Apr 6, 2010

Paying for Your Children's College (Carole)

Every once in awhile, you come across a great family with a great idea and it changes your life.  I mentioned in my last post, that we had a couple of friends who had paid off their homes back when we were all in our early 30's.  These folks really inspired us and we were able to follow their lead.  Well, there was another family that we met back in those same years who had children who were about 6 - 8 years older than ours that completely changed our thinking on paying for our children's college educations.

This family had 6 children.  They were not wealthy by any means, but every one of their children received a bachelor's degree, without taking out student loans.  The basic concepts were:

1.  Children are expected to attend a university or community college that has a reasonable yearly tuition (meaning, your student can earn enough money during a summer to completely pay for the following year's tuition)

2.  Children are expected to pay their own tuition and books for the full four years

3.  Parents will pay for room and board (either dorm or off-campus housing) through all four years of school

This wonderful family did not broadcast this plan, but as we interacted with the parents and their children over a 10 year period of time, it became obvious that this was what they were doing.  And it WORKED.

And so did those kids.  :)  From the time they were 15 or 16, these kids had jobs.  They babysat, worked at local businesses, and even had their own family-run summer business.  Most of this money was saved for their future college educations.  When these kids left for college as freshmen, they had considerable amounts of money in their bank accounts, which meant that even before they moved into the dorms, they had earned some serious financial experience and education.  It was amazing to chat with these young college students when they came home for a visit, because they knew EXACTLY how much each college credit was costing them and they knew how much they needed to save each summer to pay for the next year's tuition (to replenish their savings accounts and keep a comfortable money buffer a.k.a. Emergency Fund).  In addition, they were highly motivated to get and keep scholarships since this could save them a whole ton of money each semester.  And lastly, they kept on track.  They didn't want to spend one more semester than was necessary to get that college diploma!

Talk about teaching your children some life skills!!  Like I said, each of them are college graduates -- and at least a couple have graduate degrees.

College should be a FIRST STEP into adulthood for your children -- Controlled Freedom is what I like to call it.  To have parents pay for everything (tuition and room and board), in my opinion, delays your children learning some valuable financial lessons of adult life and prolongs the free-ride high school mentality -- hardly preparing your children for real life after college.  On the other hand, to expect your children to get a college education with no financial help (or very little) from you the parent, is just asking for them to drop out or take on oppressive student loans.  This is too much financial responsibility to ask of a teenager who has just left high school.  And, I personally think it is a bad idea to accrue student loans for just a bachelor's degree.  Graduate degrees, however, are a different financial animal.

We followed this simple program with our children.  Both Janssen and Merrick received their bachelor's degrees this way (I must mention here that when J and M each got married while still in undergraduate school, we no longer paid for their housing or food -- I'm very proud of them and their exceptional husbands that they still finished their degrees without any debt, completely independent of our financial help) and daughter #3 is a senior in college (unmarried) following the same plan.  Child #4 knows already, at age 14, that this is what's ahead.  He's already saving money!

What a relief to us as parents to not have to save $60,000+ for each child's college education.   This simple plan allowed us to have a solid strategy for our children's educational futures, but to also take care of the other important family financial needs as they were growing up -- like paying off the house, saving for retirement and many great family vacations.

What a blessing to have inspiring and really smart friends to show you the way!


Mary said...

"And, I personally think it is ridiculous to accrue student loans for just a bachelor's degree"

I must say that hurt a bit to read the above statement. I'm overly sensitive about this I know. My parents followed this exact same plan and I worked during the school year to pay for my tuition, food, etc. while they paid for my housing and my meal plan my first year.

However, I chose to begin a family while at BYU and when my husband graduated a year ahead of me and got a great job out of state we chose to take it. I worked continually on my degree for the four years I was out of school by taking independent study classes. It was a slow process, but I felt I needed to keep working on it.

Now that I live back near the university I began at I decided a year ago I wanted to go back to school. My husband and I prayerfully decided this and really felt it was the right time. I had had scholarships before but could not get them again because the budgets were all cut because of the economy. Working during the semester was no longer feasible with two small children at home who I was already not seeing enough by taking classes. Because my husband has a good job we do not qualify for pell grants. So, we took out student loans. I now have a lovely sum of money just waiting for me to start paying back when I graduate in August, but you can bet I feel that every penny of that is worth it. In this economy, especially when we have Prophets telling us that the two things that are "ok" for us to go into debt for are a modest home and a good education, I feel completely justified in doing student loans. Of course I don't like it, of course I wish there were some other way to do it, but when the Lord tells me it is important for me to go back to school I don't question it.

And that's my rambly two cents.

Melanie said...

In response to the idea of taking out loans for a Bachelor's degree and the comment above, I do think there are some instances in which taking out a small amount of loans is justifiable.

I have been following The Choice column in the NY Times which talks about college admissions. I think it's absolutely ridiculous that so many overachieving students (of which I was one) are focused solely on the Ivy league and other big name schools that cost tens of thousands of dollars. I agree with Carole that spending that amount of money for a Bachelor's degree is just not necessary. If you start at a top school during your undergraduate education, you pretty much have to stay at a top school for grad school. Better to go to a great but less expensive university for undergrad, work hard, use your own initiative to learn a lot, and then, if you're set on a big name, "move up" for grad school.

Lisa C said...

Some of my friends have an interesting plan for their kids. The kids play all expenses the first year. When they pass their first year, the parent pays back half the expense. When the child receives their degree, they get the rest of the other half. A good way to facilitate savings and encourage graduation!

I am not sure what I will do with my kids, but I feel strongly that I don't want my kids working their first semester, and maybe even their first year if possible. I, like Bart, was a peer mentor, and I think Freshman have a hard enough adjustment without having to spend lots of time at work. I like the idea of setting up the expectation early so they know to be saving.

Packrat said...

This idea is great and actually how I went to college until the middle of my junior year. I'd say plan on having a good cushion - to cover tuition and housing cost increases, emergencies, plan changes, etc.

Not only did job money get saved, but 60 percent of all monetary gifts were put in savings.

The biggie? We weren't allowed to have cars. (We would have had to buy them ourselves and pay for our own gas, maintenance and insurance. That would have taken all of our college money.)

Tasha said...

I just love this idea. My husband and I already talk about how we need to open college funds NOW for our kids (they are 5, 3, and 1). But, also really believe in working for your education. I did. I can't remember what my parents paid and what I did, but I pretty much had to have a least half or I couldn't go away...and I wanted to go away (I went to Ricks College and then BYU). But, Ilove that they pay for the tutition and we pay for the room and board and food. What a great way for them to really understand what their education cost them. Thank you for this post.

Rachael said...

I couldn't agree more with the comment "I personally think it's ridiculous to accrue student loans just for a bachelor's degree". This post really hit home because my parents were extremely young when they had me and were not prepared for a child. Therefore, when it came time to pay for school, I was left with the burden. I went to the best school into which I was accepted and took out huge loans to pay for it. I was young and mislead and really didn't educate myself about the financial repercussions. Plus, this was during the boom years right before 9/11 (I was a junior when the attacks happened). I was also the first person in my family to go to college so navigating this arena fell solely on my shoulders.

I was told time and time again I would be able to pay back the loans, my education would get me a great job and so on. Unfortunately, I blindly believed this.

None of the advice received has happened. I owe six figures for my two bachelor's degrees (accounting and economics). Paying back the funds has been a STRUGGLE. The interest alone is so daunting...and I have been unemployed since August and was unemployed in 2008 for six months before finding a job at which I worked for 9 months until I was laid off. Finding a job has been a dismal failure only exacerbated by the looming debt.

I cannot express enough how much the burden affects me. I can't buy a house and will have to delay having children despite approaching 30. Even the wedding I am supposed to be planning has not happened because of financial reasons.

Going to college does not equal getting a job. It means getting an education. As far as I'm concerned, taking out loans for a bachelor's degree is absolutely not worth it. Frankly borrowing money for this is a very costly and huge mistake, especially private loans as they have variable interest rates and no consumer protections. I constantly tell people not to do it and am so relieved to see your advice here!

Financial education is so important yet so often overlooked. Keep up the sound and insightful advice as you might be making other people's lives easier and preventing them from making costly mistakes.

Corbett Family said...

I found this post really interesting because every time a "financial advisor" suggests that we need to put vast sums of money away for our four children's college education, it makes me wonder if that is really what they need. Both my husband and I were able to obtain our bachelor's degrees with no debt and just a little help from parents and he was able to also obtain a master's degree with no debt. I did accrue a little bit of student loan debt for my graduate degree, but the lessons I learned in all of those years of paying my own way were priceless. My parents helped me as much as they could financially through college, but even that was not much. I like the idea of the parents paying for room and board and the child taking care of tuition and books. The fact that my parents could not help me at all with tuition really motivated me to get and keep scholarships. Thanks for your insight on this topic!