Examples of How to Pay for College Without Borrowing

I have been reading the best book I've ever read on preparing financially for college. The book is Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents and I'll be sharing a bit of it over the next several days. Today I want to go through an example the author uses to illustrate how to pay for college without accumulating debt.

Let's start with the keys to making this strategy work. They are:

• The student attends a community college (cheaper) for two years before transferring to a more well-known public university.
• The student works and saves his money to pay for his college education.
• The parents make moderate lifestyle changes to save money -- which they contribute to the college costs.

Here's what it looks like year-by-year:

Year 1 -- Community College

• Total cost (tuition, fees, room and board (at home), transportation, etc.): $6,860
• Savings from parents (they spend $15 per week less on bottled water, snacks, etc.): $780
• Earnings from student (30 hours per week -- less during school year -- and saves the equivalent of 20 hours per week at $9 per hour after taxes): $9,360
• Year 1 total income (parents' savings plus student's earnings): $10,140
• Year 1 surplus (after paying for college): $3,280

Year 2 -- Community College

• Total cost (tuition, fees, room and board (at home), transportation, etc.): $6,860
• Savings from parents (they spend $15 per week less on bottled water, snacks, etc.): $780
• Earnings from student (30 hours per week -- less during school year -- and saves the equivalent of 20 hours per week at $9 per hour after taxes): $9,360
• Year 2 total income (parents' savings plus student's earnings): $10,140
• Year 2 surplus (after paying for college): $3,280
• Year 2 accumulated surplus: $6,560

Year 3 -- Public University

• Total cost (tuition, fees, room and board (at home), transportation, etc.): $15,600
• Savings from parents (they spend $15 per week less on bottled water, snacks, etc.): $780
• Earnings from student (30 hours per week -- less during school year -- and saves the equivalent of 20 hours per week at $9 per hour after taxes): $9,360
• Year 3 total income (parents' savings plus student's earnings): $10,140
• Year 3 deficit (after paying for college): -$5,460
• Year 3 accumulated surplus: $1,160

Year 4 -- Public University

• Total cost (tuition, fees, room and board (at home), transportation, etc.): $15,600
• Savings from parents (they spend $15 per week less on bottled water, snacks, etc.): $780
• Earnings from student (30 hours per week -- less during school year -- and saves all earnings at $9 per hour after taxes): $14,040
• Year 4 total income (parents' savings plus student's earnings): $14,820
• Year 4 deficit (after paying for college): -$780
• Year 4 accumulated surplus: $380

It seems like the college costs are too low and the amount the student works is too high (though the author makes a good case why students can and should work during college, I'm not sure 30 or 40 hours per week is reasonable.) That said, this example does illustrate some options/ideas for how to pay for college with little to no debt.

But I think it can be improved upon (and made more realistic). Here's what I'd factor in to pay for college:

• Same community college/college split as above (though higher costs).
• Parents save a good amount in advance.
• Parents help by contributing out of current income.
• Student works (though not as much as the example above).

Given these, here's a more workable example (IMO) from me:

Year 1 -- Community College

• Total cost (tuition, fees, room and board (at home), transportation, etc.): $10,000
• Savings from parents (saved during the pre-college years): $30,000
• Parents contribution/savings from current income: $5,500
• Earnings from student (15 hours per week -- less during school year -- and saves the equivalent of 10 hours per week at $9 per hour after taxes): $4,680
• Year 1 total income (parents' savings, parents' income, and student's earnings): $40,180
• Year 1 surplus (after paying for college): $30,180

Year 2 -- Community College

• Total cost (tuition, fees, room and board (at home), transportation, etc.): $10,000
• Parents contribution from current income: $5,500
• Earnings from student (15 hours per week -- less during school year -- and saves the equivalent of 10 hours per week at $9 per hour after taxes): $4,680
• Year 2 total income (parents' savings, parents' income, and student's earnings): $10,180
• Year 2 surplus (after paying for college): $180
• Year 2 accumulated surplus: $30,360

Year 3 -- Public University

• Total cost (tuition, fees, room and board (at home), transportation, etc.): $25,000
• Parents contribution from current income: $5,500
• Earnings from student (15 hours per week -- less during school year -- and saves the equivalent of 10 hours per week at $9 per hour after taxes): $4,680
• Year 3 total income (parents' savings plus student's earnings): $10,180
• Year 3 deficit (after paying for college): -$14,820
• Year 3 accumulated surplus: $15,540

Year 4 -- Public University

• Total cost (tuition, fees, room and board (at home), transportation, etc.): $25,000
• Parents contribution from current income: $5,500
• Earnings from student (15 hours per week -- less during school year -- and saves the equivalent of 10 hours per week at $9 per hour after taxes): $4,680
• Year 4 total income (parents' savings plus student's earnings): $10,180
• Year 4 deficit (after paying for college): -$14,820
• Year 4 accumulated surplus: $720

Of course this example isn't right for everyone either. But it does have me realistic (IMO) college costs and student working requirements.

You can play with the variables however you like. For instance, we've saved more than $30,000, so we'd make that number higher and take less out of current income each year (I still think making the student work is a good idea.) You can adjust your plans based on your preferences to get a plan that works for you and your family.

The key point: if you plan ahead and work at it, your student can graduate from college debt free. Pretty cool, huh?

Comments

[Stack The Chips]

It sounds feasible, you just need to plan early and stick to it.

[Leigh Ann]

Your example seems much more realistic. I wish that I could only spend $15,600 at the state university I currently attend, but my cost of attendance is higher.

[ronald rule]

My children will not do this step

The student attends a community college (cheaper) for two years before transferring to a more well-known public university.

My children, as I did, will attend the well-known public university for all four years. This is better for the student. My sister and I both did this at Florida State University, and would not trade it for anything. My wife on the other hand lived with her parents for two years and then went to college. Living with your parents is not college, it is like extended high school. Do not force your children into this past or they will regret it.

[Everyday Tips]

My son is a junior in high school - and I just bought this book last week!

I agree, the example given does seem a little cheap. Regardless, I am sure the message still holds.

I don't think my kids will start at community college either, unless something drastic happens to our finances. However, the path described is probably what I should have done instead of going away to school right away and ending up hugely in debt.

[Patty]

What if the parents were poor and couldn't save ahead of time since they were just trying to make ends meet. And the children still want to go to college? The tuition is on them-entirely. How would you go about it then?

[Joe B]

If you try to get an engineering degree, by spending your first two years at community college, you will still spend your last four years at state university. Community colleges are great for getting general ed, but some programs, like engineering, have engineering courses that start in the first year. Those courses are not offered at community college and most state universities strictly enforce the prerequisites of those courses.

I know this first hand, having the pleasure of earning a four year degree in only six years.

My classmates at state U, who skipped community college, were able to graduate in 4-5 years (engineering is hard).

[jdgjdg]

Students can potentially earn a lot more than you listed by working full-time during the summer months. Good students in engineering internships can earn >$10,000 during one summer. E.g., searching "glassdoor.com", I see Microsoft internships pay $2K-$10K/month. Alas, English majors aren't so lucky.

[jon]

Why do you have your kid working only 15 hours a week during the summer? If they are not in school they should be working full time and saving up the money.

[Apex]

Maybe other state schools are most expensive but for Minnesota the numbers listed seem to be pretty close.

In Minnesota there are two public college systems. The MN State college system and the University of Minnesota system. U of M is a well known and recognized university.

The in state rates are as follows: The Minnesota state colleges tuition and fees all cost in the $6,00-$7,000 dollar per year range. The University of Minnesota tuition and fees is $11,000.

http://www.mnscu.edu/students/tuition/collegecostcomparison.html

Obviously room and board need to be added to this but 15-20K seems like it should do it at these schools.

I honestly have never quite understood all the hand wringing about college costs. I entered college in 1989 at one of the Minnesota state colleges. My tuition was around $2,500, my room and board was about the same and with fees and books I figured my average cost was around 6K per year. Now 20 years later it appears tuition has a little more than doubled in my state. Presumably room and board (on campus) has done about the same. So I would expect I could go to the same college I went to (one which has me currently earning over 6 figures) for around 13-14K. I consider that not only to be not expensive but to be very reasonable. If I wanted to go to the University of Minnesota for a bigger name school I should be able to do that for around 20K, still not too bad it seems to me.

[Jack Barley]

Just wanted to pass on our own blog:

http://twentyfourpoor.blogspot.com/

My wife and I are trying to get free of debt and then hope to help others do so as well through our non-profit.

Thanks for your help!

Jack Barley

[jim]

$15k a year for 4 year school is at the cheap end but some are that low. $20k is probably closer to average. Tuition for public schools varies considerably from state to state but median is about $9k. U. Michigan total costs in state is about $25k a year. U California is more like $30k a year, Virginia is $23k a year, Montana is just $14k a year. Just to name a few.

[Sarah]

Investigate your high school EARLY - many school systems (and in Ohio it is law that they have to) will let students take classes at local community colleges instead of high school courses, paid for by the school district. It is easy to get a full year of credits under your belt before you graduate high school.

Also I just checked our local community college & assuming you are in-county (which I'm assuming since the student is living at home) - it is $1270 for 15 credit hours. figure 3 semesters in a year, if you don't take a summer break, and this is under $4000.

[Sarah]

OH! One other thing - many students might not want to start off doing a community college, but taking summer classes at one and transferring them to your public school is an easy way to rack up those community college classes, and possibly graduate in 3 years, knocking off a full year of the public school tuition.

[ronald rule]

No kid really wants to gradudate college and be in the real world in 3 years, so they can work for the next 50 years. I gradudated early and wish I had slowed down and taken an extra year to enjoy college life.

[Sarah]

@ronald - I disagree - many kids who are working while going to school, and contributing most of their money to their college education would love to graduate in 3 instead of 4 years. Especially if it means less debt, and a better paying job. The idea of enjoying college life isn't necessarily going to run parallel with trying to get out of college with the least amount of debt possible.

[Michele]

Man, I must be really out of touch, because these numbers seem CRAZY HIGH to me, ESPECIALLY the numbers for the cost of community college. I mean, I went to a four year state college in the late 90s and my tuition/fees/books never came anywhere close to costing $7000 per year - much less $10,000 - and that was BEFORE factoring in my financial aid (which was VERY generous).

I just checked the cost per credit at my local community college, and it's $47, which means that a full-time, 15 credit hour student attending community college should only spend about $1400 PER YEAR for 2 full-time semesters with summers off. Add in fees and books and I think you could safely get up to $3k per year, but much more than that sounds crazy. Even if each credit hour costs $100, they'd still only incur about $5k total in expenses (including books and fees).

I'm also not sure why you're factoring in room and board if the child is presumed to be living at home the entire time (a TERRIBLE idea, in my opinion, BTW). If that's the case, the parents shouldn't see any change at all in housing costs, and only a marginal change in food costs.

Also, I can't help but think that you're a little too caught up in viewing college as a product rather than a process. Yes, it IS a product, in the regard that it's the means by which one obtains the qualifications and certifications that they need in order to enter the "real world." But it is also the PROCESS by which they gain the experiences, make the mistakes, and learn the lessons that they need to SURVIVE the real world, not just work in it. This is precisely why I think it is a bad idea for someone to live at home with their parents for the entire 4 years. Doing so provides a disincentive for students to step outside of their comfort zone, get involved and invested in the campus community, form deep and meaningful personal relationships, and ultimately robs them of the experiences - good AND bad - that students who live on or near campus with their peers have. In short, it is TOO MUCH of a safety net, and while it might save all involved some money, it also "saves" them from things that they actually NEED to experience (and no, I'm not talking about partying).

[Doug @ CheapScholar.org]

In my experience, students that hold a campus job while attending college tend to be better students and manage their time much more effectively than a non-working student. However, I have seen this model only be successful if a student is working less than 15 hours a week. If they start working more than 15 hours a week, their academics take the hit. Either because they don't have the time allotted to study or because they are sleeping less and just are not getting the rest they need to perform well in the classroom and on assignments.

So, based upon my experience, the author's recommendation of students working 20-30 hours a week is greatly off-base and probably won't benefit the student in the long run from an academic stance. However, it will certainly help them cover the expense associated with going to college...

[Apex]

@ronald - I also disagree. I graduated in 4 years and would have been happy to have it be less. In fact if there was any path available to me to make it less I certainly would have taken it.

What is so great about college? I feel sad for people who look back on college as if those were the best days of their lives. Sure is sad to reach that conclusion at the age of 22.

In fact it is my hope that in time most colleges will offer 3 year programs. The idea that most of the majors out there require 4 years to get a degree is a scam in my opinion. over half of the credits have nothing to do with the major. Why is this important? Only because some liberal arts minded bureaucrats tell us it is. If that's what you want then by all means, go get it. But if I don't want that why do I have to learn about ancient mayan indian cultures in order to get my degree in engineering? Only in the university setting are we willing to accept this notion that in order to learn about X it is also important that you be exposed to P,Q, & W for which there is no shown direct impact on understanding X.

If your company sends you to learn about a new procedure or product that you will be using in your job do they also require you to take some bird watching classes just so you have broader experience? If you want to go to some community ed classes to learn how to use a new software product you bought would you be happy if they made you learn some European history or economics first?

It's colossally stupid as a requirement to graduate with a degree in field X.

I would even be fine if they changed the degrees to indicate if you took the long or short degree (with the only difference being the short degree didn't have the liberal arts extensions but was just as rigorous in the field of study). I am willing to bet that most companies wouldn't care and I personally would slightly prefer to hire candidates that didn't waste the time on the liberal arts extensions.

[Mark]

There seem to be several reasons for going to college, and each has different requirements:

1. To be trained for a specific job. For a tough field like Engineering, you probably need to go to the four-year college to get the proper training. I know there are exceptions, but I hire engineers, and if you go to Community College for two years and then some 4-year school that actually considers that good enough, you won't be working for me. If you want a real job in a real profession, I think you're stuck with a four-year college.

@Apex on this one: I went to an Engineering school that had no non-engineering requirements, only science and engineering. The Dean insisted that he didn't have time to waste and that we could pick up that stuff later if we were interested. It still took four years - even without Mayan history.

2. To do some generic job that requires "a college education". Here, you're just looking to put B.A. behind your name to distinguish yourself from a high-school graduate. If this is the goal, then the suggested path is ideal - find the cheapest, quickest way to get the letters behind your name.

3. To become educated. Here I think that once again you are pretty much stuck with the four-year degree path, unless you are highly motivated to learn without guidance. (Because EVERYTHING you learn on this path could probably be learned in the public library.)

None off the above paths will teach you to think. But hey, mostly society wants people who don't think too hard, obey authority and are reasonably compliant. Any of these paths will get you there.

[MBTN]

This strategy is WAY OFF BASE!

In pretty much all of these posts, everybody assumes public colleges are cheaper than private colleges. Why everyone keeps making that assumption is beyond me. The price in the brochure is the sticker price. Private schools have more generous financial aid than publics, especially in this environment of state budget cuts. Go to Princeton's financial aid site and check out their aid estimator. A family making $100,000 (which is well above the median) is only expected to contribute $10K per year. That's a lot cheaper than the public schools in these examples!

If your child can get into Princeton and go there for less than a public college, why wouldn't you do it?

So PLEASE PLEASE PLEASE PLEASE PLEASE don't just assume public = cheaper. Do your homework and don't rely on one-size-fits-all advice.

[MBTN]

Also, Princeton's aid package do not include loans: just grants and work-study. So you can pay for college without borrowing using my patented "Go to Princeton" strategy. Maybe I should write a book...

[Lindsey]

This only works if you have a community college and/or public university in your town. For me, the closest CC was 30-40 miles away, the closest University was 50-60 miles away. If you figure gas at $2.50 (high right now, low when I was in school 2 years ago), with 3 round trips to school per week, you would average between $20-50 of gas expenses, PLUS you need to factor in the travel time (you could be working or studying instead), maintenance, and insurance/payments for the car.

Also, I firmly believe that college is about learning about yourself & life, NOT the classes you take. It is a time to live on your own, making your own choices, and experience people. Living with mom and dad doesn't allow those things. You're in your high school/childhood town, bedroom, and friends.

Nope, my kids will not be living with me after high school; not unless they are home between semesters or hit a rough patch and need to move back in to get back on track.

[JimL]

I was able to follow this and it worked well for me. I started at a community college for my first two years and then finished at a state university. I was able to pay my way by working at a grocery store. I left college without debt and now have a job paying 6 figures.

[Minda]

There are no community colleges in my state. So while this may help some people it is simple not an option for me. Also from what friends of mine say most programs are going to take you two and a half to three years at the University, even if you took two years at a community college because of course sequences.

[Caleb]

Working at 9 dollars per hour after taxes is a rarity. Finding a job paying 7.75 after taxes is more realistic. I actually earn more than that right now while working uring college at WCU but even my job is considered a decently good paying job.