How to Pay for College?
April 24th, 2008 by Ana
It’s finals week at most colleges around the country, and parents of graduating high school seniors are facing a huge question: How to pay for college tuition, fees, and books for next fall? Well, CNN/Money tried to tackle that question this morning, and boy did they get things wrong!
The article starts off highlighting a couple who have an 18yo and 20yo in college … at Georgetown and Tufts! It then goes on to mention financial aid … payment plans with the university … childrens’ college savings plans … student loans … PLUS loans (parents take out) … then HELOCs and raiding retirement savings like IRAs! The very last paragraph in the article really set me off:
The Mathenys were happy to borrow from their home, but they don’t see anything wrong with kids graduating with some debt too. Says Patrick: “Hopefully the loans will give the kids a lesson they wouldn’t learn in a classroom: financial responsibility.”
No, NO NOOOOO!!!!! By all the gods known to mankind, why don’t these parents simply sell their children into slavery?!? It would be quicker, and the end result is certainly the same! What ever happened to parents caring enough for their children to try to help them achieve a better life than the one they are living??
With this kind of debt-slavery garbage floating around as “good advice” it is no wonder people are wondering if student loans will be the next financial meltdown. We have been setting up an entire generation for failure with this kind of advice. Some pundits have gone so far as to nickname Generation Y “Generation Debt.” In fact, I think we are setting up the class system for the next couple of generations into those with crushing student loan debt and those who have the financial freedom that little to no debt brings. I’ll give y’all one guess where my son will end up!
So as an alternative to this bad advice, I offer my “graduate debt free” plan (for the record, I have NO STUDENT LOANS AT ALL!)
- Go to a community college for the core curriculum. This is especially good for students who haven’t decided on a major yet! Community colleges are significantly less expensive than four year universities, and the credits will transfer just fine.
- Go to college part-time while working a part-time job. It may take a little longer, but with student loan pay periods getting as long as mortgages, you will gradauate debt free and be able to keep your money much sooner. As the part-time job, I personally recommend delivering pizza
- Stick to classes within your declared major and/or minor. I am not opposed to learning for education sake, but with tuition rising as fast as it is you might want to wait until after you land a good job for the “personal enrichment” classes. I don’t have a choice, as the GI Bill only pays for classes in my major or minor.
- Save up over the summer and during the semesters to pay your tuition bill in full. Those payments plans my college offers really aren’t very good terms, and they already bleed you dry with strange fees (”debt service fee” was the one that annoyed me this semester). For my college, the business office charges almost $100 for the privilege of breaking your payments into 50-25-25% so the registrar doesn’t drop you if you can’t pay in full.
- If you do need to take student loans, take only what you absolutely need! Don’t spend the next fifteen years or more paying on something dumb, like a car that will be long gone by the time it is finally paid for (I’m not kidding, some students use their student loans to “trick out” their cars). Student loans should be used for tuition and books only.
- For the students who have no idea what they want to be and no way to pay for college, consider military service. I’ll be the first to admit the military isn’t for everyone, but if you think your child can hack it and has a desire to serve the GI Bill plus the recruitment incentives (Army College Fund in my case) will help out tremendously. Patrick from CashMoneyLife went the Air Force route and considers it one of his best moves.
These simple steps are not the be-all and end-all of how to graduate from college without student loan debt, but they are certainly a good start and also what I have done (except the loan part).
Your turn, folks: what kind of advice would YOU give for parents wondering how to pay for college without debt?
Posted in college |
April 24th, 2008 at 9:20 am
Excellent article! I forwarded it to my stepdd.
April 24th, 2008 at 10:01 am
My family did things a bit differently. The public schools in the town where I grew up weren’t fabulous, so my parents worked hard to put me and my two younger brothers through private school, K-12. That was extremely expensive, much more so than my 4-year college, so they expected us to shoulder a lot of the costs of college ourselves. Fine with me. They gave me an excellent foundation; I worked hard and was able to earn a full-tuition plus stipend scholarship to my state university. I did choose to take out some small student loans so that I could join a sorority (an “extra” my parents wouldn’t have paid for), and my student loan debt at graduation was about $15k. Large, but certainly nothing like the $100k+ that it would take at a private college. One of my brothers went to the Air Force Academy–everything paid for by the government, thank you very much. My youngest brother, well…he’s a different story.
He spent a couple of years at the same state university I went to, but now he’s about to quit and get a job for a few years while he figures out what he wants to do.
My parents probably could have paid for us to go to college if they had sent us to public school and not paid all that tuition for 13 years apiece. I am glad they made the choice they did, however. Graduating with student loan debt isn’t the end of the world, provided you’ve been smart about it and not taken out a penny more than you absolutely needed.
April 24th, 2008 at 11:15 am
Like a previous poster, my parents paid for private high school (with financial aid from the school) with an intense college prep focus. We were always told “You’d better work hard, because you’ll be on your own after this.” We were lower middle class, and my parents always drive paid for cars. They have never had credit card debt and told us that debt was to be used as a tool in rare occasions only (house and school, basically). They are kind of old school and do not even have retirement accounts (long story) to tap. They would never do a home equity loan either. Maybe the answer is to start the conversation about debt and college a lot earlier and help set the child up for success in high school. Good grades, good test scores, all the AP classes possible, and finding your differentiator (are you a good writer, a debater, an artist, an athlete, a musician, whatever) help you get the best packages to the best schools. Stay on top of all the aid deadlines, like filling out the FAFSA.
There is a move towards the best schools becoming more accessible to the best candidates. Ramit has a great post about this, well worth a read for the links in it: http://www.iwillteachyoutoberich.com/blog/college-at-stanford-is-now-effectively-free-so-whats-your-excuse
So I got credits from taking AP courses in high school (you can certainly do that in public school too), and those counted as my “basics” for college, so I could jump right into my major. This came in handy when I decided to switch majors to a more lucrative field than what I originally envisioned. It did not take me another year. Or I could have finished my original major in 3 years. I also got a 50% scholarship by writing an essay, and I got a National Merit Scholarship. Then I got some federal aid and some aid from the school. I had about 30k in debt when I graduated (this from a top-notch private university in Boston that normally ran well over 30k a year). I worked during school for living expenses. I got money off my taxes for the student loan interest, too, and banked that.
That loan debt was paid off within 4-5 years. Plenty of people have worse car loans. And while car loans are ultimately a waste, I am more inclined to see education as good debt. Your house appreciates, and so does your earning power with the right educational background.
I also don’t think some people are mature enough to go right from high school to college. If you have no idea what you want to do in life, then the military or working for a few years may be great options. That’s one way to avoid the 5-6 year plan for sure - have a goal and stick to it. Knowing you are paying your own way lights a fire under your butt too.
April 24th, 2008 at 11:32 am
These are great tips. I agree with your analysis of the article– how exactly will loans teach your kids financial lessons? People have it all wrong. I’d rather teach my kids to save up the money and stick to a budget.
April 24th, 2008 at 12:48 pm
I’m so glad you wrote about this as I read the same article in Money magazine and it was nearly enough to cancel my subscription! They practically encouraged these parents to continue to borrow up to their eyeballs to send their kids to private schools. What happened to kids going to a state school and working their way though it? Worked for me. Oh, and thanks for the link!
April 24th, 2008 at 12:54 pm
I’m sorry but I have to disagree just a little. I do agree that students shouldn’t be using their loans frivolously or taking out more than they honestly need. Where I disagree is the comment in the article about “raiding the IRAs”. That should never ever be done. No one will give you a loan to retire. I think the best solution is finding a school that wants YOU, not finding a school that you want. If the school wants you to be there, they will find a way to make it happen with the least amount of student loans possible. If you want to go to Harvard and they offer you squat, they are not interested, so you shouldn’t be interested. This is a little more geared for “traditional” students. When you are grown up with a family or ties, it is harder to pick up and move cross country to go to the school that gives you the best deal. And of course, some majors just don’t work as well stretched out by going part time. If you want to be a doctor and only go half time, suddenly you are 40 when you graduate instead of 30.
Basically, I think that student loans are ok. They aren’t the best thing in the world, but if that is the only way to go to college, and your future field pays well, you should do it. I have a BFA in theater design. I work as a receptionist. However, the fact that I have a college degree has gotten me hired twice, for more than I would have made otherwise. So while I have 17k in student loans, I can work, earn more, send my husband to college, and be ok.
April 24th, 2008 at 1:04 pm
As a former academic advisor at a community college, my advice would to students is to GO TO CLASS AND DO YOUR WORK… I am amazed at the number of people who blow off their classes because they have to work the late shift at Walmart… they end up withdrawing from so many classes they have to go be in school for another year or more. Students get so caught up in having a job to pay for their car/fun/whatever, that they forget that every year that you’re in school and not in a CAREER, you are losing THOUSANDS of dollars. FOCUS! And get through with the best grades possible in the shortest amount of time.
April 24th, 2008 at 1:05 pm
I woudl hate the thought that my children would start their working life with a huge debt hanging over their head. I think that it may make hem think that it is normal to be in debt and that there is nothing wrong with it. I have a trust fund for my children which I hope will help them out a bit.
April 24th, 2008 at 1:26 pm
I wish millions of people would read this article and jump on the debt-free bandwagon. I have over $100,000 in student loan debt because people kept telling me that it was a great idea to go get education, and not to worry about the student loans cause you can pay them off later. Well, now it’s later, and I realize how monumentally stupid it is to go six figures in debt for a five figure job. Please, please, PLEASE, anyone who is reading this, take out student loans CONSERVATIVELY, if you take them out at all.
April 24th, 2008 at 2:25 pm
Student debt is not the end of the work as long as you don’t dig yourself a hole you can’t get out of. Moderation is indeed the key to everything.
My biggest suggestion is that students consider what kind of degree they need for their career goals before they start applying to Harvard. Many careers don’t need a fancy name on the BA diploma. I wish I’d taken a year off to decide what I wanted before my parents forced me into university. Going to a community college while you figure things out also can save you a TON of money in room and board expenses, even if some ‘rent’ money is being paid to the parents. Heck, try going to a local state school and commuting to save some money.
Students should always spend months searching for scholarships and grants from private sources. When I was searching, there was one for left-handed redheads, one for virgins, one for certain ethnic groups, one for certain majors, one for children of civil service workers, some from churches… Keep searching and ask the high school counselor for help. And yes, those AP classes are worth the $150 for the test. I started college with a full semester under my belt, which saved me almost $10,000 (PSU, out of state tuition).
I DON’T recommend working full time during the school year, unless you are only going for one or two classes. I was only making maybe half of my (12 credit) tuition each semester working 40+ hours a week and my grades suffered because that was time I should have been spending on my studies. It’s about what you are learning, not the piece of paper you get at the end. I would much rather have had a small student loan and spent more time ‘personally enriching’ myself than rushing through. If students really want to work and go to school full time, it’s probably better to use a work/study grant. In addition, kids should start saving for college as soon as they start earning money from any job. My parents matched my savings, which was a HUGE help in the beginning.
My darling husband’s loans do eat up a big chunk of our current budget, but the degree he got allowed him to get a job where that’s not an issue for us. He had the luxury of adopting a minor too, which not only secured the job he has, but gave him the opportunity to move into the equivalence of management within a year. In five years we will be debt free with enough income to remain debt free for the rest of our lives.
April 24th, 2008 at 2:36 pm
The military route worked perfectly for me, but I agree… it isn’t for everyone.
For most people, your tips are great. I did everything I could to avoid student loans and being in debt.
However, I have to say that for some people, college debt is worth it - especially if there is a degree plan that is offered at one school that isn’t offered elsewhere, or if the student has the aptitude and desire to follow a long term professional plan (i.e. doctor, lawyer, or acceptance into a prestigious business school). Many of these jobs can earn a new grad well over six figures per year upon graduation, with the possibility of earning well more than that in a few years. But these are special cases and the ROI should always be investigated before taking out 6 figures worth of loans.
But for most people (myself included) that is just not necessary. Some student loans may be necessary, but too many people go to the extreme…
Nice article.
April 24th, 2008 at 3:36 pm
I just signed up for this aptitude testing company.
www.jocrf.org - Johnson O’Connor Research Foundation.
I have a few people that swear you shouldn’t waste a dime in college until you spend 2 days with these people and pay them $600 for the testing.
The cost of 1 wrong college class can pay for their testing fee.
April 24th, 2008 at 8:33 pm
Parents do not owe their adult children a college education. After you’ve reached adulthood, you’re on your own. If mom and dad want to help out, great. But it’s not required.
April 25th, 2008 at 6:10 am
The featured family is very very affluent–otherwise, those kids would have gotten more grant aid (this happens when two are in school; total family contribution remains the same).
The people in real danger are those that don’t have affluent parents to back them up/bail them out. I have a student in a MASTERS program in HUMANITIES who is already $30,000 in debt. She has at least one year to go.
My feeling is that the incredible rise in college prices was in part fueled by the incredible rise in home values over the past few years–one bubble fueling another.
The real problem is that education debt is counted as “good debt” by the prose without any distinction between Georgetown (50,000) and state school (about 10-20000). Multiply by 4.
April 25th, 2008 at 6:11 am
oops pros–sorry. Yes, I teach English!
April 25th, 2008 at 10:38 am
I don’t have a problem with a student accumulating a manageable amount of debt. Of course what manageable actually means is hard to figure out.
Given the expense of college now I think several tacks are needed. parents should save up some money for college education. Kids should try to save up some money. Looking at working for a year or two before college should be another option to save some money. Working during school should be another option. Attempting to get scholarships should be another option. Getting into a school that provides full grants (not loans for those that need them should be another option explored). Based on what the overall financial position of the student then the costs of education need to be considered. If you have to take a huge loan burden for one school, look at other options (including community colleges mentioned in the post).
April 25th, 2008 at 12:36 pm
You left out one way to get FREE school…
While reading this particular post yesterday (as I do almost every day) I couldn’t help but comment that I left school debt free on an ROTC scholarship and I haven’t regretted that one instant. Yes, I had to do a 4 year stint in the Navy, but I’m still in. Yes, I chose it because they paid for tuition, books, and the university threw in room and board if I had a high GPA (needless to say I worked my butt off). So I paid for… pizza on weekends… gas… etc. I could have lived on my own and I usually got flack for not living off campus… but it WAS FREE to live in the dorms.
Plus, upon graduation I had a job. It wasn’t high paying, but it wasn’t low paying either! In fact I still have a job because I liked it. The military isn’t for everyone (and I get that) but some kids don’t know what they are missing. They could love it and the benefit is too big to not talk about.
April 25th, 2008 at 8:09 pm
My kids are on their own.
I have 4. there’s no way i can pay for them to go to school beyond community college or a vocational school.
My retirement comes 1st.
So it’s on them to get good grades, make up their mind what they want to do and pursue it.
I work with a bunch of people who have many letters behind their names. Their quality of life isn’t any better than mine. In fact it disgusts some of them that I’m able to “keep up” with them.
I may be an exception but my philosophy is that unless you are going to be an engineer, doctor, scientist or lawyer, theres nothing that people do for a living that can’t be learned through OTJ training and personal study.
April 25th, 2008 at 8:28 pm
I think that it would be worth it to the parent to work at the college for a few years (normally 5) prior to their son or daughter enrolling. Hopefully the young adult will get in the school and most if not all of their tuition will be paid for.
In addition, for every school that accepts the student, the student should make an appointment with the director (if possible) of Financial Aid to have their package reevaluated. This should also be done each year that the student is in school. It certainly will not hurt.
April 26th, 2008 at 6:04 am
As the father of 2 girls who have just finished college on a full Ma and Pa acholarship, I find your post very useful.
I failed to plan and hence planned to fail. We have depleted quite a bit of our savings, though we are not regretting.
The next 3 kids are still a way off from college and this time, my wife and I hope to do a lot better.
Thanks for this well written piece of advice.
Regards
April 26th, 2008 at 6:15 am
Excellent article by you, not the Money folks of course! This is why we are saving for our kids school now in 529’s and ESA’s. Granted, we have no debt and have an emergency fund and are contributing to our retirement. It is our hope that those funds will get our kids through school with very little outlay on either of our parts.
Hans
April 26th, 2008 at 8:18 am
Thanks for the advice, as a college student myself, I’m very leery of going into debt so soon.
On one hand I feel safer knowing that I will be a lot better off than most of my peers, but it’s disheartening to realize how many of my friends are basically selling themselves into “debt slavery.”
April 26th, 2008 at 10:24 am
I think this is one of those areas parents really need to guide as much as possible. I really can’t get behind the “they’re adults - let em at it” comments. Sometimes, looking back, I think we forget that when we were starting college we were kids. I wasn’t a “young” 17 year old when I started - I had a bartending job, had travelled widely, had boyfriends, had done some internships, etc - but I still had no concept (none!) of the job market, what different jobs are like, benefits, which jobs get immigration visas, etc. How could I? I won the birth lottery in that there are no college fees in Ireland, and credit cards aren’t handed out like candy there, but can’t imagine how things might have turned out had I been Americanand without some heavy parental guidance.
April 26th, 2008 at 10:58 am
[…] How to Pay for College? […]
April 26th, 2008 at 5:42 pm
[…] Ana from DebtFREE-Revolution has tips to graduate college with ZERO debt. […]
April 27th, 2008 at 4:02 am
[…] at Debt Free Revolution has a couple of posts that caught my eye. One is on how to pay for college and the other is a response to a comment. It’s entitled Raiding Your Retirement is a Huge […]
April 30th, 2008 at 11:12 pm
While I think it would be great to be have no student loans and no debt upon graduating from college. Your tips are great but not for everyone. I was very fortunate in that my parents paid for my undergraduate education. However, not all people are in a situation where that is always possible. And I think that taking classes that may not be part of your major is part of education process and makes you a richer person, so I disagree with that piece of advice.
I do have student loans because I decided to get my PhD after undergrad. I could not ask my parents to foot the bill for more school, although they did help me a lot. I may not be debt free, but my education was well worth the cost of the student loans that I am now paying off. An education is priceless and the experiences you get our of college as ones that you cherish.
May 1st, 2008 at 4:43 am
[…] gives some great pointers on how to pay for college. My wife and I have just finished paying for our eldest 2 girls’ college education. The younger 3 […]
May 1st, 2008 at 12:29 pm
I have to say that I totally agree with your points, even though they may seem a little hardline. I agree about the student loan situation about only borrowing what you need, however for the record I do know some people who have taken the full loan at a lower interest rate and then invested it in a high interest account and made a good return. But this is not for me. As you say “Don’t sell your kids, (or yourself) into debt”
May 29th, 2008 at 11:38 am
Here’s one that hasn’t been mentioned yet because in America it’s fashionable to “send children away” to college to live “independently” on their parents’ dime.
How about living at home while going to that community college and holding down a job, and either paying a token amount of rent or having a work-in-lieu-of-rent agreement with the parents? It’s not glamorous to live at home because it’s impossible to pretend to be independently wealthy, but why in the world are so many families plunking down an extra $500 to $1000 per month for cafeteria food and dorm accommodations when food and shelter can be had far more cheaply at home?
Most parents like a work-in-lieu-of-rent agreement because the extra help with the yard, pets, cooking, house sitting, and housework (which they would otherwise have to pay for) more valuable than renting out the student’s room would be, even with the cost of the student’s food factored in. Plus, the parents get to brag to their friends about how they’re continuing to “support” the children who are actually increasing their standard of living.
Here’s another one: when the twelve-year-old wants to start mowing lawns or babysitting in exchange for cash, let him or her. There’s no good reason why a fourteen-year-old can’t have a summer job plus a part-time job on weekends or evenings. Half that revenue needs to go into an education account.
June 23rd, 2008 at 2:57 pm
that last paragraph from cnn money article really is something, is this for real? i’m pretty sure the parents know how hard it is to be in debt, and i really could not wrap my brains around, them being ok with having their kids fall into debt… what are they thinking? by the way, the kids should read this post, great pertinent info…
July 7th, 2008 at 11:48 pm
One thing about the top schools that I think is not mentioned a whole lot in conversations about paying for our children’s education: It’s not about the education at these schools. Oh, all right, I’m sure the Ivy League offer somewhat better education than a lot of the lower-tier schools… maybe. But the real benefit in attending them is the connections you make with other students, especially the ones from the upper classes. Those connections could really come in handy later if you have specific goals for your life.
So it was interesting to read that education at some of these Ivy League schools is getting easier and easier to afford, because that’s going to be a huge help in terms of upward mobility for the lucky kids who get in.
So it’s not always about the quality of the education itself.
July 7th, 2008 at 11:52 pm
Oh and, my own experience: I had to get into college on my own in my late 20s. I didn’t stay very long because I got derailed by mental health issues, but when I was going in, nobody told me I had to have lived in Ohio for a year before I would qualify for in-state tuition rates. Had I known that I would have delayed entry and then I could have covered my tuition with Pell grants. Now I owe student loans that I shouldn’t have had to amass in the first place. (I do not have a lot of earning power so making the tuition ahead of time was out of the question–that was why I went into school in the first place!)
So if someone has been out of school for a while and is thinking about getting back in, my advice to you is “Stay put.” Don’t move. Stay in one spot for at least a year. If you’re desperate to get in now, ask the school point-blank what their policy is for in-state tuition. It will literally save you thousands of dollars.
July 18th, 2008 at 1:50 pm
While I agree with the overall idea of this post, I disagree on some of the details (except not raiding the IRAs and not taking out unnecessary debt). Community college isn’t for everyone, just like Harvard isn’t for everyone. I went to big name schools and my parents shelled out megabucks, but I wouldn’t have the opportunities I’ve had if I hadn’t gone to those schools. Just looking at those who have the same masters’ degree as I do (but from different schools) and how many more resources I have at my fingertips makes me thankful I shelled out extra. If I choose to go on to a PhD, I won’t have to pay for it because of the network I’ve built.
That being said, I wasn’t completely nuts - my employer paid half my masters tuition. I have no student debt, mostly thanks to my parents. But for those who do take out debt, ROI is really important.
I also should mention that debt actually can help you learn about finances - it certainly helped me. I learned the hard way why credit card debt and living beyond your means sucks.