By now, all the college acceptance letters have been opened and read, and the jubilant admits and their families have come to the second phase of the admission process: How on earth are we going to pay for this?
For many, the answer will be to take out a loan.
The Project on Student Debt calculates that “two-thirds of college seniors graduated with loans in 2010, and they carried an average of $25,250 in debt.”
Parents are also carrying debt for sending their children to school — an average of $34,000 for those with loans, says Mark Kantrowitz, publisher of FinAid.org. All told, in 2011, parents paid 37% of all college costs through income, savings and borrowings, according to a study by Sallie Mae, a financial services company specializing in education.
Whose responsibility is it to pay for college?
There are those who believe parents should exhaust all their own resources for their children’s education.
In this view, parents should have saved sufficient money in a college fund to cover these expenses, and if they haven’t, they should borrow to fund university enrollment. Many students are also ready to allow their parents to drain their retirement savings in order to send them to school.
That’s the money Mom and Dad have put aside to eat when they’re too old to work.
On the other side are those who believe students should cover all of their college expenses, even if Mom and Dad can afford to chip in.
U.S. News College blogger Lynn O’Shaughnessy writes, “Some of these parents believe their children should shoulder the entire obligation because they had to pay for their own schooling decades earlier. Some believe that requiring their children to foot the bill will build character. Others simply don’t want to reduce their lifestyle.”
As a consequence, these students, who often will not qualify for financial aid because it is based on their parents’ income, must take out major loans to go to school.
To these parents, O’Shaughnessy urges, “If you’re a parent contemplating making your child pay for college on his or her own, please give it more thought.”
So what is fair?
Should you let Mom and Dad go deeply into the hole to fund your education? Should your parents leave you to start your post-college life with massive debt? Here are some issues to consider:
When it comes to saving for college, Americans are dreamers. That was the finding of a survey by Alliance Bernstein Investments, Inc., “Failing Grades? American Families and Their College Saving Efforts.”
Over 70% of parents surveyed believed that their children were so talented their special skills would allow them to win scholarships. If this were so, that would leave only 30% of families paying tuition. No wonder almost all of the financial aid administrators surveyed reported that parents had “a false sense of security” that colleges would help them cover costs.
You and your parents should be talking realistically about how your family will pay for college. If you have to take out loans, make sure you have a clear understanding about how much you’ll need to be making post-college in order to pay them off in a timely way, and let that knowledge guide your borrowing. There’s a useful calculator that allows you to compute how high a salary you would need in order to pay off your loan. If you borrow $100,000 at 6.8 percent interest for example, the program calculates that you would need to make at least $138,096 to comfortably afford the payments.
Separate needs and wants
Let’s do this one by example. Julia has been accepted to two schools, Harford, a prestigious private college, and the honors college at XYU, her state university. The former has a tuition of $40,000/year; the latter will cost $9,000. Julia needs to go to college; she wants to go to Harford. If Julia’s parents are well-off, then Harford may be the right choice. But if her parents are scraping by, then she must balance her wants against the family’s needs, and needs will tend to trump wants.
Parents make sacrifices for their children. Most of us understand this to be the duty of providing for the next generation; it’s Darwinian (with a healthy helping of love thrown in). You might reasonably expect parents to go without vacations or dining out in order to save money for the college fund or even to take out modest loans to help finance your education. But don’t ask them to give up security in old age by dipping into retirement or borrowing too much. Kantrowitz told CNBC, “By the time they retire, (parents) should have no debt remaining since they will have no income to repay that debt.” Instead of saddling your parents with debt they can’t repay, think about some of the sacrifices (Limited data plan? Covering your personal expenses?) that you might make to help pay for your own education.
Turnabout is fair play
Today, your parents are raiding their retirement fund to help you pay for college. Tomorrow your parents will be too old to work but may have insufficient funds to stop. Are you ready to support them in old age in return for the way they supported you in college?
Work on systemic solutions
Student loans have become so common and so large that some commentators foresee another financial bubble popping when today’s borrowers are unable to repay. But what alternatives do students have? Especially with Pell Grants for low-income students on the chopping block in budget proposals now circulating in Congress, the chances are you may have to bare even more of the cost of college than past generations. And with cash-strapped public schools cutting the number of spaces for incoming freshmen, more people will have no choice for college other than a more expensive private education. If you’re not already, you will soon be of voting age. Will you vote for the taxes needed to fund public higher education?
You can win a $100 Amazon gift certificate for the best undergrad response to the issue, Who should pay for college? Go to www.facebook.com/mybigq and click the contest tab to enter. The contest is part of The Big Q, an online dialog for college students about the ethical issues in their everyday lives. Miriam Schulman, assistant director of the Markkula Center for Applied Ethics at Santa Clara University, manages the program.
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