Wednesday, April 15, 2015

How to Pay Cash for College - Lesson 5 - The Role of Parenting in the College Decision

I wrote "How to Pay Cash for College" for April edition of Autumn Ridge Church Magazine. You can find the condensed version on the church website. They did a great job of publishing the article with pictures and graphics. I had to take out a few examples to fit their space requirements. This is the full article in its entirety. I'll split it over several posts to make for easier reading.  Thanks to Lisa for helping me write and edit this article.
The Role of Parenting in the College Decision...

Mom and Dad if you see your student going down the wrong road in the college decision process, you need to do some parenting here. Our students need our input and our wisdom. Just because they are now 18, doesn't mean they are ready to make all of life's decisions on their own.

Andrea, our oldest child wanted to attend a school that cost $50,000 per year and would have likely ended up with $200,000 in student loans because this very elite school didn't offer scholarships. After much vigorous discussion with Lisa and I, she ended up in a very good university that cost $16,000 per year (after $16,000 in scholarships) and she is on track to graduate debt free in four years!

Andrea was telling me after I wrote the ARC article that her senior year is likely to be almost half of the $16,000 she paid in her first two years because, her housing and meal plan will also be way less as she will be living off campus with several friends. This what God can do to stretch your college dollars if you are determined to not borrow.

Also, a less elite college may offer more opportunities for your student to shine. As a junior, Andrea is the student director of her colleges 76 voice senior choir (a great learning opportunity). Would she have been able to have the same opportunity at an elite music conservatory (perhaps, but we were not willing for Andrea to go $200,000 in debt to find out)?

Approximately 35% of the students who enter college will drop out the first year and the USA Today reported that only 53% of students who attend a four-year college graduate within 6 years. No that wasn't a typo, that was 6 years! Those are the students that didn't have a plan. So have a plan! We required our students to have a detailed plan for their time at college. This includes declaring a major, and having a semester by semester course schedule showing what is required to graduate in four years and monitoring their academic progress.

If they can't do that because they really don't know what they want to do I would suggest they attend community college for a year or two to get their general requirements out of the way and explore majors. I would also recommend taking a year off to work if your student isn't sure if college is right for them. Internships can also be a way of finding out what their chosen field is like.

Andrea has been organizing and teaching music camps during her summers to find out what teaching music is like (this is also an example of starting an entrepreneurial business to understand your field of study better.) When she told her advisor about her teaching activities in the summer she was absolutely delighted. Keep in mind she won't start student teaching until her senior year and because of these classes she organized during her freshmen and sophomore year she will have this rich tapestry of experience to draw upon. I have honestly never heard of anyone doing something quite like this and these classes will look pretty innovative on a resume. She is also collecting recommendations from parents and students at the end of each class. So she will have this portfolio of feedback to share with prospective employers. Very cool!

Sadly 8-10% of students drop out of school due to credit card debt. Many parents think getting their student a credit card is a rite of passage to adulthood and will help them establish credit, teaching them to be responsible. But statistics indicate the opposite. Providing a teen with a credit card may actually teach them to be financially irresponsible and this makes students the number one target of credit card companies. Credit cards promote the “spend now and deal with the consequences later” mindset. It is much better to start your teen out with a checking account when they are 14 with mom and dad joint on the account. Teaching them to budget their earnings and establishing a small emergency fund. Mom and dad should still monitor spending and provide input where needed. Parents should maintain this input as long as the student is still dependent on them for their college or living expenses.

Mom and dad please don't raid your retirement or take out a second mortgage to fund college. I am not saying don't help your child with college, do as much as you can without borrowing. Help your child pick a school where you can pay cash, and you won't have to borrow. You might also want to consider getting a second job to help raise money for college. This would be a far wiser approach than borrowing.

Before your student goes off to college or a career, enroll them in financial training like Financial Peace University. We recommend you attend this class as a family with your high school junior and senior. This is one investment that will do more than anything else to help your student prosper in the adult world. As you can tell from the student loan discussion, there is much misinformation out there in our culture. When you learn the Biblical principles your chance of financial success goes up exponentially.


Brian and Lisa Petersen, lead the Financial Peace University course at Autumn Ridge Church. They just finished leading their 10th class, where over 400 people have been trained in the Biblical principles of money management. Each family situation is unique and they welcome your questions and dialog on this important topic.

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