does work with some kids that when life gets too hard there at school, that they remember their personal investment, not to mention the larger sacrifices many of the parents make in such cases, but after a certain point, it’s the least of their concerns. For pyschic breaks and other issues, you then have the issues of the loans that have to be addressed. They don’t just politiely wait for recovery; forms have to be filed and there are rules with the interst meter still ticking. I know a number of my sons’ former classmates livng at home due to school loans, some of them earning some decent salaires. Ironic, that they chose at 18 to get away from home and took out loans, parents took out loans because it was so all fired important that they make this break, and now in their 20s, they are stuck at home to repay those loans.</p>
<p>*I don’t think most 18-year-olds can comprehend the effect that debt repayment will have on their lifestyles and options 4 or 5 years down the line. How could they? It’s just too abstract. *</p>
<p>I agree. These are kids who aren’t earning much as 18 year olds, so they naturally think that when they’re earning $40k plus that paying back a loan will still leave them plenty of money. But, that’s because they aren’t yet paying for rent, utilities, food, cell phone, internet, cable, car, car insurance, gas, repairs, clothes, etc. They aren’t yet paying taxes. They have no idea how much their living expenses and taxes will eat up their paychecks.</p>