During the past few years parents have been borrowing money for their children’s education with increasing frequency. Consumer loans, credit card loans (and the scariest of all) home equity loans are taken to provide higher education to children. Presumably much of this debt is incurred due to a sense of obligation to one’s children. In theory it’s hard to fault such sentiment but in actuality it’s terribly flawed.
- Higher Education is not a birthright
- Incurring debt for someone else’s asset is risky
- Parents (by definition) are older than their children & have less time to rebuild assets
It can be a dreadful feeling to discover you cannot give your child everything you wish for them. It is the rare parent who has not had his Bob Cratchit moment at one time or another. If we were to redefine what we wish for our children we might be able to assuage those Cratchit moments. Do we really wish for our children to attend a four-year private college, and study whatever they choose without cost consciousness? If so, why? Why would we think that shielding a young adult from making realistic decisions about economics and their future is ‘giving them everything?’ Isn’t giving them a realistic understanding of dollars and sense and the world at large, a gift that will last a lifetime? College isn’t (or shouldn’t be) summer camp. It’s not a protected and posh enclave where our adult children should experience life. If it ever wasn’t it simply isn’t anymore. College is a commodity and should be treated as such. Higher education is not one size fits all. We spend a lot of energy trying to match a student’s interests and personality with an institution. Affordability is the starting point for the selection process. If a four-year private college is not affordable, the value to a student of a community college+public college is far higher than a private college.
Public college still costs money and the person to incur that debt (if there must be debt) is the student. If the parent can help the student repay the loan, wonderful. Besides the obvious very real economic risks to a parent in incurring debt on behalf of a child, there is risk to the child as well. Being shielded from the realities of financial life does not help anyone make practical decisions. Being aware of the burden a parent has taken on also affects decisions. Attending college without contributing in a significant manner (i.e., summer jobs, scholarships, loans, work-study, etc.) is no longer the norm, and hasn’t been for quite some time. College is not finishing school and it’s not a series of laurel wreath opportunities. It’s a means to an end and a significant number of students don’t achieve that end. (Imagine losing one’s house or retirement without even a child’s bachelor’s degree to show for it!) Nothing helps a person (especially a young person) take something more seriously when it’s his or her own money at stake.
College has become crucial for future workers; as such we need to rid ourselves of our romanticism about the experience. Getting ready for the big great world is a process. It shouldn’t start after tossing one’s cap in the air. Putting one’s home or future security in jeopardy to delay that process is simply unwise.
