Pros and Cons of Helping Your Student Pay for CollegeJanuary 15, 2021
For parents, having a child start college is often a bittersweet experience. You are happy for all they have accomplished and excited for the adult they are becoming. At the same time, you may miss the memories of them as small children.
Having college-aged children also introduces new parenting dilemmas, including whether or not parents should pay for college. Although parents are not obligated to pay for college in most circumstances, many parents consider helping with expenses.
In fact, 70% of parents are saving some money for their child’s college. This is helpful because, in the 2019 – 2020 school year, families paid an average of $30,017. Fifty-two percent of this cost included parents’ income, savings and loans.
If you take out parent student loans for your child’s college expenses, you will be obligated to pay them back. Another instance in which parents are sometimes obligated to pay for college is if a divorce or custody agreement requires it.
Whether parents should pay for college is a personal choice. Here are some pros and cons to weigh to help make your decision:
Pros of Helping Your Student Pay Tuition
While parents are not obligated to pay for college, many families feel that there are benefits to doing so. If you have the financial flexibility and would like to help, here are a few positive impacts you may experience:
Boost Your Child’s Financial Future
If you help your child pay for college, they will be less likely to need student loans. Graduating without student debt sets them up for a healthy financial future.
If parents help their students pay tuition, then the student may not need to repay student loans after graduation. That will allow them the freedom to accept a career they enjoy rather than one that will pay more so they can pay off their debt.
Avoiding student loan debt will also allow your child to focus on their financial goals, like homeownership and maxing out their retirement plan. Recently, surveys show new graduates feel saddled with student loan debt, preventing them from going after other financial goals.
Open Doors to Job Opportunities
More jobs are expected to require college degrees in the next ten years. Helping your student pay tuition could open up doors for his or her future. Your student will have more options available to them with a college degree and greater earning potential.
If they cannot attend college because of financial reasons, that can hinder their career growth opportunities.
Allow More Time to Focus on School
Without worrying about tuition, your child can focus on academics and earning their degree. If a student has to pay for school, it may take longer to complete the degree.
Just as there are benefits to helping your child pay for college, there are also some drawbacks:
Cons of Helping Your Student Pay Tuition
While there are several pros to helping your child pay for college, it’s not always worthwhile. If financially supporting your student’s education means significantly decreasing your own financial health, you may reconsider. Here are a few reasons you may decide not to help your child pay for school:
Instill a Sense of Responsibility
If a student does not have to be concerned with paying for college, they may not learn the value of money. A student may take financial help for granted, not taking school seriously. If a student is required to contribute towards expenses, they may learn responsibility.
Focus on Your Retirement Savings
While it’s great to help your student pay for college if you have financial flexibility, parents are not obligated to pay for college if it will hurt their own financial health. As many experts say, students can borrow for their college expenses, but the parents cannot borrow for their retirement.
If you can max out contributions to your retirement accounts and still save and help pay for college, this may not be a concern. However, if you are unsure if you are on track for retirement savings, helping pay for college may not be financially wise.
Deciding whether parents should pay for college or not is a personal choice. Of course, parents are not obligated to pay for college. If you have decided that the benefits outweigh the drawbacks, however, there are many options available to help your student get started:
Parent PLUS Loans
Parent PLUS Loans are federal student loans offered by the U.S. Department of Education to parents of dependent college students. The parent is responsible for paying the loan back.
Parents can use this money to pay for tuition and other education expenses. A credit check is conducted to determine eligibility but does not affect the interest rate. All interest rates are fixed and remain the same throughout the life of the loan.
Note: There is an origination fee when the loan is disbursed. This means you will receive less money than you borrowed because a percentage of the amount borrowed will be deducted from the loan fee funds.
If you have a high credit score and a healthy credit history, private student loans may be a better option for you. Lower interest rates are available based on a good credit score. You can borrow a private student loan through a bank, credit union or an online lender.
Obtaining a private loan rather than a federal loan can be beneficial because some private lenders do not charge origination fees, and lower interest rates are available.
If you decide early that you would like to help your student pay tuition, a 529 plan may be an option for you. A 529 plan is an investment account where money can be invested and hopefully grow and be available for educational expenses. This requires you to save early and find a plan that will give you a strong return.
If you are against taking on loans for your child and unable to save early, you can still help your child by searching for scholarships. There are various scholarships available for college based on academic standards, essay writing contests, extracurriculars, and many more. Helping research scholarship opportunities can be a great help to your student to find free money for school.
Whether you think that parents should pay for college or not, it’s important to begin the discussion early. This will allow time to make a financial plan and help everyone be on the same page with expectations.