I’ve been following a great discussion in the Financial Aid forum regarding how much “skin in the game” should a kid have when it comes to paying for college. It got me thinking about our personal situation and I didn’t want to highjack that thread so thought I would post here. Our daughter applied to ten schools and was accepted at seven with varying degrees of merit aid. The remaining “big three” are reaches yet we feel she has a good shot for acceptance, but probably won’t receive much, if any aid. She is interested in studying Business and premed, so medical school may be in her future, but at this point who really knows (like many, she may not survive O Chem). We are fortunate enough to able to afford all her choices with varying degrees of sacrifice, however, if med school becomes a reality, it will be on her.
Since college selection will be her first real adult decision, I don’t want it to be an emontional one based on perceived “prestige,” and was thinking about using money as a way to make it a more practical decision. She likes all her school choices, but the OOS privates are more appealing. So I’m am debating whether to tell her that if she chooses to attend one of the seven which we can more easily afford, we will give her $40K after she graduates in four years to use as she pleases. However, if she chooses one of the “big three” she will have to take out $27K (roughly 10% of the COA) in direct loans to cover the costs. Although I don’t like to saddle her with debt, $27K is like having a new car note and think it is fair price for a great education at a private U. Thoughts?
Also, I believe there is value in attending a big name private university and don’t want this to turn into a discussion of State U vs. Private. Thanks!
If you haven’t already said she’d need a loan for certain schools and you can afford all of them, it seems a bit late to require that. That is almost a 70 grand swing for the privates. OTOH, you can certainly tell her that if she goes to less costly schools you will have more money to help her out in the future be it with med school, other grad school, a wedding or a down payment. Butnifmyou now think she should take a loan, talk about It now.
We had those conversations with our kids ahead of time and they knew they would need either merit or loans and likely both for privates.
A $27k loan is like having a car loan for a pretty nice car - but the graduate has no car! She’d still have to have a car after graduation. And the payments are usually for 10 years, not 4-5 like a car.
When I had my first car with loan, it was for a sparkly new Datsun! $6000 of beauty. I paid $144.10 for 4 years, and it wasn’t so bad to pay for the first year when the car was still shiny and new, but by year 4, I didn’t really like paying for a 4 year old car that needed a few repairs. I definitely wouldn’t have liked paying it in year 8 or 10.
I don’t like the bargaining. Set the budget. If you can afford the first 7 schools but can’t afford the others, that’s the end of the discussion. If you can afford it with her taking the loans, that’s an option as long as she understands the loans. If you have $40k left after she’s done with school, wouldn’t she get that money somehow anyway? Wedding? Grad school? Buy a house?
If she’s smart enough to get into a top school, she’s smart enough to figure out that going to State U is $xxx and top school is $xxx -x2 or x3. The math isn’t hard.
We set our financial parameters up front and as long as the school fell within what we said we would pay, we did not make it an issue in the decision. That was our approach. I do know that my S’s best friend got a new car when he opted for State U over an expensive private college so I’m guessing that wasn’t a coincidence an that others do think differently.
I’d think giving her the 40K or not could be the extent of the budget power. Why woudl you saddle her with debt if you don’t have to? I had dept when I left school. In contrast, peers who did not were able to start saving immediately. Guess the difference between starting to save early and late? a lot!
Typical teenagers who have had their livestyle provided for them all their lives cannot grasp the enormity of that decision. They will almost always pick the shiny school and the loans. At that age, 4 years later seems like 40 years later.
You’re the parent. Don’t be squishy. Just dictate the budget up front, already. Yes, there’s value in graduating from a private school w a good name, but they all don’t cost $65k if the kid has the stats to net a merit scholarship. And if the kid is pursuing med school, any reputable school will do, and money should be conserved for med school.
We gave ours a number. Savings from options under that number could be put towards a new car. When the second kid picked an option way below the number, she was only offered the savings up to the cost of a bottom of the line vehicle. Anything above that is mine. Loans were on the table for schools that came in over the number. I really didn’t consider it a bribe to take the lower priced school. It the kid applied, she clearly thought the school was worth attending. I think it,s a good lesson in long term thinking. When I graduate, I’ll probably need a vehicle. Will this old beater I’m driving make it beyond college? Can I afford a car payment? A car and a loan payment?
My kids had been working and managing their own money since 15. While I’m sure the idea of 27k in debt was beyond them, they did understand what things cost and new payments meant less money fo other things. If the difference between the four schools and the final 3 is close to 70k I can see where there’d be loans instead of a rebate
If she is considering pre-med, she should choose the school where she is most likely to come out with the highest GPA.
I gave a couple of my sons some incentive to take near full-ride scholarships–I offered to buy them cars when they graduated from college if they kept their scholarships and graduated in 4 years. We would’ve paid for more expensive schools, but then they wouldn’t get the cars (not any car–a decent used car.) They both took the the scholarships. Planning to buy that first car this May.
I wouldn’t make my kid take out loans if I could avoid it. I would just offer her help with med school (or other things like wedding/house/car) if she chose the cheaper school. And no extra help if she chooses the more expensive school. But if you can’t afford the more expensive schools, just say no. Set a limit.
While what other people did seems reasonable, it sounds like most of them paved the way for their actions before the process started. It seems to me like you’re changing the rules well into the game. If this is just coming up now, your daughter may feel like she is being punished for having gotten merit aid. How would the decision be made if there were none?
If you wanted to tell her that what you had to spend is it – she can use it all for undergrad or she can have some left over for grad school if she uses the merit aid – that seems a little less like changing the rules. You’re still willing to maintain what I think was your original position, but your daughter will have the benefit of the merit aid for grad school if she wants to pursue that. In other words, she’s the winner as a result of her scholarship, not you.
I say this assuming that you were comfortable with the “varying degrees of sacrifice” you mentioned. Money’s a tricky thing!
We let DS decide between four generous (but not equal) merit aid and Tuition Exchange scholarship offers that were all within our means. All of the institutions seemed, in different ways, like they could be good fits for him, and none of us was particularly concerned about comparative prestige, only strong departments in his fields of interest. He happened to choose the second most affordable. We made it clear that any money that we had saved for college that was left after he graduated could be used towards either grad school or a house (i.e. serious investments in his future). But we didn’t make any promises involving fixed sums because if he takes more than four years to graduate, there won’t be as much (or possibly any) left over as his aid has a four year limit. So that gives him an incentive to keep on track to graduate in a timely fashion as well.
Where are these numbers $40,000 and $27,000 coming from? They sound rather arbitrary - numbers you pulled out of the air and not based on anything. Am I missing something? It does sound like bait-and-switch on your daughter if you had not discussed this scenario with her before she chose and applied to her schools. Maybe she would have picked a slightly different list.
Can you not afford the $270K for the OOS private schools? If not, then those schools are off the table but at least wait until the decisions and FA packages are in. Does she have to take the $27,000 loan to afford the COA? (I’m still not getting where the $40,000 “rebate” comes from if she picks the one of the other schools) Why would you saddle her with such a loan if unnecessary? If you’re getting cold feet about the cost of her schools (I would because we can’t afford $270K), then have an open and frank discussion with her about the costs of her schools and the implications for her and the family. Suddenly throwing in these “bribes” and “loans” into the picture just sounds fishy to me and I bet it would also sound rather sketchy to a bright 17/18 year old as well.
It seems rather late to be having this conversation. Ideally, this conversation about parental cost constraints on the kid’s college choice should have been had before the kid made the college application list, because knowing the parental cost constraints beforehand would allow making a list that is more likely to fit into the parental cost constraints (net price calculators can be run and scholarships investigated before applying). The conversation may also be easier to do before any specific colleges that the kid has fallen in love with have been applied to or have sent admission offers.
Some of the ugliest stories pop up every April when the student gets financially shut out because the parent only then states the cost constraints which result in all of the admission offers being unaffordable. Had the student known the cost constraints beforehand, s/he could have applied to a different list aiming for affordability.
We just drew a line early on: no significant merit money then no go. It worked out fine. DS is happy where he is. And I suspect most kids can be happy at MANY schools, not just at their budget-busting “dream school”.
We told them what we could afford, helped them make lists of colleges we felt were “worth it” (i.e. I wasn’t planning on making significant financial sacrifices for a four year beer pong party… but to be in a place filled with intellectual challenges which they were taking advantage of- happy to), and then helped optimize the right combination of criteria that met their academic needs.
I did not buy anyone a car. I did not bribe anyone to take a cheaper option. All the kids could have ended up with something significantly cheaper than where they ended up, but they were up to the challenge and really worked hard to become the best scholars, citizens, and participants in their respective communities that they could.
If you can’t afford the choices your kids are looking at, explain what you can afford and figure out what works. But just as I didn’t give the kid with perfect teeth a rebate because he never needed orthodonture (here you go kid- 4K for having good teeth) or the kid who didn’t need speech therapy a bonus (here you are- go take a nice vacation to Cancun because you didn’t stutter like you brother), I was not in the business of subsidizing life choices from the college budget.
If your kid can’t make a case for why an expensive option is “better” than a cheaper option, then there you go- kid has a dumb reason for needing to be at expensive U. (cuter girls, close to the beach- I was not interested). But for a more intense academic environment with a more robust set of course offerings in the desired discipline? I’m listening.
The only way I would want my child to have some “skin in the game” is if I didn’t think they were taking their education seriously. As it is, my hope is to pay for undergraduate education without them taking on debt. As far as determining between colleges with various costs, as the parent I have reserved the right to exclude any college that I deem is not a good fit or does not make financial sense. Otherwise, it is too easy to let the tail wag the dog.
If your daughter takes the full Direct Loan amount of $27,000, her repayment will be about $300 a month for ten years…she would be better off not having a college loan…and taking a car loan when the time comes. Would be about the same monthly payment but only for 4 years or so.