Should Parents Pay For College or Should Students? Here’s How to Decide

 March 20, 2020
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Should parents pay for college? It’s a hard question to answer. It’s natural to want to help your children succeed, but choosing to pay for their education might not be an easy choice for everyone.

How you approach your child’s college costs is all about your individual situation. Here are five questions to ask yourself as you decide how to tackle the cost of your child’s education.

1. Can you afford to pay for everything?
2. Are you putting your retirement at risk?
3. Can you use a hybrid approach?
4. Do you have a college savings account?
5. Are there ways to help without using cash?

1. Can you afford to pay for everything?

The expense of higher education is a legitimate concern for many families. Even public institutions can cost tens of thousands of dollars for just one academic year.

Consider this: For the 2019-2020 school year, the average cost for two semesters, including room and board at a four-year, in-state university is $21,950, according to data from CollegeBoard.

In our survey of parents, 37% of respondents said no investment goal is more important than saving for a child’s college education, but it is important to be realistic about how much you can truly afford to spend.

When you apply for federal student loans using the Free Application for Federal Student Aid (FAFSA), you’ll learn your Expected Family Contribution (EFC). It determines how much the government thinks you should be paying for college. Your family circumstances might reveal that you aren’t capable of covering all education costs.

Take siblings into account

Consider how many siblings you have. Even if your EFC suggests your parents’ income is enough to cover a significant amount of your college costs, it’s possible they won’t be able to pay for everything once they take any siblings and their future college expenses into account as well.

Look at your situation, including how many children you plan to have, and what you can save without jeopardizing your own financial future.

2. Are you putting your retirement at risk?

If you decide you want to help your child pay for college, it’s important not to jeopardize your retirement, said Travis Boyer, an LPL financial advisor at Secure Planning Group.

“A parent’s earnings timeline is much shorter than their children’s,” Boyer said. “Parents should be saving for retirement during their peak earning years, not diverting that money to pay for college.”

Jeff Motske, a certified financial planner and the president and CEO of Trilogy Financial, pointed out that in addition to retirement savings, you should fulfill other financial goals, such as having robust emergency savings, before devoting a large amount of money to your child’s college.

“There are no scholarships or loans for retirement,” Motske said. “Don’t contribute to a child’s college education at the expense of your retirement or other important financial goals.”

Use caution when considering college loans

Figure out how much you need to set aside for retirement (and other goals) each month to secure your financial future. Only contribute to college savings after you’ve met those obligations.

Both Boyer and Motske also warned against taking on your own debt, such as a Parent PLUS Loan, to pay for your child’s college costs.

The last thing you may need is your own student-related debt as you approach retirement.

3. Can you use a hybrid approach?

Rather than looking at it as an all-or-nothing decision, consider how you might help pay for a portion of your child’s education. For instance, you can:

  • Offer to pay only for tuition costs, and make your child responsible for all other expenses.
  • Provide a stipend to cover housing and meals. In exchange, you could make your child cover tuition and fees by getting scholarships, a job or their own student loans without a cosigner.
  • Commit to an annual or four-year amount you can contribute to your child’s education (e.g., $3,000 per year). Then, let your child determine how to use that money for college costs.

It may be possible to use a combination of approaches. For example, you could offer to pay a specific amount and help your child search for scholarships and grants to make up the rest.

4. Do you have a college savings account?

Starting early can make a big difference in how much you can put toward your child’s college education, according to Motske.

“You don’t actually have to pick between your child’s college and your retirement,” he said. “The earlier you start planning for both, the more options you create.”

If you started saving for retirement with your first paycheck out of school, as you get older, you may need to set aside less money each month to reach your retirement goals. That could free up more income to put into a college savings account, including a tax-advantaged 529 investment account.

The key, said Motske, is to create a plan early on — before your options are limited, if possible. “Earmark money for college savings as your child grows,” he said. “Once your child moves from daycare to public school, take the money you were spending and put it in a college fund.”

You could also continue to use that approach for both your personal financial goals and your child’s college savings throughout the years, as your situation changes and as your income increases.

5. Are there ways to help without using cash?

It is not always about providing cash directly to your children. Instead, there might be other ways for you to help without paying for education costs.

“One way parents can help, without borrowing themselves, is to cosign a private student loan,” said Boyer. “However, it’s important to look for a company that has a cosigner release so you aren’t responsible for the debt after school.”

Boyer also recommended that parents discuss realistic education options with their children. For example, parents could encourage their children to go to less expensive schools and help them consider the return they’ll receive based on their potential future salary.

Other ways parents can help their children with college costs include:

  • Allow your child to live at home for all or part of their college career, reducing housing and food costs.
  • Encourage your child to get a part-time job in high school to save some money for college.
  • Review college options with your child, including starting at a community college to reduce long-term costs.
  • Help your student apply for scholarships ahead of time by noting due dates and creating a schedule they can follow.
  • Make sure your child fills out the FAFSA — and accurately fills out the parent information. This can help them get grants, work-study and qualify for other programs.

Not every parent can pay higher education expenses, but it’s possible to provide help and support to students.

Communicate with your child

No matter what you decide about paying for college, set clear expectations for your child and don’t wait until the last minute to talk to your student about the reality of paying for college.

Having honest conversations about the expense with your children as early as is practical may be helpful when it comes to deciding how to pay for college.

Maya Dollarhide contributed to this report.

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