Paying for college

iVillage Member
Registered: 08-09-2000
Paying for college
61
Fri, 08-03-2007 - 11:14am

Next year at this time we will be sending DD off to college. We are making campus visits, she has taken her ACT test, and has college and scholarship applications on her mind.

My question...how is your student's college bill being paid? H and I have been discussing this for years and now the time is here to make a decision and make it known to DD. We would like to help her, but we don't want college given to her and we don't want her to be overwhelmed with debt when she is finished. We believe she should put tremedous effort into scholarship applications (and have strongly encouraged her to do things that look good on her applications), however, we don't what her hopes dashed if she does not receive a lot of gift money.

DD will not be eligible for federal grants. Any government assistance will come in the form of a $3500 Stafford Loan. We thought we would give her $5000 per year which is about 1/3 of the budget for the school she plans to attend. She would be responsible for the rest through scholarships, working, and her savings. (We are hoping she will not opt for alternative loans or ask us to take out the parent loans).

I'm interested in other thoughts or philosophies on this subject.

Thanks....Julie

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iVillage Member
Registered: 11-13-2004
Sun, 08-05-2007 - 11:40pm

<<>>
That’s quite black and white.
We seem to have expended beyond college costs. It appears –any- debt would be unacceptable to you regardless of the economic benefits obtained.
Virtually all of my expenses are put on two credit cards that I pay in full each month. I do this for the ease of recordkeeping and bill paying, rebates, and flyer miles. I’m quite certain that I don’t spend more, buy more gasoline or drive more because of this. This is an interest free 30 day float. Rather than incremental payments sitting in the gas station drawer, these charges are earning interest in a money market waiting for one deferred payment 30 days later.
This can hardly be considered debt.

I respect your position that you are adamantly opposed to loans or even the use of credit cards, and are attempting to show this mathematically. Yet your examples still do not reflect the practical applicability of the utility of money. I really don’t think it likely that a student will invest $460 per month while living hand to mouth for 7 years of college on high school grad wages simply to make up for Child A’s hypothetical loan. Nor is it likely that he would invest $960 per month at the completion of his degree to make up for the mysterious Child A.

I do admire you position in this “buy now and worry about it later“ culture. But I think there are circumstances of advantageous debt that are of great benefit when controlled and balanced against a known asset, such as “future earnings” for a college loan or an “interest bearing account” for a credit card.
It looks like we’ll have to agree to disagree !

iVillage Member
Registered: 03-27-2005
Mon, 08-06-2007 - 8:39am

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Actually that invest amount was done following Child B's graduation,(NOT WHILE IN SCHOOL) upon recieving the same job that Child A had at the same income. I thought that was clear.

stacy

Avatar for jbgattuso
iVillage Member
Registered: 04-29-2003
Mon, 08-06-2007 - 9:11am

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I'll be child C. When I graduated from College Debt free because my parents paid for my education and paid off my car loan as my graduation presant....I ate peanut butter & pasta, for a yr, shopped at second hand clothing stores and got my movies from the library for my Saturday night enterninment while working my first job. I made $10,000.00 a year for the first two yrs. I paid rent, car insurance, gas, food, utilities, Doctor bills, Dentist bills, etc. I owned nothing that I bought for my apartment, it was all hand-me-downs. My mother insisted that she went with my apartment hunting and when she realized that I would not even be able to live in a safe apt complex on my budget, she insisted that my father give me a $150.00 a month so that I could upgrade to an area that she felt I would be safe. Investing money....ha ha ha.....

My Boss found out one day that my dad was giving me that extra money and he gave me a raise right away that equalled that $150.00 a month.

Not everyone even with a college degree gets that first great job :) But I was happy and working towards my goals.

When DH and I got married and I got pregnant we went back to peanut butter and pasta LOL, also our investing halted for about 3 yrs in the beginning, except for the college funds for our two sons :)

I just thought I would add this to the ideas that you and daddio are bouncing back and forth :)

Julie

iVillage Member
Registered: 12-20-2005
Mon, 08-06-2007 - 9:54am

As a single parent working two jobs, paying for college is not even an option for me (and since it's not something either my ex-husband's or my parents did for me, I don't hate myself for it - although my son thinks I'm evil)..

However, I went one step further. I got a job at a university that provides free tuition for the children of employees. DS is welcome to attend said University (which is a very good one) free of charge, and his father would foot the bill for room and board (since it would equal 1/2 his college tuition anyway). If he wants to go anywhere else, he's on his own - he can do it any way he wants - loans, scholarships, working his way through - but I am able to provide him a solid education for free - that's his option.

DS1 (18) chose to scrape by school by the skin of his teeth and can't get into the university where I work - so I told him I would pay for community college for one year (no room and board, no car, no books, just classes) - if he does well enough to transfer, fine - if not, he's completely on his own. If he's not going to take it seriously, neither am I.

DS2 (15) is perfectly content going to the university where I work, however, he'd like to go to a more prestigious Ivy league school - since he knows that's not an option financially, he's busting his butt with community service, extra grades, and honors classes to try to get himself a scholarship. If he makes it, wonderful. If not, he's ok taking the free education he's being offered.

My goal was that they not be shrouded in debt when they graduated...and this was the only way I knew how to do it. If they choose to take another direction, I can't stop them - but if someone offered me a great education for free, I'd jump on it.

iVillage Member
Registered: 03-26-2003
Mon, 08-06-2007 - 10:07am

This sounds like a discussion with DH ;).

OK, maybe a discussion with DH 10 years ago!

What has happened to him is that as he nears retirement age, he has started questioning the value of all that saving for retirement. I have been in the Scott Burns camp for years without knowing who the guy was and DH is beginning to see the same.

We have very much loosened the purse strings and have regrets that we didn't do so at an earlier time. Money is....money. It shouldn't be the basis for happiness but if a little bit can make one's life easier so they can more fully pursue happiness, so be it!

We decided we would rather help the boys now when 1)they need it and 2)we can enjoy seeing the fruits of our contribution

We have no urge to leave them a multi million dollar legacy. After all, isnt that why we taught them to have a work ethic in the first place? Let them earn their own millions!

I always enjoy your posts because you have that frugal, work ethic bent. It tends to be a different view which is always good(and reminds me of DH)

And I agree that getting in with a company can have its advantages. Once DS1 made it clear he wanted to stay at his place of employment and was pursuing a business degree, interest in him picked up. Yes, he is only shift supervisor but they joke with him about whether he will hit manager before he gets his degree.

And his 401K starts in Sept!!

I think there are many different ways of getting to the same place but I'll be honest.

I WANT my kids to have fun when they are young! If it comes down to contributing to that 401K or getting a newer car(and this IS an issue), I'd rather see the newer car. Let him be excited; let him go more places because he doesnt worry about break downs; let him make memories.

I did tell him to set a time where he will start contributing-a date or the next raise because it IS important but life is simply too short not to be sure you are enjoying it!

iVillage Member
Registered: 09-29-2004
Mon, 08-06-2007 - 10:50am


Your analysis is based on false premises.

First, you assumed that both will graduate with the same degree and with the same level of degree. And that Child B with a string of "low end unskilled jobs" will be viewed as a more attractive employee that Child A who has restricted his/her "low skilled jobs" to summer employment.

University education is more than just "showing" up for classes. There is a great deal of work involved to graduate with excellent marks. Many employers,especially those companies that hire for the more lucrative positions, hire on the basis of academic achievement. They want to see that their employees are dedicated to "excellence" in their chosen field. Credit is given for summer employment only if it is relevant.

This brings me two important points. Courses flow into each other, the material studied in a lower level course forms the background for the higher level courses. If the student takes "years" to graduate, they loose the continuity. Their marks suffer and their "view" of the bigger picture is seriously hampered.

Child A who has graduated with high marks would have most likely have had the opportunity to work at summer internships in his/her last two to three years of university. These internships are normally restricted to full-time students with excellent marks. Child B, because he/she is so focussed on being debt-free, is not able to avail her/himself of these opportunities. In many cases, these internships result in job offers after graduation. Experience gained from these types of summer jobs are given more credit than working at low-end unskilled jobs. Moreover, Child A has been able to get involve in various "career related" activities on campus which Child B has not.

When it comes to apply to grad school, Child A has the better chance since he/she is seen as a more dedicated student. Working at Home Depot or Sears does not give you any "brownie points" when it comes to grad school.

Child A graduates in 4 years. His/her income jumps in the next three years (which in high -tech industry is the norm) as he/she "passes the" initial junior levels. His/her salary, after 3 years, can be easy 2X their initial salary. In this country, paying back loans
kick in after 6 months at lower interest rates and a reasonable pay back structure. Child A is able to pay back the loan plus invest. (In fact, I remember being advised to spread out my loan payments over many years because the interest I was paying on the loan was LESS THAN that I could earn on investments.)

Child B graduates after 7 years, with no internships under his/her belt. His marks have suffered because,unless he/she is exceptionally gifted, he/she has not had the time to devote to his/her studies as he/she should have. It is more likely that his/her is not exceptionally gifted because he/she would have won scholarships on the basis of their excellent high school marks and financial need. Again, these scholarships are reserved (at least in this country) to full-time students. His/her ability to land relevant job experience is limited because he/she is not a full time student. And moreover, companies normally want to hire "interns" for a full-time term positions. Long term part-time positions are not the norm.

He/she starts looking for a job. If he is already working, the company DOES NOT automatically change his position to reflect his new status. A kid working in the shipping office isn't automatically given an engineering position, just because he has graduated. The company sees him as a "shipping clerk". I have seen this happen time and time again, especially with those who earn their graduate degrees "part time". You do not recover the "last years" of higher income. Child A's income moves ahead while Child B is always 3 years behind and even more. For example, I know two people with the same degree, a B. in Accounting. Both do not have their CGAs. One took 8 years to get the degree,first obtaining a diploma in accounting & working as a clerk while obtaining his degree. The other earned her degree in 4-years. Now, 30 years down the road, she is making 2X his salary and is a CFO of a small company. She earned relevant "on the job" experience in those all important first years. He has always struggled to break out of the "clerk accounting" mold.

Perhaps for those students pursuing degrees which are not considered "professional" level
and for which job requirements are inflated, working while going to school will make sense. Their degree is not related to "job training";it is more for "self-fulfillment".
In that case, both Child A and Child B have to both pursue additional training to improve their marketability. After all, they both don't want to be clerks or work at Chapter's their whole life.

What you have failed to factor into your analysis is the difference between a "job" and a "career". In the long run, it is best to finish your university education (all of it) early so you can build your "on the job" relevant experience.

Debt for an education is a VERY WISE INVESTMENT. It pays off in the long run. I have told
my kids and their friends that DO NOT take too long to get their degrees. They will regret it. Do it while they are young, with no commitments so they can dedicate the time and effort to do very well.

iVillage Member
Registered: 09-29-2004
Mon, 08-06-2007 - 10:55am

But CHILD B WILL NOT necessarily obtain the same job, at the same income, as Child A,upon graduating.
Avatar for beckymk
iVillage Member
Registered: 03-23-1998
Mon, 08-06-2007 - 11:09am

My kids are on their own for college.

Becky - Mom to Carolyn (17), Aaron (15), Kyle (11) & Luke (8)
Send a free greeting card on me!!
iVillage Member
Registered: 09-29-2004
Mon, 08-06-2007 - 11:29am


By the way, both DH & I are very frugal. Our home was brought clear. We buy our cars clear.
I have only one credit card which is always,always paid off in full every month. I don't spend money on clothes or running to the hair dressers every 6 weeks or the latest "gadgets". We don't spend money on expensive holidays; we live below our means. As a result, we are considered very well off, at least according to our banker. We both have good paying positions.

Our DD is going into her second year of university. More than half of her tuition is covered by a scholarship. If she had worked during the school year, I seriously doubt she would have been able to maintain the high average that she did. Instead of her scholarship increasing, she would have lost it. And I doubt that any earnings from a part-time job would have equal to that of the scholarship. She has worked this summer and combined with the money we had put aside in a government education savings plan, she has more than enough to live on next year. We will pay the remaining owning on her tuition. (Given our higher than normal income, she does not qualify for government loans.)

Next summer, she will most likely be able to find herself a summer job related to her field which pays more than the minimum wage.

iVillage Member
Registered: 11-28-1999
Mon, 08-06-2007 - 12:18pm

First of all, I want to commend your son on his desire to be a pastor. I guess what it comes down to is what do you consider necessary debt. I think that everyone would probably agree that going into debt on credit cards to pay for vacations or clothes that you really don't need is unnecessary and that going into debt to buy a house is necessary, because most people can't save up the total price of a house. A car loan would be somewhere in the middle. I think it's crazy to have a car payment of $500 a month. I have been lucky that due to various circumstances, I haven't had to have a car loan in a long time, but when my current car dies, even if I buy a used car, I don't think I could save up the whole amt.

The question is whether going into debt for college is worthwhile. I think you have to weigh the amt. of the debt being taken out vs. the amount the person is probably going to earn when they graduate and also the loss of the salary they aren't going to have until they gain that degree. For ex., if the person is expected to earn $30,000/yr, which I think is kind of on the low side for a college grad, and it takes them 4 extra years to graduate and now they are only earning $15,000/yr (I'm just picking random numbers here), that's a loss of $60,000 that they are never going to get back. Would it be worth it to take out $20,000 of loans to get that job sooner? To me, it would. But if they had to take out $100,000 of loans, that would be diff.

I was just w/ a friend this weekend. Due to the fact that her parents were divorced and had 5 kids pretty close in age, there was no money for her to go to college. she went to secretarial school and started working full time right away. She got married at 23 and went to college in the evening, having 2 kids also. She finally finished her degree and is now vice president at a bank. Do you think that she was happy that she had to go to college that way where most of our friends went right to college after high school and their parents helped pay for it? Heck no! She made sure she saved money so her kids didn't have to go through what she had to.

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