Figuring out how to pay for college has never been easy, and it’s only been made tougher by the current recession and the heavy losses suffered by most investment funds this year.
Add to that a job loss or a reduction in income and rising student fees, and those college bills can be pretty daunting.
If a financial crisis hits your family, you will obviously need to re-evaluate how to pay for college. Perhaps you need to take out more loans, or your student needs to contribute more. The mistake to avoid, I think, is to put too much of a burden on your student when he or she may be too young to see the full value of a college education.
There are countless examples of people who have succeeded without a degree, no question. But, on average, people with a bachelor’s degree earn 60 percent more than those without, according to a 2007 study by the nonprofit College Board. Over the course of a lifetime, those with bachelor’s degrees can expect to earn $800,000 more than those with just a high school diploma.
So, a bachelor’s degree seems like a pretty good thing to have if you want the odds in your child’s favor as he or she heads out into that great big world out there. We know it’s important, even if they don’t. We know that it may seem like a lot of money now, but in the long run, it will likely pay great returns.
Paying for the undergraduate degree
Some years ago, my wife and I made a commitment to each of our kids: We’ll cover your undergraduate expenses, and anything after that is on you. It wasn’t a plan we devised with an investment adviser or from consulting a book on personal finance.
Instead, we got the plan — more of a guideline, really — based on a chance conversation I had with a colleague at work. “We’re paying for the first four years,” he said, “and anything after that is on them.”
The plan made sense to us. Removing the financial burden means it’s far more likely our kids will stay in school and not be tempted to take a detour before completing their degrees.
Keeping that commitment hasn’t been without sacrifice. We’ve had to take out loans to cover costs, and we’ll be paying for these college years for some time to come. Still, we think it’s a promise worth keeping given the long-term advantages of a degree.
Striking a balance
At the same time, we’re letting them figure out how to pay for their post-graduate educations. It’s not so much philosophical as it is practical: Someday, we’d like to retire. And in this economy, we may be forced to retire sooner than we might like. So we’re trying to be careful not to take on too much debt, and if we had to underwrite four years of undergraduate work and then another two or three years of graduate work, we would probably have to start taking in boarders.
This scheme probably only works because our children are attending public universities. The higher cost of a private college could result in a crushing debt burden for us. We told our kids that if they chose to attend a private school (or an out-of-state public college, which can be nearly as pricey), they had better be prepared to earn scholarships to ease the financial burden. Most likely, they would also have had to find full-time work in the summer to help finance their educations.
Since they opted to go to public universities, we haven’t required them to chip in for tuition or room and board. But if our circumstances were to take a turn for the worse, we might have to re-evaluate.
Everyone’s circumstances are different, of course, and there is no such thing as a one-size-fits-all plan. The important thing, in my view, is that parents should do whatever they can that’s within their means to help their kids pay for school, and if they can’t, to help them figure it out so that the burden isn’t crushing.
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