Monday, February 05, 2007
Counterpoint: Why you SHOULD Help Pay for Your Child's Education
Recently, Trent argued that parents should consider not contributing to their child's post-secondary education. While there are a couple of fair points in his argument, for the most part I feel it ignores several key issues that come with paying for one's education.

Parents can't check a box saying "I will not contribute to my child's education." Any student hoping to receive financial aid of ANY stripe, including loans, will have to fill out the FAFSA (and at certain schools, the PROFILE). Both of these forms require parents to report their assets and income to arrive at the Expected Family Contribution (unless the student has served in the military). Even if the parent doesn't plan on giving the child a dime, any aid package the student receives will assume that financially able parents will contribute some portion of their income and assets toward the education. This can leave an "independent" student on the hook for tens of thousands of dollars even at lower-cost state schools.

Students who still try to finance their own education face drawbacks. Generally speaking, outside scholarships reduce the school's own grant/scholarship provisions dollar-for-dollar, BEFORE reducing the loan part of the package. Is it possible to earn enough in outside scholarships to cover nearly all college costs? Yes. Do you know many students who have done so? That's what I thought.

Students who try to work their way through school also face difficulties. Any student eligible for need-based financial aid who works at non-work study jobs starts losing 50 cents of every after-tax dollar in aid once other income exceeds $2,490.

What this adds up to is several "independent" students on the hook for lots and lots of debt.

Some parents may argue that this is just how it is, and their children need to experience the pain of paying for all their education to value it.

Most students do not need to cover the entire cost of their education to be invested in the experience. When I went to Small Liberal Arts U. for my undergraduate education, I covered a good portion of my college costs from scholarships, work-study, and my own loan applications. However, my parents still chipped in for a PLUS-type loan that was the equivalent of nearly one year's tuition, along with covering some semester billing shortfalls. Did the fact that one-quarter of my college costs didn't come out of my own theoretical pocket reduce my investment in my education? Not at all. I don't mean to brag, but this is relevant: Having some portion of my costs covered by my parents allowed me to work fewer hours, which left me more time to study and get involved in many extracurriculars. Because of this, I ended up being listed in Who's Who Among Students. I suppose I might have still have managed to do so even with more hours at a job, but I doubt it.

In contrast, while I'm immensely proud of getting a master's degree from Big 10 U., the fact that I paid for all of it out of my own savings, work-study, and lots of loans doesn't make the accomplishment any more meaningful to me. I spent a lot more time being worried about money than being proud that I was paying my own way.

Students who graduate with a lot of debt find it hard to move ahead to the hallmarks of adulthood. If a student graduates with $20,000 in student loan debt and finds a job earning approximately the average liberal arts salary of $35,000, current Stafford loan rates and terms (6.8%, 10-year repayment) make for a monthly payment of $230.16 over a monthly salary of $2,917, which is almost exactly the 8% hallmark of "burdensome debt". That kind of payment can cut into building an emergency fund, not to mention retirement savings or home downpayment savings. This might forestall children having a firm financial footing when their parents enter retirement and might need extra assistance.

These arguments can be debated back and forth. However, it really comes down to one issue:

If parents value education, they need to conform their actions to their words. I don't think anyone advocating that parents provide assistance to their children would say that mediocre students should be pushed into college if they don't want to be there. But parents who expect solid academic performance and understanding out of their children during the primary and secondary school years tend to produce children who will achieve the same way in college. And those expectations are more effective when the parents provide at least some financial show of support, such as 529 savings.

Not every set of parents will be able to afford to send their child to college without risking their own retirement. Not every child will desire to attend college. But those families have alternatives (simplified financial aid needs tests, trade school/apprenticeship tracks). For families with suitably secure parents and suitably motivated children, however, I can't find many compelling reasons for the parents to withhold the aid that society expects them to provide.

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10 Comments:

Blogger Wanda said...

Great post! I will graduate with around $20k in loans, but that's AFTER my parents paid close to $100,000 out of pocket. There is just NO way that I would've been able to attend a private school without parental assistance. Even a public university would have been out of the question. My parents aren't rich, but they have prioritized education and followed through - as you said, just as they viewed it as my responsibility to excel as a student, they have counted supporting my college education as a parental responsibility. This doesn't mean I'm not grateful for my experience (honestly, it irks me a little that people may assume that students without $100k in loans don't appreciate the experience or must be slackers). By all standards, I have done quite well at school and a HUGE part of the reason is because I didn't have to decide between eating Ramen or buying my textbooks.

So in short, yes I am supported by my parents, no I am not an ungrateful brat who squanders my education or their money. ;)

Blogger Ellen said...

I agree with your points--especially the first one. My parents made too much for me to receive any grant aid at all. If they hadn't wanted to contribute, I'd've been SOL.

Because of their support, I was able to enjoy extracurriculars, work-study jobs (and I worked the maximum allowed!), and independent studies. They decided the value of having their kid give the valedictory address at their college was worth the cost of the education. :)

I can understand the arguments for not paying for college for your kids, but it's an incredible, incredible boost up in life if you can afford it. And those loans can be crippling, especially when your first job out of college pays 30K/year.

Blogger HC said...

Thanks to both of you. It's good to see people using the gifts that they were given and appreciating them!

Anonymous S/100/30 said...

I find points one and three very compelling.

Points 2 and 4 just points out that, yes, life is harder when you pay your own way. Whether this is implicitly bad is predicated on the extent to which you think parenting should be about removing all obstacles for your children. Not everyone agrees with that philosophy.

Point 5 really hinges on how we define value. Did my parents value education? Absolutely. Did my community value education? Absolutely. But they also value home ownership, and sung its praises to me growing up. Does that mean they're obligated to buy me a house?

I think point 5 applies more to the act of implying that your pride and affection for your child is a function of where they matriculate. If parents are living a bit too vicariously through where they send their kids to college, I would agree that's definitely a case in which parents should pay as much as they can for the schooling.

(Incidentally, what is "Who's Who Among Students"? A compilation of that year's PBKs?)

Blogger HC said...

s/100/30:

You raise some good points. As I said, I wrote this somewhat as a response post. Some of my points could have been written more explicitly as such.

I intended for point 2 to follow directly from point 1; some parents may assume that their children will easily be able to make up the difference if they choose not to contribute at EFC levels. I feel that the financial aid system is unusual in the way that it rescinds aid from students who intend to pay their own way. It's not just that it's "harder to pay your own way," it's that it's as much as five times harder. That would give me pause as a parent.

Point 4 is my weakest argument (and, to be fair, Trent's strongest). He suggested that parents who save for college might not be saving enough for their own retirement. I tried to suggest a scenario in which one's adult children wouldn't be far enough along financially to help their parents in retirement because of their own debt burdens, but I'll admit the balance can and does easily shift to the other side (and tried to say as much in the post).

As to the question about homeownership, I think it's fair to say parents can support that value without making direct contributions (although many parents, of course, do).

I don't know of any home seller or mortgage company that would charge less in closing costs or require a smaller downpayment if the parents provided the initial funds, and then would charge more if the homebuyer saved up for the downpayment herself. Yet that is precisely how the financial aid system works. Again, since the receipt of financial aid has such notable disincentives for children trying to pay their own way, I feel that parents have a particular responsibility to mitigate those disincentives, at least until such time as their assets and income can be excluded from financial aid calculations.

Oh, and as for your last question: Who's Who has been published for 70 years, and is one of the best known honors programs outside of Phi Beta Kappa. Who's Who weights community service very strongly while PBK is primarily an academic honor, so there isn't a perfect overlap. That said, I can't recall any of my classmates being nominated to Who's Who and NOT later being elected to PBK (except for those proud few who were elected to PBK in junior year [I wasn't]).

Blogger moneymonk said...

Im not big on 529 plans or pay all of my daughter's tuition. I borrowed loans and receive pell grants and I also worked part-time.
I graduated with no regret.

I feel my child should apply the same habits. If I write a check to her school, she will never know the reality on working for it on her own.

I do plan to always help her. But she has to show some effort on her own.

Blogger HC said...

Moneymonk--We're really not saying such different things.

If you qualified for Pell Grants, then your family obviously had a lot of demonstrated need, and you probably had fewer loans. I think that's a situation in which parents are going to contribute less anyway.

But as I said above, I've had help from my parents to get an education, and I've paid for it on my own. And it made no difference to me in terms of how I valued my education and how I worked to get ahead. Your daughter would still learn the "reality" of working for things even if you helped her out somewhat.

Again, I don't think parents necessarily need to pay for all their child's education. But if a parent can afford to save something towards the goal, it reinforces that they expect their children to get ahead and do well.

And with that, I think I'm done.

Anonymous Golbguru said...

This is excellent !
I know some people don't like that saying "my kids should learn the hard way" but I am all for saving for kids. There are better ways to teach "reality" to children than to make them go through financial hardships.

I feel parents should have some moral obligation towards the well-being of their child. (just my opinion)

I will include this post in the upcoming Sunday Review. Good work !

Blogger Dimes said...

A very important point which you failed to make is that the costs of education are getting to where they're simply too high for a kid to fund all by himself or herself. My parents paid for part of mine, and I got scholarships, state grants, Pell Grants, SEOGs (supplemental education opportunity grants), AND work-study, and I STILL had to borrow $26500 just for undergrad. The whole nut was too much "just to borrow and pay back later." Even with the current debt, it's $157/month for 238 months, though we're knocking it down much faster than that.
Was I invested in the experience? Heck yes, both at the time while working part time and now as we struggle to kill the debt payments. Would I have been *more* invested if my parents hadn't helped out? HA! No, I'd probably have gone to Crap U. Or maybe nowhere at all. When we have kids, we're hoping to cover part of the costs for them, though I'm sure we won't be able to afford all the costs (especially not if tuition has reached $100K/year). Right now our plan is to save for retirement first, then contribute to the kids' college plans. Hopefully, other relatives, grandparents and such will also contribute to those.

Blogger HC said...

Dimes--Thanks for your thoughts. I wasn't so much ignoring the cost burden as I was taking "college is incredibly expensive" as given. Hence, my reference to "tens of thousands of dollars."

I think your plan makes sense, and I hope your family does help out.

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