Every once in a while, my former career in financial planning intersects my parenting. Perhaps that statement is never more true than when it comes to considering how to pay for college. Every semester when the new college bill arrives, I deliberate with my husband in how to help our daughter make the best financial decisions for college.

In my previous career where I worked to help people achieve their financial goals, I found it much easier to be on the outside looking in. When you’re in the midst of figuring out your own stuff, you’re balancing the wisdom of your mind with the emotions of your heart. Sometimes when you’re stuck in a situation, you don’t see it as clearly as others (and that is why we have armchair quarterbacks and backseat drivers).

I believe there is a similarity between paying for college and paying for Christmas presents. In November and December, when the stores are dressed in red and green, and evergreen garlands and twinkling lights greet you, it’s easy to get caught up in the moment. The “pay nothing ‘til January” promotions reel us in, making borrowing money easy. In fact, it’s so easy that when payment time rolls around, we have forgotten how much we’ve racked up in charges.

Chances are, if you were to pay cash for your purchases, you might give the transactions a little more consideration. For some reason, the act of pulling dollar bills out of our wallet tugs at our consciousness more than signing our name to a credit slip.

On a much grander scale, paying for college is the same. When your child is signing each year for those loans, it seems light years away until the first payment becomes due. He (or she) may be thinking that five years from now, he’ll be chairman of the board and making six figures, so a $600/month loan payment for 10 years is completely doable. Some loan programs even urge students to borrow more than they immediately need, just in case they have unexpected expenses. It’s likely that if an unexpected expense arises, the money is already spent on something else.

Just like the January, post-Christmas credit card bill, college loans mount up when interest upon interest is charged. Then comes the stark reality that six-figure salary jobs aren’t so easy to come by in most situations.

When you’re in the midst of your college career, it is really hard to see beyond the thousands of pages to be read and hundreds of exams to be taken. A life beyond research papers, oral examinations and lab experiments is not even visible on the horizon. So, it is easy to get caught up in borrowing more money and accruing more interest than a future income could pay back. You may have heard that college debt is “good debt.” Well, it is if your child will have the wherewithal to pay it back. On the other hand, if he won’t be able to pay it back, it’s generally considered “bad debt.” Your child could be looking at many years of garnished wages or tax refunds redirected to the unpaid debt.

In the ideal world, every student would have access to education. Since we don’t live in a utopian society, it’s up to families to figure out their own way into post-high school education and training. Scholarships, grants and subsidized loans (where the government pays the interest during college) are available to some students, and are based upon merit and/or need. Some students have to juggle working while attending college; some parents have to juggle multiple jobs to help their children afford college.

When it comes to paying for a child’s college education, how parents view the financial responsibility is as varying as there are clouds in the sky. Some parents believe that college is a parental responsibility and want their child to graduate without debt. Others feel it is their child’s responsibility; they already gave their child 18 years of free room and board and the rest is up to the child. Some parents agree to match whatever their child earns to pay for college. It’s a personal decision for each family. And, a lot can happen in the 18 years from a child’s birth to his high school graduation. Intentions to pay for or assist with college expenses may go awry when a family has faced a prolonged illness, job loss, marital dissolution, market crash or additional children.

I had a colleague who used his credit card to pay for his child’s tuition. He was fortunate to able to pay off the credit card right away, but paid with his card to earn mileage points. That may have worked well for his family; but, if he hadn’t been able to pay off his bill each month, he would have been paying credit card interest at a rate that was much, much higher than a government education loan would have charged.

I have always believed that money shouldn’t be what prevents a person from achieving a dream of education and pursuing a chosen career path. If a student postpones post-high school education until the savings account is big enough to pay for it in cash, he may never have a chance of realizing the dream. Just like parents’ intentions to pay for college may go awry, intentions to go back to school may go awry. Life has a way of getting in the way. So, as a parent, I’m not adverse to education debt. I look at it as a mortgage on my child’s future. Even if I could pull out the tuition dollars from my wallet, I’m pretty sure that I would still encourage some college debt. And, here is why…

When your child has an education loan, it can help him establish good credit. Timeliness and consistency of payments will show favorably to a lender when he seeks a car loan or mortgage in the future. Good credit can also help an individual garner more favorable insurance premiums and interest rates on future credit cards.

Loans oftentimes can be paid back early without penalty. If your student’s loan terms allow for early payments to be applied to the earliest loans first, less interest will accumulate.

A fixed expense like college loan repayment means that your child has to balance wants vs. needs. While it may be a lesson that you’ve tried to instill in your child from a very young age, it takes on a whole new meaning in the world of adult responsibilities.

There is value to the student in paying his own cash onto his tuition bill. My $2/hour high school job salary hardly put a dent in my Valparaiso University tuition; however, putting those DQ paychecks and all of the babysitting money I earned since 11 years old toward that first college bill is probably why I never took my college education for granted. It took a lot of long, hot summer nights serving milkshakes and sundaes to get there. On the other hand, my wealthy East Coast roommate flunked out not once, but twice. She didn’t put even a penny into her college costs.

As your child considers post-high school education, talk with financial aid counselors at schools. They will guide you and your child and help you see the options available. As the cost of higher education continues to rise, student loans are inevitable for most families. They come with big responsibilities, but also can help your student reach his big dreams.

— Pamela Henderson is the CFP at Dunebrook

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