Oct 27, 2008

Paying for a private university education

Earlier this year, I shared the conversation I had with my dentist about his daughter's dilemma on where to go to college. She had gotten into a couple of excellent University of California schools, as well as a well-known private university on the east coast. UC schools run about $25,000 per year. The east coast school is $50,000 per year. Needless to say, my dentist really wanted his daughter to attend a UC. But her first choice was the east coast school.

I just saw my dentist for a cleaning and was eager to find out what his daughter had decided. I wasn't surprised when he said that she's out on the east coast, and that she's having the time of her life. I was surprised when he said he had to take out a second mortgage to pay for her tuition. After all, not only is he a dentist, his wife is an attorney. But $50,000 per year is a lot of money, especially when you consider it's after taxes.

It's not like my dentist is one of my best friends, so I didn't feel comfortable asking if they'd saved money for college while their daughter was growing up. I don't know much about their finances, but I'd like to think that they had saved enough to pay for at least one year's expenses.

I have a strong emotional response to my dentist's situation, although I can't quite put my finger on what the emotion is, exactly. It's just that they're going through what my dad and I went through. I chose an expensive private school because it "felt right," without regard to cost. I don't know exactly how my parents paid for it, but I know it wasn't easy for them.

I greatly appreciate the sacrifices they made for me, and I know I wouldn't have been pleased if they'd tried to knock some sense in me during my senior year of high school. But if I could do things over again, I would definitely pick a less expensive school - or at least one of the schools that had offered me a scholarship. Knowing what I know now, I can't believe I put my parents through that - or that they let me put them through that.

My dentist is fairly young, so I expect to be seeing him for many more years to come. I'm interested to see where his younger daughter ends up going to college, and what his older daughter ends up doing for a career. While you can't put a price tag on the experiences she'll have at her school, financially speaking, I find it hard to believe that the investment her dad is making will have been worth it compared to the education she would have gotten at a UC. But maybe she'll prove me wrong.


Camille said...

I am debating this ALREADY in regards to our kids (oldest is 8!). Both my hubby and I went to private colleges and had fabulous experiences and got great educations. We both also had scholarships, which cut down on tuition, but the schools were still expensive and we still came out with loans to pay off (as did our parents).

I vacillate between wanting my kids to have that great experience, but not wanting them to come out of school chained to debt. I'm not even opposed to them working their way through school. I've had a lot of friends do that who are much better off financially for doing it. But to trade the experience to be an adult sooner... I just don't know.

And you thought the private/public school debate for the first 13 years was tough...! :-) At least at age 5 they don't have an opinion!

Kara Parlin said...

I think it's important for parents to discuss the financial aspect of college choices with their children. I went to BU. My parents owned their own company, so we didn't qualify for any financial aid.

At the time, I didn't know what kind of burden the cost would be for me or my parents (we both had loan obligations). And looking back, I would have chosen differently, opting for a community college the first two years and transferring out. It would have saved a lot and the liberal arts classes would have been much the same.

Anonymous said...

Perhaps a solution would be to say "We are prepared to pay X amount of money toward your education. Anything over that you will have to fund yourself."

Anonymous said...

In Canada, our tuitions are a lot cheaper as a matter of government policy (although they ARE rising rapidly), so I didn't have to go through this dilemma. Instead I got to choose my university based on rankings for my specific program + atmosphere. At the time, although I had toyed with the idea of applying to some of the more expensive schools here in the US, I opted against it...

However, now that I have moved to the US, I feel like the name of the school matters a LOT. Not just for the eperiences, but also for the networking (social and professional) opportunities they provide. I have friends from both types of schools - and while all of them are successful in their own way, the ones from the private schools (on average) seem to be just that little bit ahead...

Anonymous said...

My parents immigrated to DC from Asia. They sacrificed a lot so that my sister and I can get the best this country had to offer. When it came to education, they did what had to be done, and paid what needed to be paid so my sister and I can get the best. We both went to private schools.

I was accepted and ready to go to UVA. When I over heard them talking about what they needed to do to pay for me to go to UVA, I decided to go to GMU, which was only a fraction of the cost. They talked about getting another job (which both of them were already working 2 each), cutting back on this and that. This was not how I wanted my parents to live.

Looking back, I do not regret my decision because not only did I save my parents the frustration and sacrifice of having to pay $27K/yr versus $5K/yr (back in the early 90s), but I still got a degree, no guilt and most of all assurance that I did the right thing.

Today, they are not worried about the financial crisis that is impacting the world, because they are natural born savers. The only thing they worry about is just postponing retirement for a few years, but as my dad said,"If I retired, I would be very bored, and I would end up going back to work since that is all I know."

As for myself, we have not been able to put money asside each month for our kids college fund. We just take our tax refund each year and put it in their 529. I am hoping my kids will get scholarships, but right now they are only 3.

Dina said...

As my daughter gets older, my thoughts (and financial situation!) may change, but right now I expect her to pay for the majority of her higher education through student loans and scholarships. We do have an Educational Savings Account (ESA) set up for her, but it's only piggy bank, birthday, and a little extra from mom and dad that goes in there.

Why do I feel this way? Well, my parents helped me with school but I still came out with $40,000 in debt. Chances are I won't pay that off until she's ready for school. Additionally, I've read several financial articles that tell parents to save for your retirement, not your kid's college, b/c once you retire, that's it for your income, whereas they will have the rest of their lives to pay back the student loans.

Like Camille, I hate the thought of my daughter beginning her life chained to debt, as my student loans seem to be a major factor in many choices my husband and I have had to make (e.g., me staying at home or returning to work after baby). But I have to be realistic about what is possible. (And to me, a 2nd mortgage for an education falls into an "impossible" category. No way.)

Obviously, even though she's 3, this is already on my mind!

Anonymous said...

I have to say that while I believe that students do best at the school where they feel they fit best, I also believe that students who have to work for what they want will work harder and do better in their classes. I know I would have worked harder if I had had to pay my own tuition.

My parents also owne their own business and I did not qualify for any financial aid. But I also didn't apply for scholarships or grants. I attended a fairly inexpensive school and had a good time while I was there.

But I do think we will only help our kids out as much as we can without going into any additional debt. It isn't that I don't think its a worthy investment, but that I believe our kids will work harder and choose a school they love AND are willing to go into debt for if they feel strongly enough about it. They will have jobs and learn important financial lessons that I didn't learn until there was no safety net under me. If they need help, we will always be there, but young adults need to learn the value of both the dollar and the education they might otherwise take for granted.

Theresa said...

I know you've been thinking a lot recently about education and a price tag. I went to public school through 8th grade, an east coast prep school for high school (as a day student - we lived nearby), and an expensive Ivy for college and med school. My parents paid for everything through college, and the Navy paid for med school.

If I had to choose between spending the money on my private high school or private college, I'd go for the private high school. I think it made a much more significant impact overall and the skills learned there will transfer to any college.

That being said, I had a residency interview that lasted about 5 minutes - "You went to school there? I have a spot for you." Names help. Plus, I was never distracted by having a good football team.

Kacie said...

Holy cow.

So, this will be about $200k for an undergraduate degree? How 'bout NO WAY!

I can see shelling out that kind of money for an advanced degree, but if parents need to take out a second mortgage for their first child's first year of college, this just isn't a story that's going to end well.

Paying for my college education was a group effort. I had help from family, scholarships, and I paid for a few semesters myself. I managed to get through it without taking out any loans, but I can't help but feel guilty for how much my parents ended up paying (and I went to an in-state public school).

My parents don't seem to be too financially well-off, and I feel like they'd be in a better situation if they didn't have my schooling to pay for.

As for my child (who is due in a couple of months), we'll do our best to start a college savings account for him, but only after we've paid off our last debt and are already contributing 15% into retirement.

With the crazy rates of college tuition inflation, I'm almost certain that we'll need him to get scholarships and contribute his own money as well.

Good luck to your dentist and his daughter. I'm glad I'm not in that situation!

Anonymous said...

You can have a good experience at a state school. My son goes to one in Texas and is receiving an excellent education and is having the time of his life. He never once thought of going to a private school. Even he said it was too expensive and we are paying. It amazes me how he can live on a dime. He is the self proclaimed "King of free food".
He just decided to go to law school which is freakin' me out!!!!

Anonymous said...

I had a similar experience of going to a very expensive private college when I could have gone to a state school with scholarships - I'm embarrassed to say they would have paid me to go, and I turned it down. I think it's hard to make a good decision at that age, and I hope to be better prepared to guide my kids. I don't think it was worth it, though I learned a lot. In many ways, my husband got a better education at our big state university - they just had more resources overall.

I just paid off my loans and I'm finally feeling free of those decisions, which is good. I don't want to see my kids saddled with that kind of debt, but I definitely want them to contribute to paying for their college education - I think it's a good experience. I just want to guide them to do it in cash.


Anonymous said...

Don't forget, that second mortgage probably covers: books, meals, going-out money, the cost of joining a sorority, airplane trips to come home during breaks, airplane trips for the parents to go see their daughter, shipping costs to ship clothes/personal items home for breaks, etc. The cost of tuition and room/board is only the beginning.

I went to a state school. My parents paid all the costs (minus extras) the first year, and I had a job. For sophomore through senior year, I paid for room/board through my job as an RA and then off-campus jobs. During those years, they paid tuition only. I put myself through grad school. We did it all without student loans and without taking out a second mortgage (that I know of, anyway). Cost was a definite factor when I chose my university, and I'm sure I made the right decision.

Best, amanda

Anonymous said...

When dd was heading for college last year, we compared costs. Everyone kept telling us try community college a few years and transfer. The cc is 45 miles away, so figure in a car and gas/maintenance/insurance. She scored well on ACT and got $14000 in scholarships for the private Christian college. Along with having several siblings and a mom who doesn't have to trudge off to a job somewhere everyday, she is only having to come up with $5000 a year. We couldn't send her to the cc for that. Or the state schools.

Anonymous said...

I am currently paying my son's way through an out-of-state public university. That's expensive enough! All the college planning advice you read when your kids are college shopping tells you not to consider cost as a primary factor. The recommendation is to pick the school which is the best fit and then start looking for financing. I know for us, the more expensive private schools also had the most available funding by way of scholarships and private grants. We chose the school that seemed the best fit for him and are happy with our choice. Having said that, there were certainly schools that were completely out of our reach.