Paying for College – Alternatives

Live At Home After Graduation

You have probably read articles that are critical of students who move back home after graduating from college.  Can’t hack it on their own, or Social Losers, or Mama’s Boys/Girls, or Don’t Know How to Cook – these are some of the pejorative or sarcastic criticisms of this phenomena.  I take the other side of the argument:  When college costs $65,000 per year or more, and with high student debt, living at home after graduation is a rational economic decision by students and/or parents.

If you are a parent and you haven’t saved enough for your child’s college, but you want them to have a “full college experience”, meaning they should go full time and live on campus or at least away from home while at college:  Don’t feel bad about it.  Instead, make a deal with your child.  Have them borrow as much as they need.  Then, after they graduate, offer to have them live back at home while they work.  Don’t charge them rent, and continue to pay for their food – you did when they were in high school, and you can again.  Any “beer money” or other outside spending is on the child.  All of the money they would have paid for rent goes to pay down their student loans, which are by now accruing interest.

Let’s say rent, where your child wants to live, is $1,000 per month, and “board” is another $200.  Instead of paying that $1,200 to other people, have your child live at home and pay down $1,200 per month of student debt.  Using simple math, after 2 years living at home, the student pays down $28,800 of the loan (not including interest).  That is significant!  It’s kind of deferred savings – instead of saving an paying before college starts, you save and pay afterward.  The loan, in this case, acts like a short-term stopgap, almost a cash-flow loan, rather than as a long term loan

The caveats:

  • The child has to work.  No income? No loan pay down.  Self-explanatory.
  • The strategy works better if you live in an area where the child can find a good job.  If they can use public transportation and thereby defer the purchase of a car, then all the better.
  • It may put a cramp on social lives – both yours and the child’s.
  • There need to be ground rules.  Your child is now an adult and needs to live by house rules.

Community College

Another alternative is community or junior college.  Go there for 2 years, get the 101’s and the GenEd requirements completed, get your Associate’s Degree, and then transfer to a 4-year college.  The quality of the junior college education is probably as good as you would have gotten at the 4-year college.  They are probably using the same textbooks.  Do you think Intro to Accounting or Biology 101 is any better at a 4-year college than at a junior college?  Probably not.  In fact, that is what junior college is designed for. There are two issues:  The student doesn’t get the “college experience” of living on campus and away from home, and there is a negative, elitist-led stigma against junior colleges.  The trade-off:  Junior college is a small fraction of the cost of 4-year college.  Then, once you finally finish your Bachelor’s Degree after having started at junior college, your diploma still says that you graduated from the 4-year school.  It doesn’t matter where you start; it’s where you finish that counts.

IMO

Social stigma is a powerful force and not to be denied.  Both of the alternatives I describe here – living at home, and going to junior college – carry with them an elitist stigma.  Today, with college costing as much as it does, those who perpetuate the negative stigma need to stop, and those who do go to junior college or who live at home after graduation to save money or pay down debt (or those who do both!) need not feel bad about it.  They are making rational, very good economic decisions about their futures, and they are making present sacrifices for future benefits.

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