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Friday, November 16, 2012

Another Try: College Choices and a True Confession

Hmmmmm. The responses to my last post suggest that I was less clear than I hoped. It has been a difficult few months fo me, it is true. No wonder I can't write.

I will probably be unclear AGAIN. Nevertheless, another try.

I was struck by the fact that Sarah's parents had shelled out $20,000 a year for 4 years and that Sarah faces $20,000 in student loans, which her parents are committed to repay. I wondered if--looking ahead from that place almost four years ago--the parents regret the college choice. After all, Sarah is at a medium-level private school and majored in Psychology. So prestige-factor (crucial if one aspires to an academic career) and major (Psych does not necessarily lead to a lucrative career or anything in particular) are lacking.

I further wondered if parents should look ahead to the TOTAL cost of 4 years and figure out how their financial commitment could best be deployed. I did not mean to suggest that Junior be offered a car if he went to a lower cost school. UGH. I knew parents who did that. Bad idea, in my opinion.

I did wonder if parents should think about what they could give their kids with the total cost. Sarah's $100,000 could buy:

1. A BA from a mid-level private college with regional reputation.
2. A BA from a state school, with enough left over to buy a car (AFTER GRADUATION) and a hunk of a house.

I don't think people think like that. Should they?

The reason I am wondering is this. I put away some money in a 529 plan. My children are super test takers and ended up with totally paid degrees from state institutions. The 529 money languishes. It can be used for grad school and that may be where it will go. I can also take the money out, paying a small penalty. The money belongs to ME and Mr. FS.

Yet part of me--let's be honest, most of me--feels that I would like to share the leftovers with my children, both of whom did very well in college and have many options before them. While not $100,000 (don't I wish!), the money could ease their passage into independence. Kind of like a dowry in the olden days.

Do I make any sense this time? What would you do with the 529 money?


Kare said...

Super test takers deserve rewards!
Option one buy used cars
Option two pay for grad school
Not only did your children earn scholarships, they also kept them for four years. Lots of children cannot manage to do that. It is a huge advantage for them to start their adult life's without debt.
Just my two cents

the Frugal Ecologist said...

I was vey lucky that my parents made this calculation for me. Expensive private/out of stat school as a poor investment compared to state school. I was VERY disappointed that they didn't pay for U of Chicago but instead, I got a full ride at our state university.

The money they saved was given to me as a lump sum after graduation (before 529 plans existed) and I used it as part of a down payment on a house. sis used some of hers to pay for college, the rest for a house. Bro also got a full ride & is using it to pay some of his living expenses in grad school. I feel vey very lucky that I finished school with this head start, instead of student loans. ( which would not have been the case if left to my own devices at 17)

Funny about Money said...

Some people certainly do think this way. Take some time to visit with some community college students. My classes, as much as I bellyache about them, invariably include a number of National Honor Society types and other merit students who have figured out that they can save bundles of money by taking their lower-division core courses at the community college and then transferring the university of their choice to complete the major.

I've had students who have transferred to excellent schools, who have gone on to become medical doctors...and one who went to Oxford for the MBA.

Among friends who have sent their kids to our state's public university, I've known several who (when the economy was saner) purchased a condo for their son or daughter to occupy while in school. By taking in a roommate or two, the kid could generate enough income to cover most of the mortgage payments, although some simply enjoyed the privacy. Four years later, a break-even sale of the dwelling meant the kid lived in the college town with minimal outlay, much of it tax deductible.

With the money saved, families were in a position to give a nice car as a graduation present, to fund a semester or year abroad, or to pay for a fancy wedding. Or maybe to retire a few years earlier than one might expect.

Makes one suspect that a lot of people do indeed think the way you do.

SewingLibrarian said...

My parents certainly thought this way and insisted I attend the U of Illinois where I had a tuition scholarship for four years. I also had a General Mills scholarship that paid for 1.5 years of room and board.
They did not offer me any car, either. I had two brothers coming after me and didn't expect anything.
They enjoyed a good retirement, and now my mother is "rewarding" her children as she nears the end of her life. She will be 95 in February. Frankly, I think we are all better for not receiving any help early on, but getting it now. And I'm happy my parents did not have to worry about money in their retirement.
As for my children, we have 529's set up for them. I will advise them to stay out of debt, possibly by using Community colleges a la Funny's remarks. I know DD will struggle and may choose to learn a trade. DS is a better student and may be able to score a scholarship. I would never suggest taking out student loans!

Marcela said...

How about paying for some nice vacation together, to somewhere you would all like to go, something that creates shared memories?

Other than that, I would say follow Lisa's advice (from LPC and wait until they are 30 or more, so that they have a better idea on what to invest it in.

SewingLibrarian said...

To clarify, I meant my brothers and I didn't receive any help beyond college. We certainly did receive help during college. We all paid for grad school or law school ourselves or with assistantships.

Shelley said...

I don't think my parents thought in terms of total costs, only what they could come up with in the short term, which wasn't enough. They bought me a used car (from my uncle) to get me to the nearest state university, 15 miles away. I would be living at home, there was no money for a dorm room. I worked 35 hours a week at Pizza Hut and carried 17 hours at college during one semester. Another time I carried 15 hours and worked 4 hours a day M-F as a maid for a strange woman with two pathetically spoiled children. I think I became an expert in motion efficiency, her lists were so long. Life was classes, work and study. I think I did pretty good for a 16 year old, but I cracked after two years when an English teacher assigned me a major paper (footnotes and all!) on a subject I didn't fancy at all. I went to work full time and didn't go back to school for two years, carrying 9-12 hours in night school. It was the same slog, but with enough money to buy warm clothes, healthy food and entertainment in the summer time.

Diane said...

Dear Frugal Scholar,
Why not hold a family conference, all four of you, to discuss this very issue? You might think of it as working out a mission statement for this fund: What is its overall purpose? What do we want to accomplish? Why? What does each person think is the best use of the money, and how can we all work out an agreement for how these funds are used? I am a member of your tribe, Frugal Scholar, in that I also find amazing gems at thrift stores and am allergic to paying anywhere near full price for anything. A problem with this mode of navigating life is that we are so cheap that we don't really work out an overall way to think about our relative wealth. We take well-deserved pride in smart small purchases, and save for large purchases, such as travel, education, and retirement, yet possibly we don't think more abstractly about larger meanings. Your wonderful work in building up this fund should be rewarded by some collaborative thinking about it. You might end up leaving it intact, or spending it constructively, but you will have a clear idea about what needs to be done, following your own standards, not mine or anyone else's.
I am reluctantly part of a group of people trying to figure out a mission statement for a small and growing fund, and I have appreciated the chance to do this collaborative work. Good luck!