Should Students or Parents Pay for College?

Get 6 tips to handle the costs of college.

Laura Adams, MBA
6-minute read
Episode #233


Kristen from Michigan asks:

I would love for my daughter to go to college where she wants, and I will do whatever it takes to pay for it. My husband, on the other hand, believes that she should have to work for it. He believes she should go to a community college and do what’s cheapest. My daughter, of course, is struggling to work within the parameters of the 2 of us! We make a good living, but we haven’t saved a huge amount—and college is so expensive. What advice can you give?

Should Students or Parents Pay for College?

When it comes to paying for college, people have very different ideas about who should foot the bill. Some parents simply can’t afford the cost of college, so the student must tap every possible financial resource they can find. Some parents fork over college tuition for their kids—even if it puts their future retirement in jeopardy. And some parents expect children to step up and take responsibility for the cost of college, regardless of how much the parents have in the bank.

So, the dilemma that Kristen and her family are facing is not uncommon. I interviewed Zac Bissonnette, the author of Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching Off My Parents, to get his take. Keep reading and I’ll give you 6 tips for how to handle college expenses so you keep the peace in your family and never jeopardize your financial security. You can listen to my full interview with Zac at SmartMovesToGrowRich.com.

Never Sacrifice Retirement Savings for a Child’s Education

In chapter 9 of my book, Money Girl’s Smart Moves to Grow Rich, I recommend that you never save for a child’s education until you’ve accomplished the following 2 important financial milestones:

  1. Built up your family’s emergency fund to a minimum of 3 months’ worth of living expenses.

  2. Created and are consistently funding an adequate retirement savings plan.

Why are these 2 financial prerequisites non-negotiable? Because if you sacrifice your own financial security for your kids’ college, you may find yourself relying on them to support you in your old age! Using money earmarked for retirement means it won’t be there when you need it.

You must provide for your own financial well-being first, even if that means contributing less than you’d like to your kids’ education. Zac completely agrees and told me, “I call it the airplane rule. You’ve got to make sure that your own oxygen mask is secure and tight before you assist your child.”

Create an Education Savings Plan

You must provide for your own financial well-being first, even if that means contributing less than you’d like to your kids’ education.

Let’s assume that you want to pay for all or a portion of your child’s education. The best strategy is to make this goal a part of your spending plan as early as possible. Additionally, you may need to work longer than you originally planned, find a second source of income, or downsize your lifestyle.

How to Pay for College

But what if you’re not sure if you should pay for a child’s education? Or what if you have a divided house, like Kristen? Here are 6 tips and solutions for finding a middle ground:

Tip #1: Apply for Education Awards

There are thousands of scholarships, grants, and fellowships available that don’t have to be paid back. Educational awards are also tax-free when used for qualified expenses, such as tuition and required fees. Though Zac emphasizes that getting award money wasn’t part of his strategy to pay for school—and I’ll admit they probably won’t make a huge dent in your tuition bill—financial awards can be worth the time and effort.

Help your child seek out and apply for awards no later than his or her junior year in high school. To find the best ones, schedule a meeting with your high school guidance counselor or college financial aid offices, and search web sites like:

Tip #2: Apply to a Variety of Schools

Make sure your child applies to a variety of schools, including a few that are relatively inexpensive. That way, there will still be options if there isn’t enough money or financial aid to pay for a pricey school. Spending two years at a community college and then transferring to an in-state university is typically the least expensive way to get a college education. However, some schools actively recruit out-of-state students and can offer them an affordable tuition package, so don’t completely rule them out.

Tip #3: Put Restrictions on College Money

If you can afford to pay for a child’s education but are worried that they won’t take their studies seriously if you do, put limits on your generosity. You could require that they maintain a certain grade point average, hold down a job, live at home, or graduate in less than 4 years in order to keep the college gravy train flowing.

Tip #4: Use a Plan of Thirds

In my book, I discuss a Plan of Thirds, where you (or the student) divide up the cost of college into 3 phases:

  1. Save a third of the cost before school starts

  2. Earn a third of the cost by working during school

  3. Pay off the final third of the cost as loan payments after graduation

Both students and parents can take out separate education loans, if needed. You must apply for a student loan before or during school and most loans have built-in deferment of payments until 6 months after graduation. That means you can get a student loan at the beginning of your education and then pay it off over the long term after you graduate. If the loan is subsidized you won’t even rack up interest charges for the duration of your studies.

Tip #5: Get Familiar With FAFSA

To qualify for student financial aid you must submit a lengthy form called the Free Application for Federal Student Aid (FAFSA). It’s important to note that students younger than age 24 are generally considered dependents and must include their parents’ income and financial assets on the FAFSA.

Being a dependent could help the student qualify for more financial aid if the parents have little money to report. But if the family has significant assets (and are unwilling to help out with college expenses), their financial situation could work against the student by making him or her ineligible for a student loan or other aid.

Tip #6: Set Expectations

It’s a good idea to set expectations about how much a family can and will pay for college as soon as the student is in high school. If a child knows they need to carry the burden of paying for some or all of college, they might get a job, save more money, keep their eye on scholarships, and study harder during high school. If they qualify for Advanced Placement (AP) courses, that achievement looks impressive on college applications, can increase your child’s financial aid package, and may decrease the number of college classes you have to pay for.

Since Kristen and her husband are at odds about paying for college and haven’t saved much yet, I recommend that they meet with a certified financial planner. A financial professional can analyze the big picture of their finances and help them set realistic goals for funding both retirement and perhaps an agreed upon amount of their daughter’s college education.

To find out what Zac Bissonnette thinks about Kristen’s dilemma and the specific strategy he used to pay for a great college education on his own without taking a dime in awards or loans, be sure to listen to our conversation over at SmartMovesToGrowRich.com.

Download FREE chapters of Money Girl’s Smart Moves to Grow Rich

If you like these tips, you’ll love my award-winning new book Money Girl’s Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don’t. It’s available at your favorite book store in print or as an e-book for your Kindle, Nook, iPad, PC, Mac, or smart phone. We’re even giving away two free chapters from the book for you to sample at SmartMovesToGrowRich.com!

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More Resources:

10 Best Value Colleges in the U.S.
Bigfuture.collegeboard.org – search for high gift aid schools

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.