Parents want the best for their kids – no matter their age. This is the reason why the majority plans to help their college-bound children to fund higher education. With the ever-growing tuition fees, however, it becomes more difficult. Also, since many parents today are still repaying their own college debt, the extent to which they expect to participate in financing college for their teens is declining. For example, now only 28% of parents say they will foot the entire college bill. In 2018, this figure was higher – 34%.
This change can be partially attributed to parents being not in the position to help, despite being willing to. The same survey has shown that 65% are worried about having enough money to help their children with college. That is up from 55% back in 2018.
However, for others, it's a conscious decision aiming to encourage independence and instill good money habits in their children. Thirty-eight percent of parents expect their college-bound seniors to cover more than half of the education costs. This figure was only 31% in 2018.
This takes us to the main point of our post. Who should shoulder this financial burden? Which is the right proportion if the costs are split between the parents and the student?
What Should Parents Consider
In some countries around the world, parents are obliged to support their child while he or she gets their higher education. While there are no such regulations in the USA, the inability or unwillingness to bear the burden of educational costs may cause the feeling of guilt and failure because "that's what parents do." They paying for college, they set their children up for success. However, you should only do that if you can afford to. You should not jeopardize your own financial stability.
Do you have enough stashed away?
The sum can be as high as $300,000 if you aim for a selective private school, with all the tuition, books, room and board, and transport expenses. This is an intimidating amount for most parents to handle. Even though very few families end up paying the entire sticker price, this is still a six-figure bill. Average parents should start putting money away virtually before the child is born to cover the entire college cost. Quite bafflingly, though, a whopping 70% of parents DO NOT limit their children's school choice based on the price tag.
Ron Lieber, the author of the self-help and financial literacy book The Price You Pay for College: An Entirely New Road Map for the Biggest Financial Decision Your Family Will Ever Make, warns that such well-meaning overindulgence can be detrimental. In his interview with Money, he advises that you should absolutely talk to your teenager about what your family can afford. "Don't apologize if it's a small number or if it's $0," counsels Lieber. "You say, ‘This is what we think we'll be able to spend. This is what we might be willing to borrow. So we just want you to know that those are the constraints. And then you can talk about the implications."
What scholarships are available?
Before you even start thinking about taking out a loan, you must first max out on every aid you can get. Fill out the FAFSA application together with your child. Also, look at the merit-based scholarships that might not take your financial situation into account and only look at your child's GPA, athletic achievements, and extracurricular activities. Jay S. Fleischman, a managing attorney in a law firm specializing in student loans, recommends parents discuss ways their child can contribute by researching scholarships and improving grades.
Make it clear that their grades can be worth $100,000 in school-awarded grants, so they'd better put in some effort if they want to go to that private school they dream of. Also, talk to them about ways to earn college credits while still at high school and choosing a college based on the expected return of investment.
I used to write my papers and apply as a full-time job, which got me a full-ride scholarship. It wasn't my dream school at the time, but it was a great one. I never regretted my choice – especially after graduation, when I saw how my peers struggled. Not having to pay off a student debt made me feel like Croesus by comparison. I am very grateful to my mom, who set very realistic expectations about what our family could afford back then.
Will a loan hurt your retiring prospects?
Few people can fund their child's education out of pocket, and few students receive full-ride scholarships. The rest rely on loans to bridge the gap. However, experts warn well-meaning parents that they should be cautious not to wreck their own finances while protecting their children from crippling debt.
First of all, you must not touch your retirement fund. While your children can borrow money for their education, you cannot borrow it for your retirement.
Second, if the loan is inevitable, decide who will take the loan out – you or your child. While you will probably be able to get a better interest rate than your child, who has no credit history whatsoever, inspect your financial situation first, including your existing debt. If your child is not yet 21, they will probably need an adult co-signer. As a co-signer, you will be responsible for the debt if your child won't be able to pay. This may also disqualify you for some loans you might want to take in the future, so consider it carefully.
What Should Students Consider
Ultimately, all your parents want is to see you happy. If they are willing to pay for your education either fully or partially, accept this with gratitude. Do not feel guilty – you will repay this debt by helping your own children to find their footing. However, if your family cannot or will not help you, remember that they are under no obligation to do it. If you are in two minds about this situation, here is what you should consider.
What do you want from college?
Students are often encouraged to aim high and apply to selective and expensive schools since they offer the most opportunities for the future. However, your first consideration should be what exactly you expect from college. What is it for? Do you strive for a very specific education? Do you want a community and traditional campus experience? Maybe all you're really looking for is just a degree? This question isn't an idle one. Focus on your primary goal and consider which schools could provide it. Should it absolutely be Stanford? Could an in-state public college be an acceptable (and much more affordable) alternative? An affluent future is a possibility if you take your chance and choose an elite school. On the other hand, a debt for years to come will become an inevitable reality.
Work-study balance
Even with scholarships and your parents' help, you may still need to work to pay for your education. This will reduce your study time and put you under more pressure. Again, this is a question of your priorities. You may choose to work and go through some trying years but reduce the amount of money you borrow. You may prefer to max out on credit hours per semester and speed up your graduation to save on tuition money. Or you may opt for a more affordable school. Then, you can take your time to enjoy student years, learn, socialize, and thrive without taking out a massive loan or overworking yourself.
Emotional burden
Enjoying your parents' pay for college is undoubtedly a privileged position. However, it comes with its own caveats. Money and family can be complicated. Some students feel huge responsibility before their parents, who sacrifice so much for their education. This pressure to excel can be a source of stress and anxiety to an extent it interferes with your studies and makes you unhappy. You might find yourself in a situation where you would like to change your major or drop a class but decide not to because it makes you feel like a waste of money and a failure.
Loss of control
There is also a risk of finding yourself under the control of parents. Sometimes they feel they have power over your life in return for their financial help. From choosing your major to personal decisions like whether to have a relationship or where to travel on a spring break – strong suggestions might become ultimatums if your parents have overprotective and overbearing tendencies. Being your own self-reliant person and making your own financial decisions might be a better option for some.
Of course, each family should make this choice individually. It is equally an emotional decision as well as it is financial. However, all experts agree on one thing – parents and children should openly discuss it. And the sooner this conversation starts, the better it is for everyone involved.
