The Dos and Don'ts of Paying for College

The book Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents ends with a couple sections I think are worth sharing as we wrap up my series of posts on this book. The first lists the four main things the book has tried to communicate:

• You shouldn't sacrifice your own financial security to help your child pay for college.
• Your child should take out absolutely no student loans if possible and if he does take out loans, it should be done as a last resort in the last year or two of his education -- and only after all cost-cutting measures have been explored.
• Attending college is far, far more important than attending a certain college. Students who attend a less expensive college will not be at a disadvantage.
• The effort that a student puts into her educational experience is far more important than where she goes to school. A student who's willing to work hard and work smart can do well at any school.

We've covered all of these points over the past few weeks, but I think it's worth it for me to comment a bit on each of these again:

• In particular, don't forego retirement saving to pay for college. And don't use retirement funds for college costs either.
• If you pick a good school with decent costs, go to community college for some of the college time, graduate early, save in advance (and out of your current income too), and have your student work while in college, you should be able to graduate without much, if any, debt.
• The last two points combine one simple thought: a good student will be successful both in and after college no matter where she goes to school.

The book then ends with a list of dos and don'ts of paying for college as follows:

• Do recognize that the amount your kids' friends’ parents will be contributing to their educational expenses is likely far higher than it should be.
• Do not allow the expected family contribution calculated by financial aid formulas to determine how much you contribute. There is a good chance that the EFC will be far higher than you can really afford -- especially if you do not have a large quantity of retirement savings and substantial home equity.
• Do not let someone tell you that student loans are not that big of a deal. We simply don't have a long-term track record of debt loads of the size students are taking out now, and therefore anyone who says it will be okay doesn't know what he's talking about.
• Do not allow your child to take out any student loans in the first year of college. Some students may need, for a combination of reasons, to take out a small loan in their last years of college. If loans are needed in the first year, STOP! You need to consider more affordable college options.
• Do not fall in love with a college based on its name recognition, campus, or a few professors you happen to meet, and do not allow your child to fall in love either. Every college is a combination of great professors and lousy professors, cool students and not so cool students.
• Do not let anyone tell you that one college will provide better earning power than others. There is no evidence of this. What will determine your child's success will be his talent, determination, and work ethic, and the career path that he elects to pursue.
• Do expect your child to be the major contributor to his educational expenses -- starting NOW! If your student can clear an average of $1,000 per month -- less during the school year and more during the summer -- that's enough for him to pay for four years at a state university on his own! If your kid's still in high school, make sure he's working to save money.
• Do allow and even encourage your child to apply to expensive and selective private colleges. There is always the possibility that she will receive a large financial aid package or merit-based scholarship. Most likely, these large merit awards will come from schools where she is in the top 15 percent of the student body.
• Most of all: Do look at college as a rational investment, not a coming-of-age ritual where money is no object. Skip expensive college guides, and don't obsess over reputations, specific programs, and locales. You're picking a college, not a resort.

I've also covered most of these points as we've discussed the main ideas in this book. But let me leave you with a few more thoughts:

• This is a great book! I loved it! If you have a student (or are one) anywhere near the college selection age, get a copy and read it (I'm sure your library has one if you don't want to buy it.) I haven't been able to cover all the great things detailed in the book (and the ones I have discussed are covered more in depth in the book) so there's a ton more to learn.
• I generally agree with this book's philosophy (noted above), but I also believe in saving for college well in advance too -- a little bit per year over the 18 years or so before your child enters college. This will go a long way to giving you flexibility when the college decision comes around.
• If you want to read more on this topic, you can follow author Zac Bissonnette on Twitter.

Comments

[Meoip]

Assuming you can fund or come close to funding college I advise people to take a student loan out every semester. Taking Loans greatly effect the overall quality of your student aid package. Be wise about which loans to choose when you have money take out loans with early payment bonuses ( if you pay it off within 4 months of graduation you get cash back, these aren't as easy to find anymore). Sink your cash on hand into CDs and earn interest. I earned about 1000 doing his over 2 years.

[Money Beagle]

I can't disagree with any of these, though trying to convince someone to stay at home for an extra couple of years to go to community college can be a tough sell if they have their heart set on it. Though, community colleges have really picked it up over the 20 years or so since I've been in that choice, so as they say, it's a whole new ballgame :)

[Matt]

Community colleges are at record enrolements. Beware that this may get watered down with hiring more professor and TA's not qualified to teach the subject.

Also know that a student tranfering from a CC to a university may get all there Liberal Arts classes out of the way but they may be facing hard core subjects that will be a culture shock let alone take an extra year to complete college.

My wife did CC for 2 years and stepped in to hard core teaching classes and no breather classes. A tough adjustment. Sister in law smae thing but straight into heavy duty chemical engineering classes. She took an extra year to complete her degree because she almost flunked out taking to many core classes. A 5 year degree in 6 years

I had people tranfer form CC but were taking 5 to 6 years to complete there degree due to the fact of timing of courses and prerequisites requirement. You need to take class A and pass before taking B before taking C before taking D before taking E. That is 5 semester or 2 1/2 years.

So research wisely because to transfer from a CC may work out or it may require you to go longer and what would be cheaper in the long run?

Taking 5 years to complet a 4 year degree or 4 years for a 4 year degree.

[Doug @ CheapScholar.org]

There is a lot of good information in this book that appears to be spot on with an appropriate approach to completing college with little to no debt. HOWEVER, my experience is that very few families have what it takes to follow these guidelines to a tee. Going to college is definitely a financial decision but it is also an emotional one and the emotional factor usually trumps out all the good financial sense provided in the book.

[MC]

I agree with all this except for the community college route--because if you're aiming at getting a major in many things (engineering, sciences) where you'll be highly employable, you'll need to do all 4 years at the same place to get all the requirements in and/or to get the education you need. Community college 1st year math, chem, and biol courses aren't taught at the same level, unfortunately.

Community colleges are great, however, if the kid needs time to mature and/or remedial work before starting a 4 yr degree program at a bigger school. They may also work well for majors that don't have so many requirements or where the quality of the actual coursework isn't so critical.

[RBK]

MC:

"Community college 1st year math, chem, and biol courses aren't taught at the same level, unfortunately."

That's just not true. If a placement test puts you in Calc I at a 4-year school, it will also put you in Calc I at a community college. Most first-year students at CCs don't take Calc I because they test lower . . . and they'd do the same at a 4-year school. Calc I will cover the same material at either place-- the curriculum is largely set by the state in many cases.

I'm a CC math professor and the vast majority of our students test into College Algebra or lower, and many of them aren't even ready for that. These students would not be starting out in higher courses if they went to a 4-year school, and if they did they'd be failing at a very high rate.

I will agree, though, that for some programs-- especially ones like Engineering and Computer Science-- you will not be able to take the first and second year courses you need and will be behind if you wait until your 3rd year to go to a 4-year school. For a lot of majors you would be fine, however, and generally the instruction of basic courses at community colleges is better since we are professional teachers, not researchers who teach because they have to.

[Portfolioist]

With the drop out rates so high and only 2 in 5 students finishing 4 year school completing their degree in 6 years (according to the NY Times) it seems like the kind of level headed analysis provided here for paying for college should be first applied to going at all, and then what's studied once there.

[Michele]

I'm curious FMF, what if your children decide that they want to go to a four year school all along? Or don't want to live at home while in college? Or decide to take out student loans, or otherwise veer from this formula? I mean, college students are adults and don't need parental sign off on any of these things.

My parents had literally zero input on where I went to school or how I paid for it, so while all of the recommendations in this book and the plans that you're laying sound lovely and all, I'm having a really hard time wrapping my head around the idea that your kids will ultimately follow the plan you've laid out so precisely.

[JOA]

Taking some credits at CC may not work out because a lot of Universities and Colleges don't accept credits from CC. Some Universities and Colleges don't accept credits from another 4-year degree program even within the same state university system. Community college may also not be an option with some scholarships and grants.

I think that student loans are being portrayed as evil when they can be a useful tool. The onus is on the parents and student alike to make sure that the amount that is borrowed does not outweigh the earning potential of the degree. Many of the students with an exorbitant debt-load are those who choose to go to an expensive, private college to earn a degree with a moderate (or minimal) earning potential. The other issue is that students graduating from college often don't understand that they can't keep up the lifestyle they are used to having when their parents were paying all their expenses. Make paying off your loan a priority and then it really isn't an issue.

I live in a state where public elementary and secondary education are not a good option, so we are paying private school tuition now. Our income is such that we may not have saved every penny our child will need to go to college. If we need to take out loans to make sure that she can attend college, we will. But we will not be borrowing $100,000 for her to get a degree, regardless of what her major is. There will have to be a very good reason (like a full scholarship) for her not to attend a public university whose tuition and fees will be commensurate with her earning potential once she is finished.

[RBK]

JOA:

You are correct and part of proper college planning would be checking with admissions at any 4 year schools of interest to make sure your credits will transfer. Many community colleges have agreements or associations with 4-year schools and that results in nearly all credits transferring. The college I work at designs its courses and overall curriculum to match the needs of 4-year schools, so transfers are off to a good start when they leave here.

[jim]

I generally agree with this guys points but I think he's a little too negative about student loans. Of course thats the whole thesis of his book 'debt-free U'. I think that a small amount of student loans should not be a problem. If you get a decent degree at a decent college then graduating with $10-$20k of debt is not any kind of strain IMHO.

[KEG]

The community colleges in my area of Southern California are excellent. There are articulation agreements that cover either the CSU or UC System, and also some of the private universities. No problem at all with transferring credit. Some of the same professors teach at both the community college and a local 4 year university. The quality of education was great. My child transferred into a 4 yr public university as a junior in their accounting school which is accredited by AACSB - there are only 5 such programs in all of California. Going to community college was in no way a detriment.

[FMF]

Michele --

Yes, they can choose their own way if they like. That's their choice.

On the other hand, my financial support comes with involving me in the decision-making process.

[Squirrelers]

I agree with much of this information, and think it's wise for the most part. I do think that it does in fact matter where a kid goes to school, to some degree. At least to the extent that all other things being equal, a better brand name school gives kids a leg up for job recruiting or grad school admissions as compared to a no-name school. That said, this often (not always) comes at a cost, so one must be very careful in analyzing such opportunties.

[Ryan@theFinancialStudent]

I don't understand how a high school student is supposed to earn almost $12,000 a year. Actually, more since this assumes that they spend absolutely none of it and taxes aren't considered.

I was 16 (sophomore) when I got my first job, which was only possible because I was able to drive. Between school and sports, there's no way I could have worked enough hours to make that much money.

I think books like this have some good points, but I also feel like there's a lot of "sounds good on paper" type filler.