Student Debt

in Education, Frugality, Kids, Parenting Costs, University Costs

This is a topic that my family has been talking about, and I suspect this is not just a one post topic, so it may stretch out over the week, as student debt is an important topic.

In my case I was very lucky in that my parents paid for my education, and I graduated (in 1986) with no student debt (which is depressing knowing that all of the debt I carry now is of my own making, but that topic is really an underlying thematic premise in this journal, so we’ll leave that one aside for now).

My parents and many friends of mine, had to pay for their own education, or finance their education themselves at least. What are the pros and cons of all of this:

Pros of Having Child Pay for Education

  • A sense of ownership and responsibility can be instilled in the student. If the student is the one who has paid for something, the student is much more likely to value their education that much more.
  • A higher degree of pride in the accomplishment of “doing it yourself”, and being self-made. This may not necessarily be true all the time, but it can be a powerful motivational factor in later life. Knowing you can accomplish goals is important, and this is a very large goal.
  • At 18, this child is learning the value of money and the value of the education they are earning. Of the people I know that “did it themselves” they have a very good understanding of money and also how to live on a budget.
  • Co-operative programs are available at many Universities and this can be a way to pay for an entire education (or most of it) and they get worthwhile job related experience at the same time.
  • If a student takes care of their own school expenses, they are not burdening their family with these costs. This can be a point of pride (and is for a lot of the people I know who paid their own way).

Cons of Having Child Pay for Education

  • Students graduating with crushing debt loads, which will drag on their early adult lives. These debts can cause a great deal of consternation and angst in young people’s lives. Sometimes these debts cause a sandy bedrock to build upon, causing more issues later in life as well (financially).
  • If a child has to have a part time job during school, can they truly concentrate on school full time?
  • A degree can take longer, if there is a need to do a part time job, and thus not be able to take a full course load (or worse, your job causes you to fail courses). Longer period of education, means more costs, means more loans?
  • Can the student truly experience the University experience if they are constantly worried about money? (some might argue that in fact, that point is part of the entire University experience (I tell stories of Kraft Dinner being 4 boxes for $1.00, when I was at school)).

So is it better to help or pay for your kids post secondary education? Let’s ask tomorrow.

Follow ons:

  • Student Debt Part 2 with more direct discussion on the subject
  • Student Debt Epilogue which wraps up the subject

 

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{ 10 comments }

{ 10 comments… add one }
  • Gord May 9, 2008, 10:06 AM

    I got the student loans and only worked f.t in summer.
    Now 10 years after graduating and only three months left till student loans are paid off and having two kids I have formulated the following ideas:
    – I am going to let my kids get student loans and/or provide a set loan if they don’t qualify for Student loans.
    – I won’t tell them, but after they completed school, I will pay off their loan’s for them. Thus they believe the whole time they are spending “their money”, in hopes to help them learn about budgeting etc.

    Reply
  • bigcajunman May 9, 2008, 10:20 AM

    Sneaky, but effective methodology.

    Reply
  • Geoff May 9, 2008, 8:31 AM

    I put myself through university, including paying rent (I have some friends who say they did the same thing but lived at home, which I don’t really consider it) and am proud as hell that I did, and worked part-time during the year and full-time during the summer, and still went out and partied etc. However, for my son, my wife have made a deal that we will pay for their education to the best of our abilities — while we do contribute to his resp we also contribute to our rrsp’s, but if there’s a conflict – well, there aren’t any student loans for retirement available. Our deal is that we will pay for his education, but if he wants to a far away school (we live in Toronto so he has choices of university) he has to pay his rent, etc himself. Otherwise he can live at home, with the expectation that after graduating he’s out on his own. I want him to appreciate how important money is, but don’t want him to be burdened with a huge debt load on graduation day either.

    Reply
  • twentyanswers.com May 8, 2008, 9:49 AM

    My biggest problem with my debt from university was the misconception that paying off that debt would be very very easy. I’ll be making 50k when I graduate, I just won’t spend any money for 3 months, and that 20k I owe will be paid off just like that..

    well i got the 50k/yr job right out of university, but the 25k that I owed took almost 2 years to pay off in full, and it wasn’t fun.

    Reply
  • nancy (aka money coach) April 28, 2008, 11:19 PM

    I went to university in my early 20s, used up my (in retrospect, meagre) savings, got a student loan, and worked 15 – 20 hours a week. I was driven, got the A’s but it wasn’t nearly the experience it could have been if I had been funded. Then I graduated with a debt that took 10 long years to pay off, and significantly hampered my ability to get ahead (and most readers know the effect of compound interest = opportunity cost for me). I land fully in the latter camp. Even if the students do party more … for the portion (and I bet it’s sizeable) who will do better in university knowing at least their basics are met, and start life debt free .. that’s something I’d lobby for at a political level.

    Reply
  • sow April 28, 2008, 9:30 PM

    We don’t have kids. But one thing that we will teach them is how money works. One of our goals is to teach them how to invest. Hopefully, by the time they get to college, they’ll already have assets paying for tuition. What better way to teach them about money than having them buy assets to pay for school! Also, they’ll be able to choose their major based on their passion and not a pension. Check out http://www.stewardsofwealth.com/ for a fresh view on finances and how money works. Brain on!

    Reply
  • Nerd Money April 28, 2008, 5:38 PM

    Coming recently from university I agree with Trent that students who had lots of time on their hands tended to party more than study more. Not that they didn’t study, but when the study time was over they went to spend money instead of make money.

    I think one possible solution in terms of funding is that you loan out any funds you’ve set aside for their education. Set it up like a government funded loan where there’s no interest while they’re in school and then a modest interest rate payable to “The Bank of Mom and Dad” six months after graduation.

    Reply
  • Trent April 28, 2008, 3:56 PM

    I don’t think it’s an either/or decision. Pay what you can, but every college student should have a job and help pull the weight of the bursar’s bill.

    Unless you have on your hands the rare student who is passionate about learning, a college aged person isn’t going to study more if they don’t have a job. They are going to party more. Plain and simple.

    You have to honest about the college experience: In general, kids are hardly enthralled with their courses and hanging on every word in lecture. Often times they’ll be skipping class or sleeping in class.

    For those who ARE serious about college, you won’t have to worry about them struggling to find the time to do their coursework. They’ll make it happen. And they’ll be better for it.

    The existence of a college work schedule enforces discipline, professionalism and a work ethic.

    And I would say emphatically, if the student in question never had a job during high school, then I think you would be doing a great disservice to them by allowing them to wait until they graduate college before punching their first clock.

    Reply
  • bigcajunman April 28, 2008, 8:23 AM

    That is the kind of Christian Work ethic point of view that I have heard. I like the ideas, and don’t have any problems with it. I paid for the beer at school, and for the records and such too (and all fines and police charges along the way too).

    University is a learning experience is what needs to be remembered, not just an academic adventure. High School and CEGEP for me were just places I passed through, but University is where I learned most of the stuff I needed for life (and made most of the ugly mistakes in my life too).

    –C8j

    Reply
  • Michael James April 28, 2008, 8:10 AM

    A new factor to consider is that with the removal of grade 13, kids are going off to university a year younger. This makes it harder for them to pay the whole amount of university costs right from the start.

    I plan to pay for the basic necessities for my kids initially, and am hoping that they earn enough to take over by the end. I’m not paying for any extras, though. Meal plan, residence, books, and tuition are necessities. I’ll buy a few items of clothing and some toothpaste as well, but not much more. Pop, beer, coffee, movies, train fare, etc., are all extras that they can pay for themselves somehow. I always laugh at the breakdown of university costs I see in the newspaper sometimes. They include thousands of dollars for all kinds of things that are just extras. Students are in school to study. Free time can be spent with some of the thousands of other young people who are there. Money isn’t needed for recreation.

    Reply

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