Wrestling with college funding
March 13, 2018 | Faye Hayhurst, CPA
Doing what’s best for our children -- can we all agree this is a high priority for most parents?
Of course, “what’s best” is up for debate, and thoughtful parents can come to different conclusions when facing many common decision points: food, TV watching, cell phones, sports participation, music lessons, curfew, etc.
Decisions related to college funding are some of the most difficult. While some parents make the decision early on (perhaps based on their own experience) that funding college will be entirely the responsibility of their child, many others desire to do what they can to help. The problem they face is that the dollars involved are often staggering, the peer pressure -- on both the child and parent -- is intense, the conversations are difficult, and the choices are myriad and confusing. For parents, it appears that their child’s dream is on the line and the stakes are high. With college price tags comprising such a wide range, how should parents navigate the decision?
Ross Riskin, in his excellent article, “Help clients balance retirement and education planning,” has some guidance. Two key points are illustrated in a chart in the article:
- Start with an assessment of parental retirement readiness. If it’s low, the priority for choosing a college is affordability. If retirement readiness is high, the priority for choosing a college is the best academic fit for the child.
- Next, assess the student’s GPA (low to extremely high), major/career plans (undecided/decided) and motivation (low to extremely high). The lower and more undecided the student falls on this scale, the more the student should be responsible for college funding. Alternatively, the higher and more decided the student ranks, the more parental assistance should be considered.
It can feel selfish for parents to consider their own needs, i.e., retirement readiness. Reality check: Children don’t want to see their parents living in poverty in retirement, or worse yet, needing their help to get by. Parents shouldn’t sacrifice their financial future for the sake of giving their child his or her dream experience, especially if that dream is more of a whim or based on non-academic factors.
Another eye-opener: Even if parents have the means, bestowing those means on a child with low motivation should not be a given. Children with varying motivation levels and historical performance might warrant varying parental support.
This is general guidance; each family has unique circumstances and situations. There are factors, such as physical or learning disabilities, that call for extra parental support. Or, parents may see exceptional talent in their child that they want to invest in. That is fine; parents can make that choice.
Parents are also able to design their own recipe for what combination of elements will most influence their funding decisions. It may require extensive discussion and debate between mom and dad, and a hard look at whether saving for retirement is on track. Devise a plan; then, and most importantly, share it with the child. The sooner the better! When presented with parameters, expectations and realistic support, a high school student will be able to focus his or her college search, or work on securing other ways of funding the college option they prefer.
As with so many other parental decisions, “what’s best” may not be what a child initially thinks they want or deserve. But a decision based on long-term consequences, logic, transparency and heartfelt support will stand the test of time.
Topics: Clients, Personal Financial Planning
Faye Hayhurst, CPA
Faye Hayhurst is the MNCPA director of finance and administration. She is committed to using numbers to tell relevant stories, although she also employs words, charts and occasionally clothing to communicate a message. While some have questioned her about the pressures of being the CPA for the MNCPA, Faye considers presenting financial information to fellow CPAs a dream job. Outside of storytelling with numbers, Faye enjoys directing her church's handbell choir, visiting national parks and other scenic places, and checking out the chocolate products at Trader Joe's. Faye can be reached at 952-885-5540 or email@example.com.
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