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Who Should Pay for College? Parenting Approaches Differ

Some say it's a parent's responsibility to cover college costs, while others say the child should at least help.

Adam Zoll, 12/28/2012

Few financial decisions a parent makes are as significant--or as expensive--as the decision about how to pay for a child's college education. And with tuition costs rising faster than the rate of inflation, and more and more students graduating with college loan debt, it's a decision that can add financial and emotional strain within a family.

We recently asked Morningstar.com users on our Personal Finance discussion board how much of their child's college costs they paid or plan to pay and why. The question seemed to strike a chord with many of our users, dozens of whom shared stories about how they funded their children's educations while trying to teach life lessons along the way.

For some the question came down to a matter of financial wherewithal. Their families simply couldn't or can't afford to pay all college costs, especially for multiple children. In other cases, parents felt an obligation to pay all of their children's college costs, either as part of their parental responsibilities or because their parents had done the same for them. Below are some of the responses. To read all the comments, click here.

'We Paid All Undergraduate Costs'
Many users described covering all of their children's college expenses as a parental duty, and several mentioned wanting their kids to begin their working lives without having to worry about paying loans.

Comments by zorkl55 were typical: "We paid all undergraduate costs for our kids. I know so many people where I work who are saddled with huge debt when they embark on their careers. My wife and I did not want our kids to have that kind of burden after college."

"We paid 100% for four years, and anything after that they were on the hook for," wrote healey36. "We figured they'd have enough challenges coming out and didn't need to be buried in debt. My wife and I have lived frugally (not cheaply) to bankroll this and can almost see the light through the trees now. Have a plan, keep your head down, and you can do this."

But paying 100% of college costs can be a real challenge for many families these days, especially those putting multiple children through school.

Tedstryker wrote, "We have two kids in their junior year living at home. We have dropped our 401(k) contributions to 10% and made some other sacrifices in order to get them through without loans. It will be close. We wanted to do our best, considering the economic outlook, to bless them with a start without loan payments. They work part-time to help with their daily living expenses. I started college in 1975 with a full load for $145 per semester. Times have definitely changed."

Llaroo reported paying "all tuition, fees, room and board for our oldest two kids (graduated from top-tier private colleges in 2010 and 2011), but by the skin of our teeth because college-tuition inflation was higher-than-expected. [We had a] pretty basic plan--we started saving in custodial accounts when each child was born, then 529 accounts when we learned about them. We increased college savings every year as our income increased. We had to make some choices, including not moving to a more expensive house, but both kids have excellent jobs and will be entering professional/graduate degree programs next year."

Some parents said that, while paying for an undergraduate education was their responsibility, their kids would be on their own for graduate school.

"Our decision to cover our daughter's educational expenses is based on our belief that she should not have to worry about earning money or getting loans to pay for her undergrad experience," said BMWLover. "That said, graduate school will be in the future if she continues on the track for the major that she is currently focusing on. The cost of her master's and potentially Ph.D. will be her responsibility (OK, so we may help out a bit, but we don't have the means to cover the full cost)."

In some cases, parents laid down a baseline of costs they would cover and told their children they would have to make up any additional expenses.

For example, royal4 paid for all three of his or her children's undergraduate educations, with one qualification: "The first one wanted to go out of state, which was $10,000 more, so I said OK, you pay the $10,000. He went in-state."

'Pay It Forward'
A number of users commented that they paid or planned to pay college costs for their children because that's what their parents did for them.

"As I was about to set off for college, my father said to me: 'We can't promise you an inheritance, but we can make sure you have an excellent college education,'" recalled Juris2. "We made the same promise to our children. We paid 100% of the private college costs for our two children's baccalaureate degrees. Roughly speaking this totaled $250,000. Two thirds of this money came from our savings or current earnings; about one third came from savings bonds that my parents gave to all their grandkids for their college costs."

RCSinPGH told a similar story of carrying on a family financial tradition: "When I thanked my parents for my college education fully paid by them (in 1972), my father said that I owed them only one thing: If I ever had children, I was to pay for their education. It wasn't called it back then but today it's called 'pay it forward. When each of our daughters thanked us for their educations, I don't have to relate what we told them they owed us."

'Skin in the Game'
Although parents who felt it was their duty to pay all college costs were well-represented, several others felt it was important that their children bear some of the burden. Many mentioned wanting their kids to have "skin in the game."

"We just sent our oldest son off to an out-of-state public institution," wrote momof3. "He earned a scholarship that covers about 25% of tuition. We don't have a lot saved in [our children's] 529 plans and told our number-one son that if he wanted to go to particular out-of-state school he needed to help pay for it. He is using summer job money to pay for books and entertainment and will work part-time to continue to contribute. He qualified for federal student loans (subsidized and unsubsidized). I work in the public sector and my spouse works for a nonprofit, so we don't have a lot of discretionary money to save. Retirement saving is a priority for us. Thank goodness for a relatively well-off grandparent who chipped in $10,000 this year. We don't want our son to graduate with too much debt, but he needs to have 'skin in the game' to ensure he graduates on time (or early)."

Croesus wrote, "We paid 80% of undergraduate; kids were responsible for 20%, which they could pay from working in high school, obtaining scholarships, work study while in college, and/or loans. This worked well--they had enough of their own sweat equity in it to assure that they worked hard while they were there, yet graduated without a mountain of debt. "

Like many parents we heard from, Hohum47 devised a system for sharing college costs with his or her children. "We had small savings for college for each of our kids in super-conservative accounts. The deal was one third from the account, one third from us, and one third from each kid. If the account ran out it went to 50-50. The older one went to a small private school out of state and has since gone back for her masters on her own. Our son went to a state school, and on graduation we turned over the remains of the account to him. My wife and I put ourselves through college and while it was a lifetime ago, we are still of the opinion that a student needs to have a stake in it."

RenainTexas said she and her husband plan to pay tuition for her two young children, but that help with room and board will be contingent on how serious they are about their studies. "We want them to take some ownership and responsibility in paying for their college education," she wrote. "Are they dropping classes like hot potatoes? [Are they] making mature financial decisions, or do they need to learn more about how their decisions impact finances? Things like this will determine how much additional help we give them."

'You Owe Me the Money'
While most parents who wrote comments felt it was up to them to at least partially fund their children's college experiences, there were a few that took an alternative approach, expecting the student to pay his or her own way but offering help in one form or another.

"In the early '80s, my Dad helped me pay for my college expenses while I worked part time," moneytracker wrote. "I had three siblings, and my family's means were quite limited. I only asked him for money when I really needed it, trying hard to work enough hours to pay for everything myself. When I graduated, even though I had worked hard to take as little from him as possible, he said, 'By the way, the total comes to $3,000. It's a 0% interest loan, and the term is infinite, but you owe me the money.' I paid him back within two years. We plan to do the same with our daughter, but with the plan laid out for her up front. She can 'borrow' the money for college, for starting a business, or for getting married and starting a family, but make no mistake: It's a loan--a 0% interest, infinite-term loan. If she chooses to pay us back, then we'll know whether we did a good job raising her or not. Although she's only just turned 10 years old, she already understands what the deal will be."

EnvEng was also in the minority of posters asking their kids to pay for college themselves. "We didn't pay for our kids to go to college," he wrote. "We helped with food and miscellaneous expenses now and then, and were extra generous during birthdays and Christmases. College is often a party, and we didn't want to finance that. My wife and I paid for our own college education by working summers and getting student loans. We encouraged them to study hard and apply for scholarships. Both are managing successful careers, and they tell me they are smarter and stronger for it, compared with some of their friends who had it handed to them, and still don't get it. They knew we would help if needed."

Adam Zoll is an assistant site editor with Morningstar.com


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