If you’ve stumbled on this article you’re probably wondering if it’s your responsibility to pay for your child’s college education. So let’s get to it – should parents pay for college?
There are a couple of considerations here:
- Are parents obligated to pay for college for their kids?
- Can parents afford to pay for a child’s university?
- What other options are available to fund higher level education?
- And if they are financially able, should parents pay for college?
We’re going to talk about all of that and more.
This topic can get heated. To give us an idea of the consensus of feelings, we polled moms and got a wide variety of responses.
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Wondering what they said? Read on.
Is College a Parent’s Responsibility?
To get to the bottom of this question, we polled moms and asked: do you feel it is your responsibility to pay for your child’s college education?
The response was clear.
Of 367 moms polled, 229 said “yes”. That’s over 60% of moms who feel that yes, parents are responsible for funding higher education.
We didn’t expect those results! And believe us, reading some of the comments and feedback was very interesting.
Many moms felt that the responsibility was a two-way street. Meaning there were limits and requirements on them paying for college. Things such as:
- Student must demonstrate a serious interest in higher level education
- Parents are only responsible for “realistic” college goals (ie. maximum of four years, in-state university, undergraduate work only, sometimes even starting off at a local community college)
- Student must maintain a certain grade point average or study an approved major
The theme of “help as much as you can” was also prevalent. Many felt that a parent’s responsibility was directly correlated with their income. Meaning parents who make more money are responsible for funding higher percentages of their child’s college tuition.
Experience and Bias
At first we thought that maybe this feeling of responsibility was due to a parent’s own college experience. For example: if a person had their college paid for by their parents, would they feel responsible for paying for their child?
Surprisingly, the results were very split here.
About 2/3 of parents who felt responsible for funding their child’s education had their own college paid for by their family.
The remaining third had to pay for college themselves, and that fact alone made them strongly believe it was a parent’s responsibility. They personally witnessed the struggle of student loan debt and the sacrifices working had on their studies – and didn’t feel it was right to put their children through that.
On the other end of the spectrum, there were parents who had their own education paid for who strongly felt it wasn’t their responsibility to pay for college. Some of them cited this was because they felt entitled and didn’t take their education seriously without a vested financial interest.
Why Do Parents Feel Responsible?
Many moms feel that college is necessary to help their children achieve their dreams.
As parents, it is our job to do everything in our power to guide and help our children reach their goals. And many don’t want money to be the reason why they couldn’t reach their maximum potential.
Another motivating factor is the fear of crippling their child (soon-to-be young adult) with a large amount of crippling debt.
After all, if you are trying to teach them independence and financial responsibility – why would you show them it’s acceptable to take out a large amount of loans without a job or specific plan to pay them off?
Financial Planning for Child Education
Wondering how much you would need to save for college?
There’s a lot to factor in, but this college savings calculator can help you figure out how much college will cost and what you would need to save each month.
For many families these numbers seem impossible. Often deciding how much you should save depends entirely on what you can afford.
One of the first things you need to do is figure out your own personal budget. From there you can determine if you can afford to save for college and how much.
Finances are very personal and we’re all in different situations. Whether you are living paycheck to paycheck or have lots of cash to spare, the only way to really know for sure is to actually make a budget showing how much money is coming in and how much money is going out.
Make a detailed budget of how much you make and spend each month to determine what you can afford to save. Also, make sure you are saving for emergencies and retirement first.
When Should You Start Saving for College?
Now. If not now, then as soon as possible.
For most people, there’s never this point where you feel you have “extra” money that can be turned into a college saving’s account. This is why it’s imperative to start saving early and on a regular basis. Think $20 per week to start.
Over time even these small amounts can add up, especially when saved early thanks to accrued interest.
With time, you can slowly increase the amount you are saving. If you increase it gradually, you won’t even feel the money leave your account.
Signs you are ready to start regularly contributing to an account earmarked for education:
- You’ve paid off personal credit card bills and student loan debt
- You’re already contributing to a retirement account
- You have money in your savings in case of emergencies (usually at least 3 months worth of expenses)
Best Ways to Save for College
So when you’ve finally decided that you’re ready to start saving, what is the best account to open? Let’s briefly talk about some of the options.
When talking about saving for college, 529 accounts are one of the most talked-about and popular options.
A 529 plan is an account specifically designated for an individual’s high education expenses.
Benefits: No income requirements, can contribute higher amounts, grows tax-free, some states have tax incentives.
Disadvantages: Penalty if withdrawal is not spent on qualified education expenses, sometimes there are restrictions and/or fees if you transfer the account to another child.
Education Savings Account (ESA)
A Coverdell Education Savings Account is a tax-advantaged investment trust designed to help families pay for future educational expenses. It allows families to invest $2,000 per year, per child.
Benefits: Grows tax-free (and tax-free withdrawals), lots of investment options (with better returns than a traditional savings account).
Disadvantages: Income limit, limited contribution amount, beneficiary must use before age 30.
A Uniform Transfer/Gift to Minors Act (UTMA/UGMA) is a custodial account (trust) that children have access to once they reach a certain age.
Benefits: Not required to be spent on educational expenses (in case they decide not to go to college), doesn’t require an attorney (like a traditional trust), contribution tax advantages, no investment limit.
Disadvantages: Not required to be spent on educational expenses (parents have no say in how they spend the money when they come of age), can’t be transferred, earnings and gains are taxed.
While not a traditional education tool, a mutual fund is a great strategy for any kind of long-term savings goal.
A mutual fund is a managed account fund that pools money from multiple investors. You can choose your risk level and type of investment through the available options.
Benefits: Not required to be spent on educational expenses (in case they decide not to go to college), no investment limit.
Disadvantages: Not required to be spent on educational expenses (parents have no say in how they spend the money when they come of age), earnings and gains are taxed, value can reduce the student’s financial aid eligibility.
Based on the name “Individual Retirement Account”, most people associate IRAs with the senior years. However, it can also be a powerful tool for college savings. A Roth IRA is unique because you pay taxes on the money going into the account, so future withdrawals are tax-free.
Money from these accounts can be withdrawn at any time. If it is before a certain age, the money is subjected to a 10% early withdrawal penalty on earnings. However, the penalty is waived when the funds are spent on qualified higher education expenses.
Benefits: Many different investment profiles available, money can be taken out at any time, account value isn’t reported to FAFSA.
Disadvantages: Maximum investment limit, income limit, withdrawals must be reported to FAFSA.
What If You Can’t Save For College?
Not all families can afford to save thousands of dollars for college. In fact, many can barely make ends meet with their regular bills, let alone save for emergencies or retirement.
Just because you can’t save, doesn’t mean that your child is doomed.
So without savings how can my child go to college?
Apply For Scholarships And Grants
Scholarships aren’t just for athletics. There are tons of different scholarships out there from unexpected places like businesses, community organizations, and local clubs. Grants are awarded by the federal and state governments based on need or merit.
These are part-time positions, often on campus, that students generally must qualify for based on financial need.
Start At Community College
Community colleges cost a fraction of most universities. By completing the first two years at a community college instead, they can save a lot of money. Also, community colleges tend to have more flexible scheduling options which make it easier to work while attending school. Finally, if they complete an Associates Degree, they have a marketable skill that can land them a job. Then they have options, like working for a while before pursuing further education or continuing to work while completing their Bachelor’s.
While student loans are not necessarily ideal, they are a viable option for paying for college. To avoid gigantic payments, only use loans when absolutely necessary. Choose federal loans over private loans and minimize the loan amount to save from tons of debt. Also, look into loan forgiveness programs, many have very specific qualifications.
Consider Alternatives To Traditional College
While we probably all want our children to attend college, it isn’t necessary for every profession. In fact, only approximately ⅓ of the adults in the US have degrees. Other career paths still exist. As previously stated, an Associate’s Degree can open up many job opportunities. Also, consider technical and trade schools and apprenticeships. Military service is another option which can even become a way to pay for college.
So… Should Parents Pay for College?
A case can be made for both sides! Let’s start with the affirmative should parents pay for college option:
Reasons Parents Should Pay
- Your child can avoid debt. There is no doubt that starting out adulthood in debt is challenging. Many parents don’t want to saddle their children with that heavy burden. Graduating debt free allows them more flexibility entering the job market. It can help them buy a home and start a family sooner as well.
- Bearing the cost of college allows students to focus solely on their studies. They don’t have to worry about finances or have the added stress of working at the same time.
- In the US financial aid is based on parent’s income. Since the parents must fill out the FAFSA, their income may mean that the student doesn’t qualify for any need based assistance. Students of high income parents have very limited options for aid if mom and dad aren’t helping.
- Paying for college helps kids finish quicker and statistically increases the likelihood that your child will graduate. This study showed that students graduate at higher rates when their parents foot the bill.
Reasons Parents Should Not Pay
- By paying their whole way, some students may not value the education they’re being given. We all know that one kid who never went to class, partied all the time, and spent 6 years though never graduated. That same study showed that when parents paid students actually had lower GPAs. Paying your own way seems to push students to take their studies seriously.
- If you can not afford to pay. Skipping saving for retirement or taking out parent loans that you can’t afford can destroy your own financial situation. In the future this could cause you to become a financial burden on your children which is probably what you were hoping to avoid.
- Students learn financial responsibility. Figuring out how to budget and handle their personal finances are great skills for young adults. It is important that they understand things like debt and loan repayment as they make these decisions as well.
- Money complicates relationships so not paying can help avoid some tensions and conflicts. When parents are financing everything they may feel as though they should get to make some of the decisions such as where a student lives or what they study. This can be a big source of frustration if students pick a major that mom and dad don’t approve of or switch majors multiple times. Not paying can make it easier on parents to let their student make their own decision and even mistakes without it causing stress on their relationship.
What’s the right answer for your family? What kind of college savings account do you have? Let us know in the comments below!