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Monday, February 25, 2008

College the Poor Kids Way



Mrs. Micah featured a post recently about a sister who was talked into co-signing for her sister's student loans. Not surprisingly this did not turn out well. But it raises an interest point. Many of us are ill prepared for our financial life when we go off to college, or on our own.

Oh sure we think we are. We get signed up for credit card, and maybe even get a FREE t-shirt for signing up! We probably then only use the card for emergencies...no pizza or beer left in the house! Taking our girlfriend out! Maybe even rent once or twice.

Pretty soon that one is maxed, bummer, luckily you get a second one to help pay the first minimum payments. If you are lucky this ponzi scheme keeps up until you leave school and get a real job. Now you are saddled with big student-loans and credit card bills!

Some kids are "lucky." Their parent fit the entire bill down to spending cash and help with those pesky Credit Card bills. They want their kids to have the best start possible. Unfortunately, either situation sets up for potential failure. You either engage in the workforce with pre-made debt chains, or no real sense of how life works.

Our kids won't be like this. First we have made a conscience decision NOT (and I smell the angry emails already) to pay for their education past High School. We will help them with 100% free rent and food, in exchange for chores if they chose to go somewhere close.

Why oh Why you cheap *#$^ !?

Every single kid we knew that went to college on the parent express left school 100% unprepared for real-life, if they graduated at all. They took basket weaving and Klingon 301. They never worked the menial jobs that give you an appreciation for honest work, honest wages.

No I don't want our kids saddled with an insane amount of debt leaving school either. I would rather see them take 5-6 years to graduate and come out 100% paid.

Everyone that I know paid their own way had it hard. But they studied hard and really wanted it. Guess what? When they did graduate they had a huge sense of accomplishment! They, on their own completed one of life's milestones! What independence!

I call this: College the Poor Kids Way!

To do this you can't just throw then in the deep end at 18. You have to make sure they know what they need to succeed in the world. The whys and hows of Credit. The basics of budgeting and money management. Even a bit about investing.

Their first real investment will be in securing more income by having a college degree. Their investment will be in themselves! And what a great investment to make!

In conclusion:

Don't think for a minute that this means we don't value a college education. There are way to many studies that show the value of post-High Scool Education. We just believe that giving the lifetime gift of independance, through life experience, is worth 5-6 tough, but managable years.

(please throw tomatoes..they are softer!)

24 Comments:

Debt Dieter said...

Sounds resonable to me. I would never have expected my parents to pay for my University, and I'm actually just strting my degree now at 38, and it turns out work will pay for it! :-)

I of course pay all my own living expenses and work very hard at my job to get that though.

CatherineL said...

Hi Racer - too true. Preparing your kids to be financially independent is so important.

Unfortunately, they don't often teach the things in school that children actually need to know to cope with adult life.

minimum wage said...

What if they work the menial jobs, pay their own way, then graduate and don't get a real job, i.e. they stay stuck in menial jobs?

Fiscal Musings said...

I'm also not planning on paying for my kids education. I want them to work for it, so they appreciate it more.

I may help them later with some of their student loans, but that'll be after they had the experience of taking them out and figuring things out for themselves.

Sharon said...

RacerX,
Okay, here's the other side. Our deal is that we will pay for 1/2 of in-state tuition. (Which we are presently doing with our two older daughters). My older two daughters are from a previous marriage so their father is footing the other half. Lucky them. They are responsible for ALL of their spending money, including but not limited to books, car insurance, cell phones, etc. They are both intelligent and GREAT kids, who actually know the value of a dollar. They will each have to foot the bill for their Masters (they are both in education programs...one wants to teach Middle School History, the other wants to teach 4th or 5th grade). They both worked hard and maintained great grades in H.S. which landed them in great schools in Virginia (in-state). Neither has a credit card. They never ask us for a dime. We do this because we can. However, if we could not contribute to our retirement AND pay for half their college, we would choose retirement. One daughter graduates in May, the other one just started. (She is already putting as much money away as she can to pay for her last year of school to get her masters). So while I believe that kids should "own" some of their college education, I also believe that a helping hand is okay too. The professions they chose are not high paying ones for sure. I don't want to see them saddled with too much student loan debt. Our daughters don't qualify for subsidized student loans. Their loans would have to come from banks whose interest starts accummulating as soon as they take out the loan.
Both my daughters are aware of our family finances. They realize the danger of debt, and I've instructed them on how to manage their money as best I can. I'm hoping that they start their careers without debt, or as little as possible.

RacerX said...

@Debt Dieter - That's great! Congratulations on starting your degree. You will have such a feeling of accomplishment when finished. All the best!

@CatherineL - They sure don't teach those things that are needed, but I feel that it is my responsibility to teach them this and not hope school does!

@Minimum Wage - It is possible, but if they have the drive to work and make it through school it would be doubtful. But if it happened they would have the skills to make it on their own, which is better, in my eyes, then coming out of school blind.

@Fiscal - I probably did make it too black and white. If one of the kids had an opportuniy to attend something special where stretching it out wouldn't work (like Juliard) we would help them get the loans to pay for it. But it would be their debt.

@Sharon - It seems that you have a great plan that works for you. Which to me is always the key. Given our late start we won't be able to do both Retirement and pay for college. But if we could we would still opt for retirement. But to your point the best laid plans with kids often changes! Great rebuttal - Thanks

@All! - I know this is kind of a "third rail" topic to discuss. I feel that alone makes it worth haing. But to a larger point, anything on your list of expenses should be judged seperatly to see if it matches up with your principles. Not just because we are supposed to do something!

Thanks you all for your opinions and comments, but especially for visiting!

Sharon said...

RacerX,

Another idea is to look into scholarships to help with college tuition. There are a bunch out there that never get taken. This website comes highly recommended.

http://www.scholarshipcoach.com/

minimum wage said...

@Minimum Wage - It is possible, but if they have the drive to work and make it through school it would be doubtful. But if it happened they would have the skills to make it on their own, which is better, in my eyes, then coming out of school blind.


I have a degree and no marketable skills!

RacerX said...

@Sharon - Totally with you there. There are many scholarships that go unused! Untapped treasure! The other part of this belief is that the kids will work harder in High School if they want to go to college. This idea has struck a chord with one of the kids...the other not so much..yet!

@Minimum - As someone who went to Music School instead of regular college, you would have had to majored in something odd to beat that! (Nothing against Music Majors!!!) You raise a great point though that many leave school with a degree that is interesting to them, but not AS marketable. If you don't know what you want to major in, Communications is what I recommend as a well rounded degree. Not sure what your degree is in, but I worked with a VP of Sales once that had his degree in Chinese Literature...What do you want to do and what is your degree in? Happy to help if I can!

Thanks all - Great discussion! Thanks for commenting

Mrs. Micah said...

I dunno. I mean, on the one hand my parents gave me a lot of support. But I also "paid" over half through scholarships. So while I didn't have to work in college to pay tuition, I worked my butt off to keep high grades for the scholarships.

And I worked as a bathroom cleaner for extra money to save/for expenses. And as a research assistant. At the same time. It wasn't bad, actually being a bathroom cleaner was therapeutic.

But I knew some kids with full rides who worked in maintenance because they wanted to feel like they were making their own money.

RacerX said...

I think there are exceptions on each side. Kids who work through college and don't learn the responsibility needed for life, and those whose parents wrote them Carte Blanc to live stress free and were model student. I guess my suposition is that those are not the rules, but the exceptions.

As someone who had to work for 100%of what I have, I really respect earning it. But don't look down at all at those who don't.

Given that you were a hybrid :) what would your plans be? My ideas have certainly changed from 22 to 32 to 39! And probably will continue to change.

Dawn said...

I guess I'm the exception to the rule. My parents paid 100% of tution and books for 4 1/2 years of school. (I have a degree in IT.)

However, there were strings attached if I wanted them to pay for it.

The school was in-state. I commuted and lived at home. I had a job throughout (and since I was 16) to pay for my expenses (gas, beer, fun money etc). I did not pay for car insurance (using my parents extra car) or rent.

Looking back, I cannot thank my parents enough for allowing me to start without student loan debt!

I understand your point of view, but I have always been very hard-working (graduated with a 3.0 from college) and responsible financially, also thanks to my parents example (who only went into debt for houses or cars, nothing else).

So, while some kids who get college paid for by their parents are irresponsible and ungrateful, not all fall into that category.

RacerX said...

Welcome Dawn!

There are great execptions on both sides, and for me it isn't really about the kids being grateful. More about them taking responsibility for their future as well.

You story is a great hybrid sort of example that I don't disagree with either. You had very clear goals that had to be met in order to have the funds available!

Great points and thanks for commenting!

wealthy_1 said...

First of all congrats on your post appearing on MSN again. That's where I saw it.

I have to say I agree with you. We got burned. We were willing to pay for C1's education--anywhere she wanted to go. Price was no option. Of course, she picked a big expensive school. Luckily she got about 1/2 in scholarship and financial aid. So we went into debt $25,000 to pay the other half. After one year she decides she doesn't like it and she's going to quit. We were devastated! Now we have debt and no degree! Based on C2's academic performance, we've decided we're not paying. We'll help him figure out how to pay, but for actual dollars, he's on his own.

RacerX said...

Thanks Wealthy!

That a huge pitfall. It is even worse when the parent take out debt to pay for school for the kids.

Great cautionary tale from the parents-side!

Thanks for commenting and the kind words!

SJean said...

I didn't comment before (but noticed your recent post that you were mentioned on MSN money) and it brought me back.

First, I take some issue with this comment. "Mrs. Micah featured a post recently about a sister who was talked into co-signing for her sister's student loans. Not surprisingly this did not turn out well. "

I am that sister, and actually, it hasn't turned out poorly (yet). You may make predictions about how it WILL turn out, but that is not an accurate statement. I wasn't "talked into" I was simply asked. Slight difference, but important still. Did you really read the article?

Second, I don't disagree with your overall point, and I do think providing solid financial knowledge is extremely important for little 18 year old. (Obviously my parents did not do that well, at least in my sisters case, and in my case with respect to not understanding cosigning). I don't think parents are obligated to pay for education, especially at the expense of their retirement.

Third, I also don't think that kids whose parents are willing and able to pay for their college are unprepared for life or less responsible and hardworking. That is just something the rest of us tell ourselves to feel better. I can think of a zillion counter examples and few examples that line up with your stereotype.

Last, kudos for you for sharing your viewpoint, though it may be unpopular in the upper middle class crowd.

MB said...

One problem for your kids is that their financial aid will assume a parental contribution, and the college won't care about your decision. College education, even adjusted for inflations, is vastly more expensive than it was 20 or 30 years ago.

In principle, I agree with you. I don't pay for my child's car or insurance because I know he'll learn more and respect the rules more if he has to pay the consequences of a speeding ticket.

RacerX said...

@SJean - Point taken on the loans for your sister. Glad they haven't turned out bad...and I hoped they don't. The "talked into" part is from how I read (and yes I did read the post). If a parent is "asking" you to sign for the loan, given a parents authority position, a request can feel pretty pointed. If this wasn't the case, great!

re: your third point - As I said in my second post, I believe it is the parents call. This is what we believe. However, we may amend, as I said due to other circumstances. I am glad you can name a zillion good examples of kids that were paid for and few that turned out poorly. I would ask then though why you would agree with the position that children should pay? If the overwhelming evidense is for the opposite way I would change my opinion.

Regardless, that you for visiting and commenting!

@MB - Great point on the school demanding that parents pay x-portion. I won't penalize the kids, by making them not go to school due to our income. Or forcing them to leave the house to afford it.

Shuchong said...

Hmmm... I really do think there are some instances in which your plan won't work. It certainly wouldn't have worked for me. I never could have held down a job that was more than 10 hours a week and still kept up with my homework. And my university didn't let students go part-time, nor do students take more than 4 years unless they have to skip a year for family emergencies/health purposes.
(This is common among schools that are competing, though they say they aren't, for top spots in college rankings, as time to graduation is one of the factors US News and others take into account when rating schools.)

Making me work would have put me at a disadvantage compared to my peers. That would have made it even harder for me to find a job, since I was one of those kids who was majoring in Klingon (well, okay, comparative literature, but still...)

And perhaps choosing a major like that was naive, but I loved it, I learned a foreign language (Chinese) that may help increase my earning power someday. And when I graduated, I had the power of a snobby, highly-regarded school on my resume, not to mention its network of snobby, highly-regarded alums who could help me get jobs.

Now, as I look into law school, my undergraduate institution is going to be a mark in my corner again.

Tuition at this place is prohibitive (over $30,000 a year, and that's not including room and board), and though they meet all demonstrated financial need with grants, as mb pointed out above, they wouldn't have taken away my parents' contribution just because my parents said they wouldn't pay. Unless I took out well over 100 grand in student loans, I would not have been able to attend, no matter how hard I worked, without my parents throwing money at me. I don't think it was money that they threw away.

Of course, you're entirely right that being on my own was a huge shock (I still haven't quite recovered). I think your plan has great merit in that regard. But maybe forcing your children to get summer jobs and modeling frugality could accomplish the same thing, without cutting them off from the possibility of attending a school like the one I went to.

Funny about Money said...

"Every single kid we knew that went to college on the parent express left school 100% unprepared for real-life, if they graduated at all. They took basket weaving and Klingon 301. They never worked the menial jobs that give you an appreciation for honest work, honest wages."

Well, now you know one who left school 100% prepared, graduated cum laude, went on for a Ph.D., and now has an excellent academic job.

My parents paid for my undergraduate tuition. My husband and I paid for my graduate school tuition, with which I helped by working as a T.A. and landing a couple of decent fellowships. Though I went to a third-rate public school, like Sharon I could NEVER have graduated Phi Beta Kappa had I been forced to work my way through. Even at a mediocre school, a full-time course load means full-time work-- at your courses, not at McDonald's. My parents told me my "job" was to go to school.

Since then I have taught at an upper-division campus that served adult students who were working their way through, starting with two years in community colleges and then finishing at the university's branch campus. Let me assure you, it is not good for a student to divide her or his attention between a job and pursuing a degree.

Nor is it good for the quality of education _any_ of the students receive. The result of classrooms full of overworked and distracted students is rampant grade inflation. As an instructor, you simply cannot set standards high enough to matter, because none of your students will pass your courses. So, the next time you get a letter of application from a young job seeker fresh out of college and find it full of laughable errors (none of which you would like to see in any documents written for your company), you will know why that is happening.

Possibly the kids you've observed are suffering from a poor upbringing. Possibly they would be no more responsible in the workplace than in the educational institution.

Rather than depriving your kids a few years from now, when they need your support at a stressful and challenging time of their lives, try turning off the television now. See that they know how to read and that they DO read, that they're getting a competent elementary and secondary education, that they can handle money, that they know how to deal with sex responsibly, that they can and will use alcohol responsibly, and that they don't do dope. That's a bit more work than telling them to get a job, but it's a lot more likely to result in a competent adult.

SJean said...

Thanks for your response! I too hope it turns out ok, but only time will tell.

I think parents should help pay, as they are able, if they have funded retirement, and if the kid shows they want it. That really isn't all that common in many circles.

However, I don't think that kids are entitled to it, and shouldn't feel they are owed it. They can do it on their own if parents are unable to help out.

I would find it odd if an extremely wealthy parent refused to help... But I guess it is a personal decision.

RacerX said...

@Shuchong - I agree with you that there are times and kids this will not work for and said that in the original piece. If something came along that couldn't be stretched out, as you mentioned, and loans weren't available, I am not opposed to loaning them the money.

I just want them to recognize, regardless of who pays that college is NOT a guaranteed right.

@Funny - Congratulations on your achievements, they are a great testament to your hard work.

I do want to highlight a few points where I have some disagreements:

"it is not good for a student to divide her or his attention between a job and pursuing a degree. Nor is it good for the quality of education _any_ of the students receive. The result of classrooms full of overworked and distracted students is rampant grade inflation. As an instructor, you simply cannot set standards high enough to matter, because none of your students will pass your courses"

That would mean, and I am not trying to put words in your mouth, That all kids are having a harder time, not just the ones working through school.(Given the None would pass statement)- I also have a major issue with the price of College today, as others have mentioned. When private schools have Billions in investment funds (I know it isn't every school!)It is hard to understand why tuition is rapidly outpacing inflation.

"Rather than depriving your kids a few years from now, when they need your support at a stressful and challenging time of their lives, try turning off the television now."

You are making some assumptions about me and our kids that aren't true. You are assuming that this is due to our kids being TV-Watching, X-Box babysat kids who can't read. That is not only untrue, but unfair.

Our kids watch TV less then an hour a day have multiple activities, and my wife is a stay-at-home mom to make sure the kids have the support they need.

"See that they know how to read and that they DO read, that they're getting a competent elementary and secondary education, that they can handle money, that they know how to deal with sex responsibly, that they can and will use alcohol responsibly, and that they don't do dope. That's a bit more work than telling them to get a job, but it's a lot more likely to result in a competent adult"

More baseless accusations directly at us and ours that are not right, and frankly upsetting.

I don't think you can show me one post where I have been 100% less than supportive of others opinions, whether you agree with mine or not, do not depict my children in any derogatory way.

@Sjean - Glad it is going well so far. I wish the best for you and your sister!

Thank you all for visiting!

Anonymous said...

Before I get into this dicussion this is where I'm coming from. I am the child of two parents who were both the first person to graduate from college in their respective families. Because of how difficult it was for them to remain in school they vowed to make sure their kids had an easier time affording college. I like many others who have responded to this post had my basic college cost paid for but I picked up all other expenses such as books and everyday luxuries. (like chinese) I worked full time in the summer and had a part time work study job during the year.

If you don't want to pay for college that's fine its not the way I would do it but it's your family and your money. However, I guess I'm like many others don't use it's for their own good as your justification. I went to a highly competative school execpt for a few legacy kids we all had to work to get into the college. Just becasue many of our parents paid our way did not mean we slacked off. It just meant that we were able to take on other oppertunities such as working in unpaid internships or volunteering to help tutor kids in the local inner city public school how to read.

I would suggest that you be honest with your kids about how you are not going to pay for school but also make sure that you help them understand that they should not limit themselves to looking at the nearby schools only. Many times scholorships and co-op programs make schools farther away cheeper. (in other words help them figure out how they can pay for where they want to go)

Jane

RacerX said...

Thanks for visiting Jane.

A couple answers to your points:

"If you don't want to pay for college that's fine its not the way I would do it but it's your family and your money."

And I say the same for everyone.

"However, I guess I'm like many others don't use it's for their own good as your justification."

But I am, and in MY opinion it is...see above to your first comment. You make it sound like their are alternerative issues involved, and there isn't.

"It just meant that we were able to take on other oppertunities such as working in unpaid internships or volunteering to help tutor kids in the local inner city public school how to read."

I really wish all kids were like that. If my kids were to get non-paying jobs for the same hours I would help pay more. But, I don't believe you believe that even a signifigant percentage of College Student are using their free time to "help inter-city kids learn to read. Not trying to be snarky, but tem having more time to network makes more sense as an argument.

" would suggest that you be honest with your kids about how you are not going to pay for school but also make sure that you help them understand that they should not limit themselves to looking at the nearby schools only."

We are, and continue to be completly honest with the kids. Please see the recent post on our Family Budget Meetings" They all know if they are going to college that they will need scholorships to attend. It has supplied extra motivation in all. All are also looking at what they really want to do and are preparing for it.

Thanks for commenting not trying to be harsh back in my response either. Email always comes off harsher.

To All:
As I have said before, I respect everyones idea or ideal on how they want to pay for college, or first house or dowry or whatever else you as a parent decide to do. Your kid. Your call.

But some want to believe that if you are not paying there is something wrong with you or the kids.

This just isn't true. It isn't some big ponzi deal to rip off the kids, or a believe that education isn't valuable. It is a disagreement about when a child needs to have the balance of being Your Child vs being a Child OF yours...

Thanks all

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