Can Paying for College Actually Hurt Our Kids?

Carrie Sloan
Posted

paying for the partyGiven that a college degree can easily cost a cool hundred thousand (or two), there are plenty of good reasons to fear having to save up that much money. But a fear of harming your kid’s odds of success probably didn’t make your list.

However, that’s the very conclusion that Laura Hamilton, assistant professor of sociology at the University of California, Merced, came to after writing her thesis, “More Is More or More Is Less? Parental Financial Investments During College,” which was recently published in the American Sociological Review.

After living in a dorm at a large, Midwestern university for a year to conduct research, and tracking the undergrads she was interviewing for a total of five years, Hamilton knows of what she speaks. In fact, she and her coauthor, Elizabeth A. Armstrong, recently published “Paying for the Party: How College Maintains Inequality,” a book about how class issues impact students.

But before you drain your 529 account and head to Tahiti, read on because it turns out that there is a right and a wrong way to pay for college—and what you do today could impact your child’s future in a big way.

LearnVest: What was the biggest takeaway from your experience?

Laura Hamilton: The literature in education suggests that every dollar that a parent invests in their child’s education will give them a good return. It’s this notion that it’s the best investment, period. But I was seeing that a lot of parents weren’t getting what they thought they were getting with this investment.

RELATED: Why Paying for My Daughter’s College Is My Ultimate Life Goal

  • http://fitorama.wordpress.com/ Lauren Lever

    Yeah because it is so much better for them to have 50-100k of student loans after college -_-

    • Laura

      I dont think this was the moral of the story at all.

      Its more about making sure that your kids understand the value of their education. In this scenario, the parents are still contributing, they are just keeping their kids in the loop so that they understand the financial implications of their degree/time in college.

      • http://fitorama.wordpress.com/ Lauren Lever

        College is a racket, anyway. We need to shift the paradigm so that people who don’t want to go to college, don’t have to. As it stands right now, even for lower paying jobs, it requires at least a bachelor’s degree. I got a Master’s and it has been pretty much worthless for me, but I still have all the debt because the last few semesters they couldn’t pay my stipend because of Katrina, awesomesauce.

        • Sharon J. Gilman

          I feel your pain, Laura. I’m in a similar situation. I don’t plan on paying for my kids college tuition, but I’m also not going to let them rack up thousands of dollars in loans they may never pay off in their lifetime. I’m planning on teaching them to work for what they want and learn how money can work for them. Hopefully they will be in a better situation than our generation is now.

        • KPmoney

          Garbage. You must have picked a worthless field. This is the problem. Kids dont look at the value of the education and don’t do a cost/value analysis. No-one is saying “don’t pay for college,” just to do it correctly….

          • Liz Leyden

            There are no guarantees when it comes to majors. A field that has a lot of jobs when you start a degree program can have one when you finish. Ask anyone who has finished nursing school in the last 5 years, or anyone who graduated into the 2000 tech bust.

  • http://caitlinbates kindaslightly

    I was lucky enough to have my parents fund all 4 years of my tuition, and the first quarter of school [we were on quarter system, not semester] they gave me a wad of cash for food and supplies needed for class. I wasn’t on a meal plan and I was attending art school where the supplies needed surpassed fees of a regular universities fees for classrooms and books, so I unfortunately blew through that almost instantly. My parents actually did not want me to get a job during my whole first year at school, but I felt so guilty for using all of their money that I got one anyway. When I wasn’t in class and doing course work, I was working part-time at a mall. All the money I got from my job went straight to supplies, food, and gas in my car. If I had spent too much on supplies and food, then I took public transportation or bummed rides from friends. I didn’t flounder in my studies just because mom and dad foot the bill. They taught me long before high school that school was important and so was studying, and you did whatever it takes to not just get good grades, but actually retain the information [which, I personally believe is more important than just a GPA]. I still had a social life [mostly confined to the dorms in the wee hours of the morning]. And I was able to “have it all” … I just had to bust my ass harder and lose on some sleep some nights, which was worth it and I don’t regret anything, Not just receiving a BFA, but graduating cum laude was proof enough that, yes my parent’s paid tuition, but I was able to keep my high GPA, do all my school work, party if I wanted to and work part-time jobs to pay for all the extras that I wanted and sometimes needed.

    • Laura

      What you did was commendable, but unfortunately it is not the route many college students choose to take. I had friends take out ridiculous school loans because they chose not to work, and decided that those school loans should also fund their social activities.

      While parents are always telling their kids that education is important, they are not talking about how to finance that education.

      • Young Millenial

        Again, this goes back to, it being the individual student’s responsibility to realize that they need to work hard on their classwork while in school or their money will go to waste and they will still be strapped with those loans afterwards. If they chose not to work hard and mess around, that is their fault, and it is their choice to take out more loans to go back to school and actually start working hard for their degree at a later time. Also, it is nearly impossible to work a part-time job and take a full-time college class workload (at least in my programs). The amount of schoolwork and projects that were assigned in my major makes it impossible to have time to work a part-time job and pass all of your classes. Some people can handle this depending on their situation, but mentally I would never be able to handle that. There also needs to be a balance between schoolwork and relaxation/social time because you will go insane if you just do schoolwork all the time with no breaks. All work and no play makes you a dull person, just like The Shining said. They weren’t lying. This is proven I’m sure in some psychology study.

        Students also need to realize what degrees or fields will get them the best job for their buck when they graduate instead of throwing their money away on a degree that is worthless. They need to do the research on the field or degree program before they enroll and take out these loans. Any college loan amount to me id ridiculous. It looks like monopoly money when you see the figures for tuition and financial aid. It is pretty much like taking a mortgage out to get an education these days.

    • Young Millenial

      I agree with the way you handled yourself and commend it. In the end it is the individual student that has to be responsible financially and realize what they can afford. This is a life lesson that I learned a few times when I was out of money after graduating with no job and had to live with my parents. It isn’t a given that you’ll get a job after graduation. If parents always give their kids money, than that is their fault that they aren’t teaching their kids to be financially responsible and independent. If the parents want to coddle their kids their whole life, that is the price they pay for doing so and they aren’t being good parents in my mind. They should expect to have their kids calling them for money all the time and them giving in because that is what they taught them to do. As far as I’m concerned when you have kids, you should start saving if you can for them to go to college in this day and age because without a degree it is tough to make a living unless you find a niche, but only a few people out of many are able to do this.

  • Elissa Backas

    my parents paid for my education and I had a 3.8 GPA.
    Either way, kids shouldn’t work hard at school because it’s expensive, they should work hard because they’re there to learn and get a good job after they graduate…

  • Matthew Gordon

    The problem with setting a minimum GPA is that many programs aren’t all that GPA-focused. In my experience in the humanities, it’s largely about the quality of your research and writing. With capped marks (i.e. there’s no A+++ that brings up your GPA all round), it’s difficult to get a true idea of a student’s acumen simply by averaging the courses.

    • Young Millenial

      After you graduate, it is more about the people you network with and know that helps you get a job than your grades. If you got a B average or better in your major classes and close to that overall, that means that you are eligible for any job and will still graduate. I’m not saying don’t work hard, because I did and in order to get hose grades you have to work hard and not be a slacker. However, it is your experience in your field that also counts towards getting you a job after you graduate. So, I encourage everyone to find an internship or job related to their field on the off months of school, it will help you immensely in the long run.

  • mara

    When I came to the US as an exchange student It was just a dream to stay here for college considering the high tuition in the US compared to going to a public university for free in my country.
    I visited a private small college just to see what it was like and to my surprise they offered me 16k in scholarships a year (for academic and sports) with a 21k total tuition. I was super excited but still doubt my parents will help me with the extra 5k I needed (I didn’t have the option of loans). I told them the news and unexpectedly they said yes and my life changed from one second to the next.

    Their financial help was the left over tuition balance..no more..no less. My spending money (books, entertainment, etc) came from side jobs at the school. I worked in the alumni fund office, I also tutored Spanish, worked catering special events, was a receptionist at the gym, etc. In the summers I babysat, took care of older people, cleaned houses, painted properties and street cubs, and did whatever I could find for extra cash. At some point tuition was higher and I only had my parent’s 5k..so I became a resident adviser, applied for more scholarships and payed that I would not run out of money before finishing school.

    Somehow it all worked out and I couldn’t thank my parents enough for helping me out. Those four years allowed me to build a nice resume and get tons of valuable experience. I did not get to have crazy spring break trips or party every weekend but I still had lots of fun. I will totally help my kids make it through college with no loans. It feels nice to have a real job now and not have them.

  • Frugalista

    My parents paid (granted, I went to my state school nearly 20 years ago when college was still actually affordable) and I graduated Magna cum Laude. OTOH, I didn’t ask to be born.. the least they could do is pay for college so I had half a chance at being successful in this life they brought me into.

    • violet99

      Wow, talk about entitled. “I didn’t ask to be born?”

    • Maureen

      If it requires the support of your parents’ bank account for you to be successful in life, you’re living in a paradox because you’ve already failed.

  • Alexis Greenwood

    Thank you for sharing; both the article and the study were well-intended, although I have to say: “You’re surprised why?” It makes perfect sense that adults will not work hard unless there is value attached to that work. Notice I used the word “adult” and not “kid”. People over the age of 18 are legally adults. If we started calling them that, and treating them like that, perhaps they’d be a little more motivated to act responsible and respectful.

  • Young Millenial

    I half agree and half disagree with this article. The part I agree on is that parents shouldn’t be funding the social aspect of college for their kids. If they need extra money to join a club or for parties or a meal plan, that should come from financial aid money or the student loan money and the student needs to budget out how much they can spend or find a part time job if they can to be able to afford these things. If the student doesn’t qualify for financial aid, it means either them or their parents should be able to afford to pay for those types of expenses. My parents paid for the first 2 years of my 7.5 years of undergrad and graduate schooling. If they didn’t do that, I would have even more debt than I have now. Luckily Obama made some new programs to help us out such as the Public Service Loan forgiveness program and Pay as You Earn program. Currently, I’m having a tough time getting a mortgage approval for buying a house and it isn’t because of my income. I took the risk to go to one of the best grad schools in the country for my field and now have an extra 100K in student loans because they didn’t offer any scholarships. I still stand by my decision, because it has helped me get to where I am today. This degree has put me in good standing with my career as I can now move up faster than I could before. However, the way student loans are looked at by mortgage brokers currently is that they can’t calculate your loans based on an income-based repayment plan, they punish you for having a large amount of student loans regardless of your income. They ignore common repayment programs such as income-based and modified repayment schedules and thus use the highest monthly payments you would have to pay for 3 years straight, which is unrealistic in this time period. So, what I’m trying to say is that having this student loan debt is hindering my financial future by preventing me from buying a house and having more equity and pay more in taxes, even though I can afford closing costs and monthly payments. Also, interest rates for loans change quite a bit over time depending on the loans and can end up costing students much more over the life a the loan than they originally signed up for. Parents should be helping to pay tuition of their kids (they had them, be responsible) if they are financially capable because it is outrageous and is increasing higher than the rate of inflation and hurting us later by preventing us from buying houses, being qualified for higher credit, and buying new cars until some sort of reform happens for the millennial generation that got stuck in the rut of an economic depression and greedy colleges increasing their tuition costs with no cap.

    The financial teaching should be done while people are in high school by the parents and let them know that they are cut off in college if they overspend on unneeded things during college and can’t budget to teach them a lesson. Living expenses while in college might be an agreement of how much each kid can get per semester from their parents if they don’t qualify for financial aid, but the parents need to encourage their kids to get summer jobs to pay for some of these other expenses during the school year that are related to being social, like I did. When I was on financial aid from the fed. government for living expenses, they gave me $10,000 per semester. It was enough for rent or room and board, books, needed school supplies and some other stuff, but by the end of the semester it would usually be gone, so that should teach college kids how to budget as well. In conclusion, parents should at least partially help their kids pay for tuition in the current era, as it is a huge financial burden once they graduate unless tuition rates change. We are not in the 1960-1990s era of tuition. It was much cheaper back then to go to college and didn’t put as much of a burden on young professionals as it does now.

    • Sharon J. Gilman

      I think you should only take out that much in loans if you’re going to get a job that will pay it back before you retire. How much of a return are you getting back on that investment? And I don’t mean a return as in ‘a good career.’ I mean financially, how much of a return are you getting on that? I think there are way better ways to make money out there than shelling out hundreds of thousands of dollars to end up with a job that pays $30-60,000/year. My friends who have graduated from college with bachelors and masters degrees and have gotten jobs in their field still can’t afford to move out of their parents house because of their student loans.

      • Young Millenial

        It is virtually impossible these days to do so. A normal college tuition out of state ranges from about $20,000 to $55,000 annually out of state or in state if it is a private college. Plus, these rates go up every semester with no knowledge of why they do so. It’s been a major complaint in CA. These rates have far surpassed the rate of inflation and the government knows that, which is why Obama created those programs. Also, why is there a 15K to 25K discrepancy with in-state and out od state tuition? It makes no sense to me. Without the education I have I wouldn’t be able to move up in my field and that means I have to pay the piper because neither me or my parents had the money to foot the bill, which is why they created financial aid. Call me crazy, but I’m pretty sure I’d have to be working at the top level of my field as soon as I graduated to pay off these loan amounts within a reasonable amount of time. Again. my state didn’t have good programs or colleges for what I wanted to do, so that is why I did what I did and I worked hard and now I am making a decent salary, but not one that will pay these loans off any time soon. That is because when you add in cost of living, it becomes difficult to pay these back fast without being a CEO of a company. Times have changed and my generation seems to be the one that has been the guinea pig for this whole process.

        • Liz Leyden

          Even state schools are becoming unaffordable. When my mother graduated from Boston State College (which has since merged with UMass Boston) in 1973, in-state undergrad tuition and mandatory fees were $1,500 per *year*. When I graduated from UMass Boston in 2004, in-state undergrad tuition and mandatory fees were about $125 per credit; $1,500 paid for four 3-credit classes. In 2013, in-state undergrad tuition and mandatory fees at UMass Boston are $495 per credit; $1,500 pays for one 3-credit class.

    • Maureen

      I’m in this exact same situation. I feel your pain here.

  • Kim

    Kids need to be involved in the expenses of their college experience. It helps them get ready for the real world. I didn’t have parents who could pay for my college, but they were supportive in every way possible. I found having a job while in college helped me to use my time more wisely plus I had money to help with living expenses. Our son decided to go the military route which helped with his college expenses. I think this article gives some great ideas on how to help our children during the college years, but not enable a lifestyle that isn’t real.

    • Young Millennial

      I agree 100%. My parents couldn’t afford to pay for me after my first 2 years. Getting a job for me was impossible, as I explained below while in college because the amount of work in my major was astonishing every semester. Also, honestly, in my situation having a part-time job wouldn’t have made even a scratch in my overall student loan debt. I want to school out of state because none of my in-state schools had my major or the professors with the expertise I wanted. This meant that I had to take out exorbitant student loan amounts just to pay for the tuition. So, an extra $2,000 per semester would equate to about a 0.1% payment of my loan debt not even factoring in interest rates. It would’ve been good for living expenses, but that is about it. That is why I worked in the summer to get the extra spending money for the following school year to add on to the financial aid I was getting from the federal government.

  • Young Millenial

    I also want to say that I think there are a lot of misinformed parents when it comes to funding their kid’s college tuition as well. A lot of them grew up in times where college was less expensive and there were less options available to them financially. I think if the parents and their kids spoke to a federal loan councilor before going to school, that would help to alleviate these uncertainties in loan repayment explained in this article. In fact, there have been changes in federal student loans enacted by the Obama administration in December of 2012 that could definitely help the future generation of college students.

  • KNav

    I love what my parents did for me. They provided enough for four years at an in-state University, four years of books, and two years of room and board. I was absolutely allowed to go to a private university, go abroad, go out of state, join social clubs, or just live at home – But it was clear that after the money they had saved for me, then the loans were mine. With that knowledge I could sit down and decide what was valuable, study the worthiness and costs of different colleges and programs.

    I worked part-time to afford the dues for my co-ed business fraternity and social activities and I understood the value of a dollar. With my sister, it was clear she’d need five years to graduate – so she lived at home for four of the years she was in school and still stayed in her budget.

    I was debt free when my diploma came in the mail. I’m going to give my kids the same options and am grateful for how they raised me.

    • Young Millenial

      Thank you! It is the student’s responsibility to understand what they are getting into with college and how to handle their finances. This study is just saying that some students are apparently going to college for the wrong reason and their parents aren’t being responsible because they are giving them money at will instead of teaching them how to budget their money. The parent’s have the responsibility to ensure that their kids aren’t strapped financially with loan debt as well after they graduate since they brought them into this world and that is part of the process to starting their professional career unless they decide not to go to college.
      I’m going to try as hard as I can to pay for my future kid’s tuition and if I can’t I will let them know what they will have to pay once they are out of college and also have them talk to a student loan counselor before they go to college. I will also tell them to find a job during the summers to pay for any extra money they need for social activities while at school instead of me coddling them. Glad you were fortunate enough to have your parents pay for you and have your loans paid off. Unfortunately in my scenario, like I said before, even working full-time for 5 years in my field would hardly be enough to pay off my student loans because I went to schools out of state and some didn’t offer large amounts for scholarships.

  • kgal1298

    I had to take out my own loans for college. By the time I was going to be a senior I was over extended and couldn’t finish school. I’m okay not and my credit is getting back up there, but I feel like kids need to decide if college is right for them. Did I need it? Not really what I learned I learned on the job. College taught me a lot about different social stigmas, but often times I still feel like I’m that girl right out of school learning new things. I don’t know I wish I would have taken a job right after high school and just took time to decide things. My dad had died a few short months before I left for college and I was a mess that first year took the second year off then came back, but then all the finance stuff happened. It was rough for sure and I’m probably better off for it, but ugh I wish I didn’t have those loans on me.