Should I Loan My Kid Money for College

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klneutral
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Should I Loan My Kid Money for College

Post by klneutral »

I have set aside enough money in 529 plans to fully pay for our kid to attend a state university for 4-5 years, but have always told him he needs to come up with half the money through work, loans, scholarships, etc.

The hope is that he will do better if he has some skin in the game. If he comes up short for his half, I have always figured I would make him a personal loan.

There have been posts here that most Bogleheads seem to think loaning money to family is a bad idea. They say don't loan money, just give it away, if you can afford it and wish to.

So I am having second thoughts. I generally see the wisdom in the idea of not loaning, but wonder whether it applies in this situation.
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HardKnocker
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Post by HardKnocker »

No reason the kid can't earn some of it.

But tuition costs are so ridiculous there is no way the kid could earn enough.

I'd just pay the bills with the 529 money provided the son/daughter is doing adequately in school.

It's a definite jump start to get through school debt free. Hopefully the student is worthy of your largess.

I'm not in favor of 529 plans myself. Too restrictive.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett
njuser
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Post by njuser »

"I'd just pay the bills with the 529 money provided the son/daughter is doing adequately in school."

Same here. Let him work for his spending/fun money. I am paying for my son's college and he is doing well and seems appreciative. He uses his gift money for spending.

The situation would be different if your own financial security was being compromised.
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cycleProf
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Other option -

Post by cycleProf »

You could pay with relatively modest contributions from your child - from summer work and limited school-year work - conditioned on him/her maintaining a 4.0 or a 3.5 or what you think acceptable.

Making the best use of college opportunity is a full time job, no?

Grades / commitment / performance falls off => full time work for some period with the opportunity to return to school understanding the expectations of his/her sponsors...

- David
MONTYKEATING
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Post by MONTYKEATING »

@OP: This is very good advice generally but you may want to make an exception in this case. There aren’t too many scholarships out there for undergraduate students anymore, so besides saving enough to pay for college, his only option will be to take out college loans and contend with huge interest rates and debt for the remainder of his life. With the economy the way it is, well-paying jobs are hard to come by without an education, so he may not be able to earn enough to save up for college, and then he won’t be able to get decent employment, hence putting him in a vicious cycle.
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klneutral
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Post by klneutral »

To be clear, the choices I am considering are:

1. Loan him a portion of the cost to attend college.

2. Just pay for the whole thing (maybe have him earn spending money only)
pcola2234
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Post by pcola2234 »

i think i'd go with the earning spending money portion. Perhaps (depending on how high a percentage tuition is of the total) you could say I'll pay for tuition, but you're expected to pay room and board. My brother was somewhat irresponsible going off to college and spent our parents' money on sales at the mall, and he would ask me for money and one day I basically told him that he needed to shape up or else his savings would be zero and I had no intention of bailing him out. He got a job at the school cafeteria and gets 2 free meals sometimes per shift and makes a regular paycheck, which has been a huge maturing factor in his life. I think if the money exists, I'd go with paying for tuition, conditional on performance which I think would motivate him or her, and expecting the rest to come out of his or her job. They'll probably have to take a personal loan from you to cover personal expenses, as from experience most college bound students underestimate how these can mount up.
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ShowMeThe...
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Post by ShowMeThe... »

I think having him pay for his own spending money (not necessarily room & board, those charges can be pretty substantial) makes sense. The reason some people don't like the idea of loaning money to relatives is that it changes your relationship. You're no longer just "dad", now your the banker he owes money to. Changes the way he feels about you and can make things awkward if he gets behind on paying you back, etc.
shoetrip
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Post by shoetrip »

College is a PRIVILEGE not a right. American culture has reduced the perception of higher education as a place where parents mortgage their financial future to send their kids off to go to have sex,party, watch sporting events, slack off; cram for passing grades and then graduate to make six figure incomes.

Make your kids work and contribute to their educations so they will understand and appreciate that it is not a right but a privilege, the same way student immigrants come to our country everyday bust their humps to pay for their educations in order to realize the American dream.

I have never heard one immigrant complain about their student debt load or that their parents didn't finance their education nor do I see any of them arrive on campus the 1st day with brand new BMW's, Merc's or SUV's and Apple products

Our kids need to have that immigrant hunger for success in their stomachs not the prevailing sense of entitlement.
Last edited by shoetrip on Sat Aug 20, 2011 9:51 am, edited 1 time in total.
pcola2234
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Post by pcola2234 »

couldnt agree more shoetrip, i definitely think federal aid and our culture make college devalued by trying to make it an everyman's experience. College is not suited to everyone

Certainly I admire the outcome the OP is trying to produce by getting their kid to appreciate their higher education
shoetrip
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Post by shoetrip »

klneutral wrote:To be clear, the choices I am considering are:

1. Loan him a portion of the cost to attend college.

2. Just pay for the whole thing (maybe have him earn spending money only)

There is nothing wrong with a loan. A loan tells your child that the money is NOT his; it is your money that you expect to be have paid back. There is nothing wrong with that; teaches adult responsibility @ an early age and it may prevent the kid from learning about debt as most kids do by getting hooked on credit cards.

I earned my spending money by busting my hump in the summer with 3 jobs and made sure it lasted for the school year with doing additional things like throwing parties, making t-shirts, cutting ROTC kids hair; scalping tickets, etc.
I also had a full tuition scholarship but my parents didn't give me the tuition money they could have spent; instead my dad said "atta boy!" and he used the saved money for whatever they felt the needs of the family were.
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stevewolfe
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Post by stevewolfe »

Maybe spend the first couple semesters at a local community college in your area. You may find that your school district participates (reducing costs) and, at least here in PA, many of the community colleges have arrangements with state schools such that the classes will all transfer. This is a great way to try college at a lower cost and really you are mostly dealing with general education classes the first year anyway - why pay more for them?

A few friends of mine have done this with their kids with good success. This dramatically lowers the first year cost and does make it easily attainable for them to pay 1/2 and prove they have skin in the game and do well. In year two, you can transfer to state school and maybe one of the suggestions above would be more clear as an option at that time.
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Post by Khanmots »

For a different perspective...

I got what money I could from scholarships, from working over the summer and from taking some work-study positions during the school year. Parents funded the rest.

Unfortunately however I started off in the wrong major at the wrong school, took 2 years to find out, and an additional year to flunk out. Telling parents then was one of the hardest things I've ever had to do, I can't imagine how it'd have been if they had loaned me the money for school instead... I really don't know what I would have done then; I was low enough already. Thankfully I wasn't in that position.

I'm quite thankful that they let me move back home, helped me get back on my feet and enrolled at a different university (evidently SATs can help forgive a lot). They continued to help support me through school and I cut back on how much I was working to focus more on school. This time I graduated cum laude with my engineering degree.

Now, all that said, coming out from school without debt has helped a *lot*. It's now 6 years later, and I'm approaching 6 figures in retirement savings (and just recently drastically increased my savings rate), have no debt other than a mortgage with 14 years remaining. When I compare that with my coworkers my age who still have a lot of loans... well, it's a drastically different situation.

Now, I have (or rather my parents did) traded student debt for a good likelyhood that I'll be helping to support my parents in their old age, but you know what, I'm ok with that.

Personally if I ever meet that special someone and have kids of my own, I think I'll do pretty much what my parents did. Expect my kids to contribute what they can to school, cover what they can't, and expect them to cover their own spending money (although if they have too much spending money, I think there'd be a talk :P ).
TimDex
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college

Post by TimDex »

If you've saved the money in a 529 to pay for tuition/room/board, then spend it. There's no point in the kid having debts when he graduates.

Working is worthwhile. If his spending money is what he earned, he will be way (hopefully) cautious on spending it on foolishness.

So my vote is spend the money but have him earn his spending cash. He will be grateful (remember, someone's going to have to take care of you eventually), but he will have learned something about the value of work and money.

Tim
"All man's miseries derive from not being able to sit quietly in a room alone. " -- Pascal
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mmmodem
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Post by mmmodem »

HardKnocker wrote: But tuition costs are so ridiculous there is no way the kid could earn enough.
False. I graduated in 2007 with no help from parents and debt free at graduation. I went to a community college while working part time living at home. Then I transferred to a state college out of town and paid for my tuition and living expenses from my savings and a paid internship over the summers. It was a conscious decision on my part that a bachelor's degree was a bachelor's degree and I did not need to go to a big expensive school to get it.

I don't expect it to remain inexpensive when my child grows up. I also don't want them to work part time as I did. (My grades may have been better if i didn't have to work part time.) So I will be contributing a significant portion of their higher education for public schools. I agree with op that if the kid has some skin in the game he will likely perform. Loaning money to your children is one of few exceptions in my book. They're your children and your responsibility. Just make sure you don't expect the money back so there's no hard feelings on your end. But let them believe it's a loan at least until they graduate. My coworker's child just transferred out of the college her parents fully paid for after one difficult math course over a single semester to go to art college that will cost her parents 3 times as much.[/quote]
Last edited by mmmodem on Wed Aug 24, 2011 12:10 pm, edited 1 time in total.
allsop
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Post by allsop »

HardKnocker wrote:No reason the kid can't earn some of it.

But tuition costs are so ridiculous there is no way the kid could earn enough.
So the rest of the world have a competitive advantage with respect to higher education costs nowadays?

I ask this not to be provocative (well, not totally, that is) but reading threads here on bogleheads.org I've become aware how (much more) expensive US higher education have become with respect to future income. Very expensive health care is another issue with comparatively little to show.
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Post by Alto Astral »

I went to university in another country. I stayed with my parents till I was about 22 and they paid for everything. My dad gave me 'pocket money' every month as we call it back home, to eat out occasionally with friends.

I went to grad school in the US on a 90% tuition scholarship. I worked 20 hrs per week for the rest of the fees, food, accommodation etc. I stayed with roommates and cooked at home to keep expenses down. I would not have been able to go to school had it not been for the scholarship since my parents could not afford the tuition in this country. This was 10 years back.

Recently my wife wished to go to grad school but she did not have a scholarship. Since I am able to afford the in-state tuition, I did not want her to work and just focus on her studies. She's got a decent job now. When we have kids and if they want to study further, we would pay for it and not think about any loan.

Like others have mentioned, I consider education as a privilege and place a high value on it. I am grateful for the opportunity this country has provided. My opinion is that if your kid desires to go to university and then grad school after that, that's the best gift they can give you. Since you can afford it, I would let them focus on their studies and look for opportunities in their department to do research (paid or unpaid).
MnD
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Post by MnD »

#2.

Option #1 is no different than any other "direct loan to family member" situation, and those almost always end badly.
klneutral wrote:To be clear, the choices I am considering are:

1. Loan him a portion of the cost to attend college.

2. Just pay for the whole thing (maybe have him earn spending money only)
saurabhec
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Re: Should I Loan My Kid Money for College

Post by saurabhec »

klneutral wrote:I have set aside enough money in 529 plans to fully pay for our kid to attend a state university for 4-5 years, but have always told him he needs to come up with half the money through work, loans, scholarships, etc.

The hope is that he will do better if he has some skin in the game. If he comes up short for his half, I have always figured I would make him a personal loan.

There have been posts here that most Bogleheads seem to think loaning money to family is a bad idea. They say don't loan money, just give it away, if you can afford it and wish to.

So I am having second thoughts. I generally see the wisdom in the idea of not loaning, but wonder whether it applies in this situation.
I understand if a poor student has to work to pay his or her tuition. I just don't undestand why a parent who has the means to pay tuition would make their child work in college and risk lowering their grades just to give a lesson in the school of hard knocks.
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stevewolfe
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Post by stevewolfe »

I'm not sure why paying for your own education is hard knocks although it does kinda feel that way at the time.

I took off a year between high school and college and worked full time. I then started college and paid for everything on my own including my car and apartment. It was hard - and I did spend the first semester with relatives. But I graduated with a degree AND an ability to know I could make it on my own, manage my money, save for what was important and accomplish something on my own.

That's helped me tremendously in life. My parents weren't poor, we weren't rich either, but my dad said basically "if you want to go to college, get to work". So that's what I did and I wouldn't change a thing about it.
bonghead
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Re: Should I Loan My Kid Money for College

Post by bonghead »

klneutral wrote: The hope is that he will do better if he has some skin in the game.
On the contrary, he will do better if he can devote 100% to his studies and not have a job robbing his time and energy at the point in his life that he needs it the most.

It's great if he can write an essay and get a scholarship or grant. But if he must work for the money on a student wage, it's just a drag. Ideally you want *his peers* to have jobs, so they are at a competitive disadvantage. I did not need help from my folks because I got enough free money (grants and scholarships). It was obvious that my peers who had jobs had to work harder to survive. I'm grateful for the advantage of having all the time I needed to study.

And does it make sense to add to the stress by attaching strings to a loan that must be paid back? I don't think so. But then it depends on how much of a sacrifice you want to make.
Last edited by bonghead on Sat Aug 20, 2011 12:31 pm, edited 3 times in total.
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peregrine
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Loan kid money for college

Post by peregrine »

I write this as a graduate of an Ivy League school. My parents paid nothing for my education as they were not able to do so. As you might imagine, under those circumstances I did get financial aid but did have loans and at times it was quite a struggle

My perspective: Your child will do better if he has some skin in the game. Children whose parents paid all their costs often (but not always) did not appreciate their education as much. I suggest telling your child you will pay the following costs: room ( not to exceed 120% of the cost of cheapest dorm room), meal plan - maximum number of meals per week, books and supplies ( about $500 per semester, more if student is in engineering or art) and health care. You child needs to come up with tuition and all other costs himself. Thus, if he wants to go to an expensive private school, he needs to come up with tuition. Scholarships are available. If he goes to state U, tuition should be managable with earnings from summer and part time jobs.

If the student comes up short, give only a short term loan. You do not want the student to drop out part way through the semester because then the money paid for tuition so far is lost. If you pay some tuition for one semester, subtract that amount from the amount you pay for the next semester. If the student is still short, he can skip a semester and work.

As someone who had to pay back loans, I recommend having your student avoid them as much as possible.
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Kenkat
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Post by Kenkat »

My parents paid for my college tuition 100% and I have every intention of doing the same for my kids. I was able to focus on school and graduated cum laude with a 3.5+ GPA. That opened lots of doors for me when it came time to get that first job. I still worked and earned spending money so I understood the value of working as well.
sscritic
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Post by sscritic »

I haven't seen the terms of the loan yet.

What is the interest rate? When does interest start accruing? When is the first payment due? What is the length of the payment period? What are the penalties for late payment? Is it secured (e.g., by his first born son)?

And what about you? Are you prepared to sue him in court?

No one can say whether you should lend him this money if they don't know the terms.
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Post by Grt2bOutdoors »

No. You saved the money with the intention of paying for college, you have it, now use it for it's intended purpose.

I'm with the other poster - why some feel the need to burden their child with loans when they clearly have the means to pay for it? Personal loan, bah humbug! You want your kid to take a loan - fine, let them fill out the FAFSA and obtain a Stafford loan - now the kid has got "skin" in the game and if he/she defaults it will be Uncle Sam knocking on their door periodically. Far better than having family chase for money plus the stigma that will follow them all the days of their lives, if the 4 year degree fails to materialize into a job or one that makes them self-sufficient because of circumstances out of their control (the economy) or some other unrelated family squabble (these do happen in families all the time) where the part about the personal loan being given convienently crops up into the discussion. This is the reason why family should avoid lending money to other family members.
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Post by Grt2bOutdoors »

kenschmidt wrote:My parents paid for my college tuition 100% and I have every intention of doing the same for my kids. I was able to focus on school and graduated cum laude with a 3.5+ GPA. That opened lots of doors for me when it came time to get that first job. I still worked and earned spending money so I understood the value of working as well.
Kudos to you, Ken.

I took a loan out for my schooling, I'll be damned if my kids will be forced to do the same even if it means they can't attend "fru-fru" university.
sscritic
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Post by sscritic »

More on the student loan bubble:
Here's a chart based on New York Federal Reserve data for household debt. The red line shows the cumulative growth in student loans since 1999.
...
This chart looks like a mistake, but it's correct. Student loan debt has grown by 511% over this period.
...
Obviously the number of students didn't grow by 511%. So why are education loans growing so rapidly? One reason could be availability. The government's backing lets credit to students flow very freely. And as the article from yesterday noted, universities are raising tuition aggressively since students are willing to pay more through those loans.
...
All this college debt could put the U.S. on a slower growth path in the years to come. As Americans grapple with high student loan payments for the first few decades of their adult lives, they'll have less money to spend and invest. All that money flowing into colleges and universities is being funneled away from other industries where it would have been spent in future years.
http://www.theatlantic.com/business/arc ... 99/243821/
Grt2bOutdoors
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Post by Grt2bOutdoors »

sscritic wrote:More on the student loan bubble:
Here's a chart based on New York Federal Reserve data for household debt. The red line shows the cumulative growth in student loans since 1999.
...
This chart looks like a mistake, but it's correct. Student loan debt has grown by 511% over this period.
...
Obviously the number of students didn't grow by 511%. So why are education loans growing so rapidly? One reason could be availability. The government's backing lets credit to students flow very freely. And as the article from yesterday noted, universities are raising tuition aggressively since students are willing to pay more through those loans.
...
All this college debt could put the U.S. on a slower growth path in the years to come. As Americans grapple with high student loan payments for the first few decades of their adult lives, they'll have less money to spend and invest. All that money flowing into colleges and universities is being funneled away from other industries where it would have been spent in future years.
http://www.theatlantic.com/business/arc ... 99/243821/
We can all thank our local elected officials for this mess - you know they "got your back". :roll:
stan1
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Post by stan1 »

I worked summer and Christmas break jobs to pay for my computer and my other modest spending money (although in today's climate an unpaid internship/"volunteership" might be considered to gain relevant work experience). I think that's the best approach when the family is able to pay for tuition, room and board. Having your children graduate with a loan 2, 3, or more times greater than their annual income will saddle them for life with a huge burden and limits them from starting important careers like teaching. Military ROTC programs are also options, and will (at least for now) guarantee your children a job when they graduate.

I did not have a car, ate out once or twice per week, and wore mostly the same clothes throughout college. Keep your kids lifestyle expectations low and they will be fine. If they eat out 5 nights a week at home, they'll expect to do the same at college. If they eat out once a month at home, once a week will be new found independence.
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Post by Leesbro63 »

kenschmidt wrote:My parents paid for my college tuition 100% and I have every intention of doing the same for my kids. I was able to focus on school and graduated cum laude with a 3.5+ GPA. That opened lots of doors for me when it came time to get that first job. I still worked and earned spending money so I understood the value of working as well.
+1
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Post by archbish99 »

Take a look at how Yale does tuition scaling, and pull out the student portion of it. They expect the student to earn $4,500 a year between summer jobs and part-time work during the semester. They calculate how much the parents can contribute, and the foundation covers the balance.

Setting a (low) dollar amount that you expect him to contribute, and telling him that he can achieve that through whatever combination of work, co-op, summer jobs, or budget cutting he finds appropriate is reasonable. Alternately stated, tell him how much you'll give per semester and the rest is in his hands to make happen or not.
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Post by BenBritt »

I paid all expenses for two and a half years for my daughter.She quit in her junior year and married. I wanted her to have the advantages I did not. What a stupid mistake! My advice is to let any child work and pay part of costs. I wish you the best. Time for a Stoli on the rocks for me !!
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Post by flowerbuyer »

I see nothing wrong with the student working part-time during the year, and full-time during summer break to earn spending money. My daughters did, earned good grades, and graduated without any student debt. Their dad and I (divorced) covered tuition, books, and room and board in the dorms. If they chose to live off-campus....and they did after the first year...we gave them the campus room/board equivalent to use.

Both graduated in four years.
jeh676
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Post by jeh676 »

I would use the 529s for their intended purpose, assuming the student is making adequate progress (which is likely a very individual yardstick).

My parents contributed substantially to my education. Scholarships paid tuition and fees, but they paid room/board. I knew what sacrifices had been made to save that up. For me, the fact that it was someone else's sacrifice made it that much more important to use it wisely.

As a student, I had an inflated sense of what my income would purchase post graduation. I would have underestimated the impact of loans on my future. And I was pretty quick with numbers. For some reason, the gravity of the 'pile of cash' they had saved was far more real than 'you'll have to pay back $200 per month for the next 10 years'.
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Post by brogrammer »

If I hadn't graduated from college in debt 15 years ago (both with student loans and unnecessary credit card debt I had created for myself) I don't think I would have gained the healthy respect I now have for savings and living within one's means. Goodness knows when I wracked it all up I didn't feel that way.

I say let the kid have some skin in the game.
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Watty
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Post by Watty »

Leesbro63 wrote:
kenschmidt wrote:My parents paid for my college tuition 100% and I have every intention of doing the same for my kids. I was able to focus on school and graduated cum laude with a 3.5+ GPA. That opened lots of doors for me when it came time to get that first job. I still worked and earned spending money so I understood the value of working as well.
+1
Another +1

My parents were able to pay my tuition and basic room and board at a state university. I did the same for my son and have let him know that the money for his college is basically a “loan” but it would be paid back by paying for his kids college as much as is reasonably afford if he has kids someday.
Nowizard
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Definitely:

Post by Nowizard »

Unless it would make you work more than a year longer. Your children will benefit from money now more than when you die, assuming you would leave them assets.

Tim
milestogo
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Post by milestogo »

It depends on the child. Some kids should be supported if they have a good gpa and are making good decisions but other kids need the pressure of something on the line in terms of money to make them take college seriously and finish on time.
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Post by dkdoy »

Leesbro63 wrote:
kenschmidt wrote:My parents paid for my college tuition 100% and I have every intention of doing the same for my kids. I was able to focus on school and graduated cum laude with a 3.5+ GPA. That opened lots of doors for me when it came time to get that first job. I still worked and earned spending money so I understood the value of working as well.
+1
+2
scubadiver
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Post by scubadiver »

In your situation I would cover their tuition / room & board. Nothing wrong with making them find their own spending money though.
etm
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Post by etm »

There is no noble idea at work here. If your son or daughter would benefit from a bit of work (perhaps because they are not fully mature) then it's a good idea. But if they are self motivated and good kids then I don't see the point. After all, you can never be too thin, too rich, or have to may A grades. :)
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HomerJ
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Post by HomerJ »

Have him take out some Federal loans... Let him make the payments for the first year or so after he graduates, then pay them off...

He'll understand and appreciate your contribution more...
TRC
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Post by TRC »

Why not loan him the money, and when he repays you....keep it in an investment account for him and give it back to him when he gets married?
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Post by DVMResident »

dkdoy wrote:
Leesbro63 wrote:
kenschmidt wrote:My parents paid for my college tuition 100% and I have every intention of doing the same for my kids. I was able to focus on school and graduated cum laude with a 3.5+ GPA. That opened lots of doors for me when it came time to get that first job. I still worked and earned spending money so I understood the value of working as well.
+1
+2
+3 my folks + grandma paid for school from undergrad up through vet school. I worked 2 summers in HS, worked through out undergrad on campus (some paid, some unpaid), and summers in vet school (paid). I had to take out a small loan in 4th year of vet school when I had 2 siblings in college (it's paid off) and my folk's couldn't cover it all.

The sad truth was I could only make $3k-$4k per summer, which barely scratched the surface of costs, especially in vet school. I think I clearly had a good appreciation for working and keeping costs low. I think I turned out alright and so did my siblings.

If your kid is serious about school and work, I wouldn't worry about "skin in the game." They're already self-motivated and they'll find their way. No reason to put a huge debt burden on them before they even start. By not having debt, their kids will be less likely to have debt, and their kids, etc.

When your kids sees his class mates struggling to pay back loans, he will appreciate being debt free.
Grt2bOutdoors
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Post by Grt2bOutdoors »

DVMResident wrote:
dkdoy wrote:
Leesbro63 wrote:
kenschmidt wrote:My parents paid for my college tuition 100% and I have every intention of doing the same for my kids. I was able to focus on school and graduated cum laude with a 3.5+ GPA. That opened lots of doors for me when it came time to get that first job. I still worked and earned spending money so I understood the value of working as well.
+1
+2
+3 my folks + grandma paid for school from undergrad up through vet school. I worked 2 summers in HS, worked through out undergrad on campus (some paid, some unpaid), and summers in vet school (paid). I had to take out a small loan in 4th year of vet school when I had 2 siblings in college (it's paid off) and my folk's couldn't cover it all.

The sad truth was I could only make $3k-$4k per summer, which barely scratched the surface of costs, especially in vet school. I think I clearly had a good appreciation for working and keeping costs low. I think I turned out alright and so did my siblings.

If your kid is serious about school and work, I wouldn't worry about "skin in the game." They're already self-motivated and they'll find their way. No reason to put a huge debt burden on them before they even start. By not having debt, their kids will be less likely to have debt, and their kids, etc.

When your kids sees his class mates struggling to pay back loans, he will appreciate being debt free.
Well put.
at ease
Posts: 341
Joined: Thu Aug 02, 2007 9:16 am

Post by at ease »

....your approach sounds like you want him to be able to go so you made provisions....but, you hope he will show initiative and get some outside support (work, scholarships etc) to be in the game personally....that would be nice....by now, you probably know his tendency to get involved ???

....anyway, you also say you really always "thought of your support" as a loan arrangement.....so it may be you really don't want to let go of the money, but feel like it may be the future outcome.....but darn-it, you want him in the deal financially...and you feel the need to help but aren't ready to "gift" it all yet... perhaps you can approach it/think of it as a partnership...ie, something like an agreement that you will be his equal partner and pay his up front education cost as long as he is doing his part (passing grades/some work) on a semester by semester basis...but let him know/think that when he's done, you want him to work out a repayment plan that is reasonable based on life then....

this way, you get him in college, he believes he has a stake in chipping in and being successful in class....and then at graduation you have a "choice" based on "life" then(yours and his) , to work out a reasonable approach to collect, or forgive, the 1/2 partnership investment in his future... this way you are invested/involved and helping him go forward....kind of a win-win approach for you....cause you really planned and wanted to loan the money...but have began to worry about that a little...this might be middle ground to condider....good luck; PS; the good news is that he has you to help and that you have done the hard part by saving the money needed....
RookieMistake
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Joined: Tue Mar 15, 2011 1:45 pm

Post by RookieMistake »

shoetrip wrote:College is a PRIVILEGE not a right. American culture has reduced the perception of higher education as a place where parents mortgage their financial future to send their kids off to go to have sex,party, watch sporting events, slack off; cram for passing grades and then graduate to make six figure incomes.

Make your kids work and contribute to their educations so they will understand and appreciate that it is not a right but a privilege, the same way student immigrants come to our country everyday bust their humps to pay for their educations in order to realize the American dream.

I have never heard one immigrant complain about their student debt load or that their parents didn't finance their education nor do I see any of them arrive on campus the 1st day with brand new BMW's, Merc's or SUV's and Apple products

Our kids need to have that immigrant hunger for success in their stomachs not the prevailing sense of entitlement.
Couldnt have said it better!
It is ones personal choice to go to college in hopes of achieving all their own personal dreams. If you give your child a free pass to college by paying for it for them then there is no risk on their behalf. What stops them from dropping out and persuing something else?

I suggest having them fill out the FAFSA and applying for a student loan on their own and let them realize that all this future school debt is potentially on their shoulders. If and when then graduate college, pay off the student loan for them as their graduation present; this lets them know that the debt will be on THEM if they decide to drop out.
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JupiterJones
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Location: Nashville, TN

Post by JupiterJones »

I fully agree with the "don't loan relatives money" rule.

I also agree that having some "skin in the game" can help, and I like your idea of having him come up with half.

If he comes up short? Well that's easy: He doesn't go to college then. Maybe he works a job for a year and saves up money. Or picks a cheaper school. Or only goes part-time at first. Or all of the above.

It won't kill him.

JJ
Stay on target...
aetos
Posts: 22
Joined: Tue May 03, 2011 11:27 am

Post by aetos »

Having skin in the game doesn't necessarily make someone do any better. If you have certain expectations then you should tell that to your kid not try to use money to teach him a lesson. Forced lessons never work. But if you think burdening him financially will teach him a lesson then by all means
Xile F Investor
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Joined: Tue Jul 27, 2010 7:54 am
Location: Virginia

Post by Xile F Investor »

Give them 5/1 ARM. Once they graduate, adjust the rate every year, based on market rates. Let them compare your offer and other market offers, and then decide. Put on the table the possibility to start off in community college or work through college. Should be some great life lessons.
What you must do is, speak so loud that I can not hear you. | Those who say it can not be done should not interrupt the people doing it.
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