[Editor’s Note: This guest post is written anonymously by a CPA who is currently working as a community college Chief Financial Officer. On a personal basis his six children have attended various public, private, and military colleges and graduate schools. On a professional basis, he has observed many financial errors made by students and their parents with regards to paying for college. In this piece he tosses WCI readers a few pearls of wisdom. We have no significant financial relationship at this time.]
One of the major expenses for all families is paying for college. In many ways it’s a nice problem to have as every parent wants to do all they can to help their children be successful and providing them a good education is probably one of the most important ways parents can help. Unfortunately, a lack of planning and unchecked parental ambition can make realizing those dreams more costly and perhaps less successful. As high income parents your children aren’t going to qualify for need based aid –it’s all on you and your preparation. Allow me to pass on a few observations as a parent and college administrator that may be useful as you prepare for your children’s future success.
Everyone Is Different
Each child has their own set of motivations and ambitions. You can create opportunities but ultimately it is their vision of their future that will lead them to educational success. College isn’t for everyone but everyone needs a skill. If your child doesn’t enjoy traditional academic success, encourage them to explore other career training options. Math may seem much more exciting and relevant when they can apply it to a “hands–on” skill. Pushing them in a direction they aren’t ready to go will be a waste of their time and your money.
You Don’t Necessarily Get What You Pay For
There is a huge price variance in higher education. Much of that is to be expected in that public institutions should be charging far less than actual cost due to their taxpayer subsidies. In some instances elite institutions with need-blind admission policies can actually be less expensive for low income students. However, with the exception of a few institutions with large endowments, it is the tuition paid by high income students’ parents that is subsidizing the cost of education of the low income students. Merit based scholarships also vary widely. You need to look at the net cost of attendance including living expenses before you can make any meaningful comparisons. A very common mistake is to conflate cost with quality-especially at the undergraduate level. Quality is more a function of the student than the school. A community college with typically smaller classes can be a much better value for most students for the first two years. While it may matter where you graduate, nobody cares where you got your general education.
Begin With The End In Mind
This second of the late Stephen Covey’s Seven Habits Of Highly Effective People is particularly important to planning an academic program. Currently only 57% of first time full time students are graduating with a bachelors degree within six years. Most of that is due to a lack of a plan and students wandering aimlessly with a lack of focus. Certainly students should be able to change their minds but the sooner they explore their options and the more specifically they plan their programs the better. Another application of this principle is to help students be realistic about the graduate training requirement for many vocations. For example, most students understand that if you want to be a doctor you have to go to medical school but few seem to understand that professional work in a social science has similar extended graduate training and doesn’t have nearly as good a return on investment. I’m not suggesting that a good liberal education is without value but far too many students are graduating without realistic preparation for what is needed in the employment market. That is proving to be true for even those that get jobs. In a recent report by McKinsey & Co. less than half of American employers believe their new employees are adequately prepared in their post secondary programs. There is a huge mismatch between what students are studying and available jobs.
Ensure Your Child Has Some “Skin In The Game”
Your love should be unconditional, your financial support should not be. Your child should be incentivized to succeed academically. Promises and expectation of unconditional support can be very destructive of personal ambition in high school and college. Preparing for college and even applying for merit-based aid is a lot of work and no normal adolescent is going to put forth their maximum effort if it makes no difference in the end. A recent study using federal data from across the country reports that the greater parental contributions were, the lower the student grades were. Another related study reported that the lowest grades were earned by students where there hadn’t been much discussion about the student’s responsibilities. However, the same study also found a positive correlation between parental support and graduation. The message is not that parents should stop paying for college but evaluate expenses and make smart investments with some accountability. With modest means and six children I, out of necessity, put my children on a “fixed contribution” plan from an early age which set my parental contribution at four years of tuition at a state university or equivalent. They were to receive it even if they received scholarships. The requirement of personal responsibility proved to be a powerful incentive and five of the six qualified for scholarships and now have at least a masters degree with no outstanding student debt ( the last went directly into the military). Setting aside your commitment in a 529 plan is a good investment that can also make it seem more real.
Make High School Count
Over 20% of new college students aren’t prepared to do college level work and consequently are paying college tuition to learn material typically taught in high school. On the other hand, well prepared students are able to save time and money by participating in more advanced coursework. Most states now have “dual credit” arrangements with the local community colleges or advanced placement options that will enable students to get a head start on their undergraduate education by fulfilling many of their general education requirements while in high school. These classes are obviously a lot more work than typical high school courses but can save thousands of dollars in future college costs.
Planning in advance for post secondary education will make a big difference both in the success of your child and in your own finances.
What do you think? What steps are you taking (or did you take) to control college education costs for your children? What did your parents do that worked and didn’t work? Comment below!
I liked this guest piece. Short but to the point. I love the idea of a “fixed contribution” plan. That would help easily share the load and keep their motivation in track.
I am grateful that my parents could afford to pay for my undergraduate education as it has made me much more financially secure at this point. However, I did go to a private school (which was a much better financial deal than it is now), and my father had a few stipulations.
1. had to take classes at the community college in the summers that would transfer (really only works the first two summers though)
2. had to pay personally for any class I did not get an A or B
3. had to graduate in eight semesters or any additional cost would be on me
I would add that for my children I will likely strongly suggest that they complete their first 1-2 years at a community college unless receiving a substantial scholarship offer.
It helps to begin with the end in mind. We currently have two children in college who are both planning on medical school. We contributed fixed amounts to 529’s as they grew up. We sat down with them and explained that if they went to a public university on merit scholarship how much more money they would have saved to help with med school. They both chose the public university on merit scholarship over private. One even got more merit aid after doing well her freshman year. Many public universities have scholarships based on merit regardless of need. We will have the same discussion between public and private before med school. Our state has excellent public universities and med schools. We may not be able to keep them completely out of debt for school but should be able to put it off till mid to late med school.
A word of caution about AP classes in high school: If your child is thinking about med school, check out the entrance requirements for med school. The med schools are not fully accepting AP classes to meet the all basic science requirements anymore. IDK how they would look at community college classes for the core sciences. Also, colleges like to keep your child around for more than 4 years so be involved in course planning. So again, begin with the end in mind.
BTW we invested in three 529’s years ago, one for each child. Over time we have moved the money out of Fidelity and Schwab due to performance and fees to the Vanguard Plan in Iowa and the T. Rowe Price plan in Alaska. Both of which have outperformed many similar plans and are very easy to navigate. Our state plan has dissolved due to poor management and investments. Glad we didn’t chose it! Check out http://www.collegesavings.com for good info on plans.
I agree that it is important to have a goal in mind and to evaluate the AP courses that children are taking.
I was on the admission board at my medical school for a few years. We gave freshman level courses very little concern. Some kids struggle with the transition and we found that freshman level course grades had very little relation to quality of medical student. Most AP courses will only get you credit for freshman level.
My kids are glad that they took AP in high school. And, they did use the AP credits in the humanities to meet freshman requirements. But the med schools they are interested in will no longer allow AP credit to meet the requirements for Gen. Biology, Gen. Chemistry, Gen. Physics, Organic, or even Calculus, which is very different than when my husband and I attended med school.
Great guest article. As a resident now, I am beginning to start paying back loans; although I have signed up for IRB, thus making my payments basically zero. My parents helped out significantly with both UG and medical school, however, I did take out some loans every semester to help them out.
Furthermore, I have a comment about Dr. Mom’s last post. I took AP credits in high school; scored a 4 or 5 on the AP tests and received 35 credits in college as a freshman. This was probably my biggest mistake. Although those 35 credits saved a lot of $$, it eliminated what I called easy “A’s.” This is something to consider when choosing the route of going to medical school; because 30+ credits of A’s can boost your GPA by .2 or so.
I agree with the idea of retaking classes in college that you may have already received AP credits for. Unless you are a genius with photographic memory, typical premed students need to strategically “play the game” to boost their GPA in order to optimize their chances of admission to med school. This includes retaking classes they may already have AP credits for to get higher grades and providing a better foundation for future classes. Another example, learning not to overschedule too many challenging classes at once (as espoused by some of my fellow premeds who wished to graduate early taking as many as 22 units a term) as this can be harmful to your GPA.
I had a few friends who despite getting AP credit for intro calc, bio, etc retook them their freshman year to get those easy “As” which ended up being “Bs.” This was at a top ranked public university. So don’t blow those intro classes off if you go down that route. Additionally, things might have changed but just 5 years ago my allopathic med school accepted my AP calc class as a pre-med requirement because my undergrad transcript showed credit for it. Having AP bio credit was only useful in that it gave me advanced placement to the 300 level bio courses in undergrad, but I still had to take the same amount of bio courses.