College keeps getting more expensive. According to the College Board, in 2016-17, the average cost of a year at a public four-year college – including tuition, fees, room, and board – was $20,090 for in-state students and $35,370 for out-of-state students. At private, nonprofit colleges, the average cost was a whopping $45,370 per year. At those prices, it’s no wonder a 2015 Gallup poll found that over 70% of parents say their single biggest financial worry is how to pay for their children’s college education.
But perhaps all those parents are worrying about the wrong thing. Maybe the question they should really be asking is whether they should pay to put their kids through college at all.
Between the high price of a degree and the uncertain job market, some parents these days are questioning whether a college education is worth the cost. And even when parents do choose to send their kids to college, some experts say the students are more likely to succeed if their parents don’t foot the bill for it.
Advantages of Paying for Your Child’s College
Many parents assume that putting their kids through college is the best way to start them out on a successful, prosperous life. And indeed, there’s a lot of evidence to show that a college education has big benefits.
Here are a few of the arguments in favor of paying for your kids’ college education:
- They’ll Have More Job Opportunities. According to the Bureau of Labor Statistics (BLS), about 1 out of 3 jobs in the country now require at least some education beyond high school – and this gap is only expected to widen in future. The BLS predicts that the biggest growth in the job market from 2014 to 2024 will be in careers that require higher education. Even now, unemployment rates are much lower for workers with a college degree. In 2016, the BLS says, unemployment was at 5.2% for workers with only a high school diploma, but only 2.7% for those with a bachelor’s degree.
- They’ll Earn More. College graduates don’t just have an easier time finding a job; they also tend to make more money. The BLS reports that workers with a bachelor’s degree earn an average of $1,156 per week, compared to $692 per week for people with only a high school diploma. That works out to a difference of more than $24,000 per year.
- They’ll Avoid Student Debt. Paying your kids’ way through school can help them avoid the overwhelming student loan debt that many of their peers are burdened with. According to the Project on Student Debt, nearly 7 out of 10 graduates leave college with student debt, owing an average of more than $30,000. This debt can take not just years but decades to pay off. In fact, some people are still dealing with their student loans in retirement. A 2015 study by the LIMRA Secure Retirement Institute found that about 15% of all the non-mortgage debt owed by retirees was for education loans.
- They’ll Have a Better Chance of Graduating. A 2013 paper in the American Sociological Review (ASR) found that students are more likely to finish college when their parents are paying the bills. When students have to pay their own way, they could be forced to quit school early because they can’t afford to pay the bills anymore. This is particularly hard on those who have taken out student loans, since they now have the burden of student debt without the higher income a college degree can provide. College dropouts are four times as likely to default on their student loans as students with degrees, according to USA Today.
- You’ll Get Tax Benefits. Because a college degree has so many benefits, the government offers a wide variety of ways to help you pay for it. The IRS offers an income tax deduction of up to $4,000 for college tuition and fees – for you or for your child. Alternatively, you can use a tax credit to reduce your taxes directly by up to $2,000. The IRS also allows parents to set aside money tax-free for their children’s education in special savings plans.
Disadvantages of Paying for Your Child’s College
Although a college education offers many advantages, it also comes with a high cost. And surprisingly, picking up the tab for your children’s education poses risks not just for you, but for them as well.
Here are some of the drawbacks of paying your kids’ way through college:
- It Can Shortchange Your Retirement. To meet the high cost of college, many parents are raiding their retirement funds. In a 2015 survey by T. Rowe Price, 30% of parents said they intended to tap into their 401(k) accounts to pay for their kids’ college education. Financial experts say this is a big mistake. Your kids can always borrow money to pay for college, but you can’t borrow money to fund your retirement. Even if you think you have enough time to replace the lost savings, you could be forced to retire earlier due to illness or job loss.
- It Forces Their Career Decisions. Not all career paths require a college degree. It’s possible your child would be happier and more prosperous in a more hands-on job, such as plumbing or auto repair. If you send your kids off to college without even discussing these other options, you could be forcing them into a different career path that won’t suit them as well.
- It Can Create a Sense of Entitlement. You always appreciate things more when you have to work for them. Students who pay their own way through school – either through work or financial aid – understand just how much their education is worth. This, in turn, makes them more likely to work hard at school so they can get their money’s worth. By contrast, students who have all their college costs paid for them sometimes see this as their right and feel no obligation to work for it.
- It Can Lead to Dependency. When you pay for your kids’ college expenses, they learn to look to you to pay their bills. This can be a hard habit to break after they graduate. By contrast, students who have to handle their own college costs learn to take responsibility for their finances – a skill that will serve them well in adulthood.
- It Can Harm Their Grades. You might think that paying for college would improve your kids’ grades by freeing them to focus on their studies. However, the 2013 ASR paper found that the opposite is true. When parents cover all the costs of college, kids spend more of their time partying instead of studying, and their grades suffer. Some of these students – especially those who don’t have wealthy parents – go on to have trouble finding jobs because of their poor GPAs, according to Forbes.
Alternatives to Consider
Many parents struggle to pay for their kids’ college, but they don’t see what the alternative is. They think that a college degree is the key to success for their children, and they don’t see any other way to make sure they attain it.
However, there are many ways students can carry the cost – or at least part of the cost – of their own education. There are also career paths that can allow them to go to college for free, or even skip college completely. Here are a few alternatives to consider before deciding to foot the bill for your kids’ education on your own.
Work Through School
Students can pay a big chunk of their education costs by having a job in college. Many colleges offer on-campus jobs through work-study programs, but there’s a limited number of jobs to choose from, and most pay only minimum wage. Some students find they can make more with a part-time job off campus, such as waiting tables. Students can also earn money through a side business, such as tutoring, which lets them set their own work hours.
It’s unlikely students can earn enough to cover all their college costs while also studying full-time. Experts generally recommend that students work no more than 10 to 15 hours per week. At the federal minimum wage of $7.25 an hour, that comes to between $2,175 and $3,622.50 over the course of a 30-week school year.
However, the net price of a year of college – that is, the total cost of tuition, fees, room, and board, minus any aid from grants and scholarships – is much higher than that. A 2016 study by Demos found that the average net price of college for low-income students ranges from $6,152.25 per year in Hawaii to $13,489.75 per year in New Hampshire. So, at best, a student’s earnings can only cover a little more than half the cost.
Fortunately, there are ways for students to increase that income. For one, they can earn more money during the summers. If they work 40 hours a week for 13 weeks, a summer job can bring in an extra $3,770, even at minimum wage. Adding that to their earnings during the school year could get them over the net price for college in some states.
Another alternative for students is to work more hours and take classes only part-time. According to the U.S. Department of Education, 22% of students at four-year colleges, and 61% at two-year colleges, are part-time. The obvious drawback of this approach is that it will take longer to earn their degree. On the plus side, it offers at least a chance of paying all the bills out of their earnings and graduating debt-free.
Students can also contribute to their own college costs through financial aid, which makes college more affordable. Financial aid comes in two main forms: Gift aid, including grants and scholarships, is money the college gives you that reduces the amount you pay; self-help aid just makes it easier for you to pay for college with your own money.
Gift aid can reduce the cost of college quite a bit. The College Board reports that in 2014-15, the average in-state price for a four-year public college was $9,410 per year. However, the average net price, after gift aid, was only $3,980. Self-help aid, including loans and work-study jobs, can pay for the rest.
Aid can also be need-based or merit-based. Need-based aid, such as grants, depends on how much your family can afford. If your income is low, you can get more financial aid.
Merit-based aid, such as scholarships, usually depends on the student’s abilities. Students can get scholarships for having good grades, high test scores, or some special talent, such as art or sports. This means your children can help pay their own college costs by working hard in school, getting good grades, and honing their talents.
Free and Affordable Colleges
Students can also keep their college costs down by choosing a school that’s more affordable. One common choice is to go to a community college for the first two years. At these schools, Demos found, the average net price is typically lower, ranging from $4,188 to $15,149 per year.
Students can lower their costs even more by living at home while attending a community college. That way, they only need to pay for tuition and fees, which cost an average of $3,440 per year, according to the College Board. That’s well within the amount students can earn through part-time and summer work.
Some colleges aren’t only affordable; they’re actually free. All across the country, there are colleges that offer free tuition – and sometimes room and board as well – to students who meet their strict criteria.
The best-known free colleges are the military service academies, such as West Point and the U.S. Naval Academy. At these government-funded schools, all students attend free of charge. In exchange, they pledge to serve five years in the military after they graduate.
Other free colleges, such as Berea College in Kentucky and the College of the Ozarks in Missouri, require students to work on campus in exchange for tuition. Still others offer free tuition to students who want to train for a specific field, such as music, the ministry, or naval engineering. And in several states, community colleges offer two years of education for free to any student whose grades are good enough.
Parents often knock themselves out paying for college because most high-paying jobs these days require a college degree. However, there are some notable exceptions to this rule. According to the Bureau of Labor Statistics, fields that can offer a high salary without a college degree include:
- Postal Service. Mail carriers earn a surprisingly good salary of $58,110 on average. Postmasters and mail superintendents do even better, averaging $71,670 per year.
- Power Generation. People who operate power plants earn an average of $74,690 a year. Power distributors and dispatchers average $81,900 per year. Those who operate nuclear power reactors top the scale, at $91,170 per year.
- Transportation. Transportation inspectors earn a median salary of $72,220 per year. Transportation, storage, and distribution managers earn $89,190 per year, and commercial pilots earn $77,200.
- Police Work. The average police officer earns $59,750 per year. Detectives and criminal investigators do better, at $78,120 per year. And the folks who supervise police and detectives do best of all, at $84,840 per year.
- Elevator Installation. Installing and repairing elevators isn’t a glamorous job, but it’s an important one. People in this field can earn $78,890 a year on average.
Most of these jobs require only on-the-job training. For a few, such as elevator installation and repair, you must complete an apprenticeship – a period of intensive training lasting one to six years. During this time, you earn only a modest wage for your work, but it’s still a lot cheaper than paying for four years of college.
Even in white-collar fields like accounting and computer science, many companies no longer require their workers to have a college degree. Glassdoor reports that tech giant Google, publisher Penguin Random House, major accounting firm Ernst & Young, and numerous others are now offering high-paying jobs with no degree required.
Deciding Whether to Pay for College
As you can see, paying for college isn’t the only way to help your kids get off to a good start in life. To figure out whether it’s the best choice for your family, there are several questions you need to consider.
Question 1: Are Your Finances Solid?
Experts warn against putting your own future at risk for the sake of your children’s. Before you put even one dollar into college savings, they say, you should make sure you’re meeting your own financial needs. That means having at least three months’ worth of income in an emergency fund and meeting the required payments on your mortgage and other debts.
You also need to make sure you’re saving enough for retirement. Experts say to err on the side of caution with this, since you could be forced to retire early or spend more than you expect in retirement. Only when you’re confident all these needs are covered should you start setting aside money for college costs.
Question 2: How Many Kids Do You Have?
If you have – or plan to have – more than one child, you need to think about all of them when planning for college. Otherwise, you risk stretching yourself thin to set aside college savings for your first child, only to find there’s nothing left when the second kid comes along.
Figure out how much you can reasonably afford to put aside each month for college savings, then divide that up fairly among all your children. If that leaves only a small amount for each one, it’s better to know that up front so you’ll have the right budget in mind when it’s time to start looking at colleges.
Question 3: What Are Your Child’s Career Plans?
Even if you’ve already saved up money to send your kids to college, that doesn’t necessarily mean it makes sense to spend it that way. College is only a good investment if your kids will use that degree to pursue a career where it really makes a difference.
A college degree is a bigger advantage in some fields than in others. Health care jobs, such as pharmacy and nursing, have lots of job openings for new graduates. Engineering and agriculture majors, and some education majors, are also likely to get good jobs, according to Kiplinger.
But other majors, such as literature and the arts, don’t offer a clear route to a high-paying job. Your child could spend four years at college only to end up working in retail anyway. If your child is passionate about art, perhaps they could redirect that passion into a more lucrative field like art education. However, if they won’t even consider a degree that could pay for itself, maybe college isn’t a good investment.
Remember, too, that some careers don’t require a degree. If your child is drawn toward hands-on work, such as auto repair, maybe a trade school or an apprenticeship would be a better value. A military career can start right after high school or with a free education at one of the service academies.
Question 4: Is Your Child Ready?
Before you start shopping for colleges with your teen, think about whether they’re ready for it – both academically and emotionally. Many students find the work at college is too challenging, and the distractions of student life are too great. A report from the National Student Clearinghouse Research Center found that only a little more than half the students who started college in 2009 had earned a bachelor’s degree by 2015. Before you invest money in tuition, it’s worth considering whether your child has what it takes to see college through to graduation.
For some teens, it might make sense to spend a year working before they start college. This lets them contribute financially and also teaches them to be more responsible with money. Learning the value of a dollar can also make them more willing to consider a reasonably priced school when the year is up.
Another option is for teens to start out by taking classes at a community college. This cuts the cost and gives your kids more time to mature. After two years, they can transfer to a four-year school to finish their degree. And if they decide after a year or two that college isn’t for them, at least they’ll have learned that lesson fairly cheaply.
Question 5: Is There a Better Way to Pay?
Even if you’re sure your kids are ready for college and you’re ready and able to pay, that doesn’t mean you have to bear the cost yourself. It’s always worth looking into scholarships and financial aid to help offset the cost.
You can apply for need-based aid by filling out the Free Application for Federal Student Aid (FAFSA). Experts say it’s worth doing this even if you don’t think you’ll qualify. Having a completed FAFSA can make it easier to apply for scholarships and other merit-based aid.
Free colleges are another option worth looking at. These schools generally cater to a very specific group of students, so chances are your kids won’t qualify. But if your child happens to fit the guidelines for one of these schools, it could offer a top-notch education at no cost to you.
The Best Way to Pay for College
If you’ve decided that paying for your kids’ college is the right move for your family, the next question is how to do it. Experts recommend these moves for parents saving for college:
- Start Early. The earlier you start setting aside money for college, the more years you have to let the power of compound interest work for you. If you start a 529 or an Educational Savings Plan (ESA) when your child is born and set aside small, manageable sums each month, you can grow a sizable college nest egg by the time your child turns 18. That’s a much smarter move than waiting until your child starts college and cannibalizing your 401(k) to pay for it, or taking out a pricey private student loan.
- Discuss Costs with Your Child. Many teens don’t realize how much college really costs, or how much you could be sacrificing to pay for it. A 2016 Money survey found that only one in three college students thought their parents were passing up major purchases to pay for their schooling, while nearly 60% of parents said they had done so. The only way to clear up this confusion is to be open with your kids. Show them your household finances so they can see for themselves how much you can afford. This can help them set their sights on a school that’s in your price range.
- Choose the Right School. Ask your kids to make a list of colleges they’re considering, and go over it together. Ask what they like about those particular schools, and discuss how well those schools can help them reach their career goals. Use sites like Money and College Scorecard to check out the schools’ graduation rates and how their students fare after graduation. You can also filter schools based on location, activities, or particular degree programs. Work with your child to narrow down the list to schools that offer both a good fit and a good value.
- Look for Free Money. If all the schools your child likes have high price tags, don’t rule them out. Remember, the net price of a school is often a good deal lower than its sticker price. To make sure you’re comparing apples to apples, use a net price calculator, which shows what those schools typically cost out-of-pocket. Both the College Board and CollegeData offer free net price calculators online. You can also use the College Match website to search for schools that offer a lot of financial support for students.
- Set Expectations. Finally, make it clear to your kids that the money you’re paying for college comes with strings attached. Tell them you’re only willing to pay for college so long as they work hard and keep their grades up, and you won’t pay anything for extras like fraternity dues or spring break travel. Laura Hamilton, the author of the 2013 ASR paper, says in an interview with Forbes that students get more out of a college education when they see the money their parents are paying as a salary for working hard, not as an entitlement. She also recommends requiring them to have a part-time job either on or off campus to teach them responsibility and money management.
Paying for your kids’ college education doesn’t have to be an all-or-nothing matter. It’s perfectly reasonable to figure out how much you can afford to contribute, and let them decide how to raise the rest of the money. For instance, they could decide to go to a community college for the first two years so that your contribution is enough to cover their full expenses. Or, if they want to go to a more expensive school, they could try to make up the difference in price with a combination of work and scholarships.
In fact, even if you can afford to pay for an expensive college, there’s something to be said for asking your kids to contribute part of the cost themselves. Having a scholarship forces them to keep their grades up, while having a part-time or summer job helps teach them responsibility. This means they’ll leave college better prepared for the real world than their classmates who just took their parents’ money and spent four years having fun.
Did your parents pay your way through college?