Parents face a dilemma when it comes to paying for their children’s college education. While many parents with the financial means to cover the full cost of college may choose to do so to eliminate the burden of student loans on their graduates, there are also valuable lessons to be learned when students have some skin in the game financially. Hybrid approaches that involve students in contributing to their education costs can provide important financial lessons and prepare them for the real world.
There are various ways in which parents can structure a college funding arrangement that allows students to contribute financially without incurring excessive debt. One option is to set a flat dollar amount and let the student decide where to attend college. If the student chooses a more expensive institution, they can cover the difference, while any savings from choosing a less expensive school can be kept by the student. This helps students understand the financial implications of their decisions and may encourage them to make the most of their chosen university.
Another way to ensure students have some financial stake in their education is to require them to contribute a certain percentage of the cost each year. This can help prevent education from taking a back seat to extracurricular activities and reinforce the value of money and education. By having students contribute in some way, parents can instill financial responsibility and help students become more aware of the cost of their education.
Performance-based contributions to college costs can also be considered, where parents agree to pay for the full cost as long as the student maintains a certain GPA. If the conditions are not met, parents can decide on appropriate responses, such as reducing their contributions or giving the student a probationary period to improve their performance. This approach can be helpful for students who need extra incentive to reach their full potential and encourage them to take their academics more seriously.
Parents can also choose to have students cover specific expenses that are unrelated to education, such as discretionary spending money for entertainment and personal expenses. By making students responsible for these costs, parents can teach them about budgeting, needs versus wants, and the value of money. This approach can help students develop a better understanding of their own lifestyle expenses and make more informed decisions about their finances in the future.
When parents are unable or unwilling to contribute the full cost of college, they can provide their students with options to bridge the gap. This can include offering parent loans, unsubsidized loans, or encouraging students to get a part-time job to help cover their expenses. Ultimately, open communication between parents and students is crucial in deciding how much to contribute to college costs and in teaching students valuable lessons about personal finance and responsibility.
