Should you pay for your kids’ college? Here are the pros and cons

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Should you pay for your kids’ college? This can be a tricky question to answer, and one that doesn’t come with a one-size-fits-all answer.

At first glance, the concept of paying for your kids’ college expenses might seem foreign. It’s not at all uncommon for older adults to proudly boast that they paid their own way through school.

Meanwhile, other parents take the stance that of course they will pay for college — either because they want to save their kids the struggle they themselves suffered by being solely responsible to pay for their degrees, or come from a family where that luxury is the norm — or their student is a first-generation college student they are eager to support.

For single parents, you may have no choice.

These states have laws or case law that can require a divorced parent to pay for some form of college expenses, and some require child support as long as the kid is in school:

Alabama, Arizona, Colorado, Connecticut, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Maryland, Massachusetts, Mississippi, Missouri, Montana, New Jersey, New York, North Dakota, Oregon, South Carolina, South Dakota, Utah, West Virginia and Washington.

However, this is something that may be negotiated at the time of divorce, including if you file your divorce yourself.

Of course, there is no precedence requiring married or never-married parents to pay for college.

If you have a choice in the matter, read on …

Should you pay for college? Here's what the experts say:

But times have changed and one thing people of older generations may not recognize is that college costs have skyrocketed, especially over the last two decades, says Lynnette Khalfani-Cox, a.k.a. the Money Coach, a Houston based personal finance adviser and author of College Secrets: How to Save Money, Cut College Costs, and Graduate Debt Free and College Secrets for Teens: Money-Saving Ideas for the Pre-College Years.

Today, public colleges cost between $25,000 to $35,000 per year, including tuition fees, room and board books and supplies. Private colleges and universities cost $50,000 to $75,000 per year all-in.

“I'm extremely cognizant of the fact that it is literally impossible for a college student today who is going to a four-year college or university, to work enough hours and fully fund their own college costs and in-full, “ says Khalfani-Cox. 

That said, do not write a blank check for your child's education without any consideration for the return on that investment — and a deep dive into whether you as the parent can truly afford that expense.

Robert Farrington, founder of the leading personal finance site on student loans, The College Investor, urges parents and their students to have frank conversations about the return on investment (ROI) for any higher education decisions — and for parents to be honest with themselves about what they can really afford. Do not be naive about the actual value of a college education in 2022, he warns.

“If you don't want to end up a statistic in the student loan crisis, you need to be mindful of how much you spend or borrow, Farrington says. “If you spend too much, college becomes a bad investment and you'll struggle to pay for it over your next 20 to 30 years.”

Fact: In every industry, there is an increase in earnings with more education, according to the Bureau of Labor Statistics. However, do not fall into the line of thinking that more expensive degrees automatically net out more lucrative careers.

Indeed, The Foundation for Research on Equal Opportunity (FREOPP) analyzed 30,000 undergraduate programs and found the median bachelor's degree for those who graduate in time has a net ROI of $306,000 in lifetime earnings. A few degrees like engineering and nursing netted out at $1 million-plus.

However, if you do not graduate, the median net lifetime value (premium in earnings minus cost of education) of a bachelor's degree drops to $129,000. When the foundation crunched the numbers for all the degrees in its report, more than a quarter of bachelor's degree programs have a negative ROI

“Regardless of your beliefs on whether higher education should be free or how valuable it is, the fact is, today it is a monetary investment,” Farrington says. That goes for both students and their parents, many of whom overestimate what they can truly afford to pay for their kids’ degrees.

“Parents think they're helping their kids by spending all their money, or even borrowing Parent PLUS Loans to help their kids pay for college,” Farrington says. “However, a few years after graduation, when parents are thinking about retirement, they quickly learn they can't — they spent or borrowed too much to pay for the kid’s college. So, parents have to work longer, or even worse, have to move back in with their kids who by now are in their 30s/40s because the parents can't save.”

The problem with these ROI calculations is that it is not realistic to expect most 17- or 18-year olds to decide what career they will pursue for the rest of their lives. 

“I recommend staying broad, such a general business major, unless the student really has a deep understanding of what they want to do,” Farrington advises. “That opens up a lot more options to find a positive ROI route through college.”

It can also help your student decide if a career that does not require a degree at all is a better fit.

Here's what the consider if you're trying to decide whether or not to pay for your child's college education:

Pros and cons of paying for college

The College Investor's guide, Where To Apply To College – Finding Academic and Financial Fit, can help you sort out the price-value ROI equation, and the reality is that most families will devise a college finance strategy that is a combination of financial aid, choosing a school that is a good fit for the student’s goals and skills, parent financial contribution, loans for both students and their parents, as well as part-time work (such as being a nanny) for the kid.

But as a parent, consider these pros and cons of paying for your kids college:

Pros of paying for your kids’ college:

  • Allows the student to graduate with a manageable amount of student loan debt, or even none at all
  • Allows them to focus on schoolwork and maintain a social life
  • Might sway them into choosing a more affordable college
  • Can help close generational wealth gaps for some families 

Cons of paying for your kids’ college:

  • Can ransom your retirement
  • Kids may develop a sense of entitlement, lack of money management skills, especially if they don’t have the opportunity to work part-time
  • Removes the exercise of scrutinizing the ROI on the investment in the degree vs long-term earnings or other value
  • You could end up with an overwhelming amount of debt, bad credit, if you take out loans for a child’s dream school that you cannot afford

On one end of the paying-for-college spectrum, Khalfani-Cox plans to pay for 100% of college expenses for her three children. She is a first-generation college graduate whose parents didn’t have the opportunity to attend college. She and her husband are both entrepreneurs and have a 24-year-old who has already graduated college, a 21-year-old college junior, and a 15-year-old. She and her husband also bought the kids’ first home (which have so far been a condo and townhome purchased during their college years) and a car.

“My family and I are very fortunate financially, I recognize my privilege and the fact that I've been able to achieve really at levels that my parents, my grandparents and ancestors just only dreamed about,” says Khalfani-Cox, who is Black.

“We’ve promised our three kids that in order to help close the wealth gap in this country, we are going to give them what we're calling a wealth starter kit or a wealth launch kit, she says. “Paying for their education is so they don’t have to worry about money, the home is in recognition of the huge homeownership gap between Black and white households in this country, and the car is so they can drive away and not be dependent on us anymore.”

How much of college should parents pay for?

Unsurprisingly, most parents aren’t going to be equipped to cover all expenses in full with savings. Before looking into parent or student loans, Khalfani-Cox urges parents and students to pursue scholarships, grants, work-study programs and paid internships, in addition to the contributions they can make themselves. 

“If you still don’t have enough money to pay for college, that’s why you should look into loans, which should be in the student’s name,” she says. 

Khalfani-Cox is adamant that college students shouldn’t be working more than 20 hours per week, much less full-time, as the hourly wages they would likely earn would be a drop in the bucket in terms of expenses and would leave literally no room to spend on anything else.

“Working takes time and attention and focus away from hitting the books and from the academic side or from the enrichment part of college,” she says. “I also strongly recommend you don't let a student work during their freshman year, which is an adjustment period for the child to be on their own for the first time to be independent.”

Parents share their experiences helping pay for college:

Gabriela Ramirez, a mother of three children ages 15, 11 and 8, agrees, especially after having lived the reality of paying for college herself when her parents couldn’t afford to finance her education at the University of Houston. 

Ramirez initially started working part-time as a bank teller, but then moved up to working full-time (40 hours per week) by the end of her sophomore year. This situation had its perks, as the bank offered a generous tuition reimbursement program for qualifying employees, along with medical benefits, which is what incentivized her to work full-time. However, while she was able to graduate on time, she felt this arrangement came with the sacrifice of a social life between full-time work and full-time school schedules. 

“It was stressful because during my ‘free time’ I had to study, and I remember having to study in between servicing clients,” Ramirez says. “I also did not get to experience the dorm life because I lived at home to please my parents and save money. I also didn’t join any clubs, had no time to attend any social events.”

As such, Ramirez and her husband, who she met at the University of Houston, plan to help their eldest son, who will be college-bound in the next two to three years, and other children as much as they can, wherever they decide to go. 

“Part of the reason I stayed in Houston was to please my parents, as Hispanic parents sometimes guilt their children into staying close by and I did not want to disappoint them,” she says. “I want my kids to have the full college experience, go out and explore, make mistakes, and learn and grow from them. I don’t have a preference for which college my kids attend, so long as it is a good fit for them and we can afford it.”

Even so, as much as many parents want to do their best for their children and help to not end up with insurmountable debt after college, many also want to instill good money management skills.

“I think it is very important for young adults to have a good grasp on finances early on, so I would like for my son to get a part-time job at least to pay for something and learn responsibility,” Ramirez says. “If I was able to do it, he can do it.”

Erin Williams, a West Point, N.Y based mom of three children ages five, three-and-a-half and two, has a more unique plan in that she and her husband plan to pay for a chunk of their kids’ college using the Post-9/11 GI Bill education benefits. She and her husband both served in the military and went through the process of transferring the Post-9/11 GI Bill education benefits to their kids, giving the three of them 66 months of tuition in total, which should cover about two-thirds of undergraduate education for each child. 

Although she has a while until her kids are college-aged, Williams is conscious of the fact that they may have all three in college at the same time (possibly even two years where all three are in college), so they have tried to be deliberate in planning for it. 

“My husband and I both had college paid for — I went to a military academy, and he had an athletic scholarship that paid for half his tuition and his parents covered the other half,” Williams explains. “Starting adult life with no debt was huge for both of us.”

As the other end of their hybrid approach, Williams and her husband plan to have their kids take unofficial “loans” from them that can be paid back once they graduate and enter the workforce, without accruing high interest rates.

“We don't want them to take out traditional student loans, either, which I see as predatory business and I don't want my kids to spend half their adult lives paying a loan off unnecessarily,” Williams says.

 One potential caveat, Williams noted, is that she wants to ensure her kids value their education and understand how costly it’s going to be while also avoiding living their entire lives in debt.

“My husband often reflects that he didn't take college seriously enough and he believes that if he was more financially invested, he would have taken it more seriously,” she says.

One of the caveats of committing to paying your kids’ educational expenses is that you may have to give them some tough love regarding what you can afford, especially if they’ve got their heart set on an expensive private college versus an in-state option with lower tuition and scholarship offers. You may receive some pushback from your emotional teenager, Khalfani-Cox says, but when you explain why in the long-term it’s best to come out as close to debt-free as possible, they will likely understand.

Kelly Dumesnil, of Fort Collins, Colo., had a unique experience in that she was the one who opted to accept a full ride to Ohio State University despite her parents being willing to finance her education at Stanford University, which would have cost about $75,000 per year. Ohio State actually paid Dumesnil a stipend to attend, enough for her to buy a car and invest in the stock market. 

“It was a pretty big shock to basically everyone at the time because I had been saying I was going to go to Stanford since I was 8 years old since my older sister had gone there,” Dumesnil says. Plus, her parents had very highly valued prestigious higher education for all their children, and were taking on expenses for Dumensil’s brother’s medical school, and the degree for her younger sister who was unlikely as the other siblings to earn scholarships, while still paying loans on her sister’s Stanford degree  — a burden that made little sense to Dumensil given her ability to go to college for free. 

“My parents have always taken extreme pride in their kids’ successes, which is common among immigrants and minorities,” Dumesnil says. “We’re Mexican Americans from Texas’s Rio Grande Valley. My parents both got GEDs, my dad went to The University of Texas Rio Grande Valley, and my grandpa got his associate’s degree later in life. So to them, their kids making it at these elite institutions was the ultimate pride.”

But the deeper reason for rejecting Stanford in lieu of a state school? Dumensil was rebelling against her parents’ paradigm that a prestigious education would increase her social standing — as well as a rebuff against their conditioning their love on her academic achievements. 

“My parents were so angry I didn’t pick Stanford and my mom cold-shouldered me for months,” she says. “I felt like their love was contingent on me succeeding academically. It wasn’t, but all the constant praise for my grades and school achievements, and the way they bragged about my sister when I was growing up made it feel that way sometimes. I was rejecting the idea that I needed to keep striving just to be something for them to show off.”

Dumesnil says her experience will undoubtedly influence how she and her husband view their 3-year-old daughter’s path to higher education.

“I think we’ll be a lot more conscious about not putting pressure on her in any direction,” she says. “I really have no personal investment in what she does other than that it helps her to grow and feel fulfilled.” 

One of the biggest potential pitfalls of funding your kids’ educational expenses is if parents commit to doing so at the expense of their retirement savings, Khalfani-Cox says.

“If you’re not careful about avoiding that, you’re shooting yourself in the foot and doing yourself a disservice, so we've been extremely clear with our kids and said ‘we are not sacrificing our retirement and we are not tapping our home equity to pay for college,” she says

“Frankly, there are just way too many other options for students to fund higher education. They can always borrow for college, but you can't borrow for retirement. Single people, in particular, need to be extremely careful about their own financial security and not jeopardize their well-being as they plan for, or enter, retirement and not jeopardize that by overextending themselves, by committing to colleges that they can't afford or taking out loans that they can't afford.”

How to pay for college as a parent

If you decide to help your children pay for at least some of their college education, you have several options for paying for college as a parent include:

  1. Seek out scholarships and grants
  2. Personal savings
  3. Investments
  4. Cash-out refinancing of your home
  5. Sell valuables for cash
  6. Income-based repayment or income-sharing agreements
  7. Installments paid to the college
  8. Student loans and Parent PLUS loans
  9. Private student loans (rates starting at .94% fixed)
  10. College 529 savings accounts

College 529 savings accounts

Many parents, grandparents and others choose to invest in a 529 plan to help pay for the education of a child in their lives. There are pros and cons to 529s. One of the biggest mistakes parents make is actually investing too much in their children's future education, neglecting their own retirement and other long-term financial planning.

Remember: There are countless ways that young people can finance and pay for their college educations (including paying for it themselves!). But there are no loans or Pell grants for retirement.

If you are on track with your investments, have at least 3 months in cash in a savings account, are maximizing your employer's 401k or another retirement match, have your personal debt easily managed, and feel comfortable that you can retire comfortably, then consider investing in your child's future. Here is what you need to know:

What is a 529 plan?

A 529 plan is a federal program that allows for tax-advantaged savings and investing for education. Any profits from a 529 plan accumulate tax-deferred, and you do not pay federal taxes on any distributions when you use them for qualified higher education expenses, which now include accredited colleges and universities, computers, and up to $10,0000 for K-12 private education.

How does a 529 plan work?

Almost every state has its own 529 plan. You can invest in any state's 529 plan, and use your investment for any one of the more than 6,000 U.S. colleges and universities, as well as 400 schools in other countries, that are considered eligible.

In many states, you can deduct your 529 investment from your state taxes. In all cases, any gains from your investment are tax-free, as long as you use the money to pay for college.

If your child named on the account does not use the money for any reason, your investment can be transferred to another family member without penalty, or saved for a graduate school — so long as the funds are used for qualified educational purposes. Unused funds can be withdrawn for non-education purposes, subject to federal taxes and a 10% penalty.

To successfully use a 529 plan:

  1. Open a 529 college savings plan. The College Investor's 529 Guide explains plans in each state.
  2. You choose which investment fund you want to manage your money, putting you, the investor, in control of the investment.
  3. Contribute when and how you like — occasionally as you have extra cash, with automatic monthly depositions, and/or in gifts from loved ones at birthdays and holidays.
  4. When it comes time to withdraw the funds (in a lump sum, or as-needed), fill out your program's withdrawal forms, and distribute to the beneficiary (child) — not the account owner.

The bottom line: In today’s day and age of exorbitant college costs, make sure that the sum you and your student are spending on college will have a positive ROI long-term. If you decide to help pay for your kids' school, but sure to account for your own financial well-being as well. 

Emilia Benton is a freelance journalist covering a wide range of topics including personal finance, health and wellness, among many others. Her work has appeared in publications such as LendingTree, Insider, SELF, Women’s Health, and more. Emilia is also a 10-time marathoner and lives in her hometown of Houston with her husband, Omar, and Boston Terrier rescue, Astro. 

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