Over the years, my opinion on college funding has shifted a bit. I used to be of the opinion that kids should be responsible for paying for their own college education. After all, I paid for most of mine, and I was one of those parents that thought, “If I can work my way through school, then so can my kids.”
Well, that stance has softened a bit over the years, for a variety of reasons. The student loan industry itself has a lot to do with the way I feel, but the majority of my shift has been in the way I view the education of my children, both in a formal setting and through informal learning at home.
Our College Experience
My wife and I both struggled in college to meet financial obligations. I turned to student loans to finance my tuition, and after returning to school years later, I turned to Visa. My wife shared a similar experience, often struggling to cover rent and living expenses while in school.
My first year or so of college was pretty well covered by my mom, who somehow managed to carve out tuition, and room and board out of her own household bills. I worked part-time at a local fast food restaurant, then a vitamin store, and finally a sports retail store in the local mall. I spent the summer after my freshman year working for a landscaper – mowing lawns and digging trenches for in-ground sprinkler installation.
It was tough working and going to school – no doubt about it. I remember one particularly bad time during a winter quarter when the old car I took to college quit running and I had to walk to work off campus, at night, in the cold, and yes, it was uphill in both directions (or so it seemed)!
I spent much of that time feeling sorry for myself, which did little to help the situation. Of course, later I realized it was a good experience. The part-time work covered my groceries and incidentals, and Discover covered the rest, since they were nice enough to give me a credit card application at a football game in exchange for a free t-shirt.
Those student loans, and the college credit card debt, haunted me for much of my early 20s, but I had nowhere near the average student loan debt most college graduates have these days (around $25,000, according to the latest figures). In fact, total outstanding student loan debt now exceeds credit card debt.
The Gift of Education
I don’t believe college education is a right, and I do not believe my kids are entitled to a college degree. For that reason, I choose to consider it a “gift.” I’m not loaning the money to my kids, and I’m not asking them to take out loans. I’m not asking them to go into debt, either to me or the federal government.
We are gifting our kids money that we will have set aside their first 18 years of life for the purpose of obtaining an education in a field they are passionate about first, and will support their lifestyle, second.
That’s not to say they won’t have some skin in the game. They will be expected to work during the summer for their own spending money, and they will be expected to pay for certain items as high school students, either from an allowance and/or part-time work. However, it is my goal to get them through college, should they choose to attend, without accumulating debt.
What If My Kids Don’t Go to College?
If our kids decide instead to learn a trade, or start their own business, or take some other path, we’ll use the money to help there as we can (minus the tax penalty from withdrawing 529 money and it not being used for education).
That might look like investing in a mechanic’s set of tools for my son, or giving my daughter some seed money to start a business, or helping either of them with licensing or specialized training (outside of college) they may require to do what is they love to do. Who knows what that might be.
The Sooner You Start Saving, the Less You Have to Save
I recommend parents start saving for college early. Celebrate the arrival of your baby by opening up a 529 college savings plan and begin investing, even if only small amounts. Grandparents and aunts and uncles can contribute money as well. The longer you have to invest, the less you have to contribute each month.
As kids get older, encourage them to open their own savings account at a local bank, or somewhere like ING Direct, that now offers a savings product specifically for kids at a higher interest rate than most traditional banks.
Introduce kids to the magic of compounding interest. Help them learn the mechanics of banking – checking balances online, reading a statement, completing a deposit slip, and most importantly, balancing a ledger.
I would be remiss if I didn’t mention this final point. Be sure to take care of your own financial needs first. As they say in airline travel, in an emergency you should put on your oxygen mask before helping others with theirs.
Before heavily funding college savings for your kids, be sure you are socking away enough for your own retirement. It’s natural to want to put your kids first, however, if you don’t take care of your financial future you may become a burden on them later. After all, there are no grants or scholarships for retirement.
I’d like to get your comments on the idea of paying for college. How are you planning for the expense in your family? (Note, there is no wrong answer here, as everyone has a unique financial situation and value set).