Updated on 07.13.09

The Total Money Makeover: College Funding

Trent Hamm

This is the ninth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the tenth chapter, finishing on page 182. The next entry, covering the eleventh chapter, will appear on Saturday.

ttmmWhen I was growing up, my parents didn’t save any money for me for college. Not because they were neglectful, but mostly because there weren’t resources for such saving.

Where are we at now? I’m doing just fine, with just one college loan remaining, and my parents are safely in retirement, leaving me without worrying about how they’re going to make ends meet.

This experience, when I reflect on it, makes me question the value of college savings. I do understand the benefits of helping my children through school, especially if they realize the value of it. However, looking at things from a post-college perspective, I’m actually much happier that my parents are safely retired than I would be if they had floated my college bill and were still working.

For me, at least, it makes sense to focus on retirement savings and make absolutely sure that it’s covered before even considering college savings. I think we’re there.

What to Expect from College
Many parents seem to expect that once the kids are out the door to college, they’re well on their way to a lucrative career. Ha. On page 169:

If you are sending your kids to college because you want them to be guaranteed a job, success, or wealth, you will be dramatically let down. In some cases, the letdown won’t take long because as soon as they graduate they will move back in with you. Here me on this: college is great, but don’t expect too much from that degree. […] Because we have turned a college degree into some kind of “genie in a bottle” formula to help us magically win at life, we go to amazingly stupid extremes to get one.

This kind of talk is anathema to some. How dare someone impugn the value of a college education!

Here’s the thing: the actual college education only teaches you a bit of what you’ll actually need to know in the workplace. The value of college comes in other areas: the relationships you build and the skills and ability to actually get through the minefield. The college degree merely says that you were able to navigate the minefield, not that you picked up invaluable knowledge that will help a business make money.

I found that the “cramming” skills I learned in college didn’t pay off until I had secured a job. The relationships I built paid off helped me get my foot in the door for my first big job interview, but I had other opportunities on the table that weren’t connected at all to those relationships. My actual college degree? It was a nice resume filler, but it was not what got me the job and it was not what helped me succeed when I got there.

Devaluing the Pedigree
Page 171 discusses the idea that where your degree comes from doesn’t matter that much:

In some areas of study and in a very few careers, where you graduate will matter, but in most it won’t. Pedigree means less and less in our work culture today.

The panic that people feel about how they “must” get into this certain college is completely overblown, from my perspective. You succeed or fail based on what you do and the relationships you build, not the environment around you. You can flame out just as well at MIT and at your local tiny state school. You can also succeed dramatically at both if you work at it.

I would far rather have a child that went to a small school without a great pedigree, took advantage of all of the opportunities there, built some great relationships with people, and got good grades in an area they’re passionate about than to go to Harvard and flunk out after two semesters.

Pedigree matters less. What matters more is the individual: did they take advantage of their opportunities, or let them idle around them?

College Lifestyle Adjustments
When I was in college, there were two groups of kids. There were the kids with “helicopter parents” who gave them plenty of cash to spend, seemed to stop by the dorms all the time, and would actually call professors on their behalf. There were also the “free” kids, the ones whose parents dropped them off, came and visited on occasion, but mostly let the kids do their own thing.

I was in the latter group. My parents came and visited regularly, especially when I was a freshman, but success was largely up to me. They never contacted a professor, and outside of a $10 or a $20 bill left behind on occasion, they didn’t provide me with funding beyond buying some of my textbooks as my “birthday” or “Christmas” present. I had a job starting my first semester and I kept multiple jobs throughout my college years.

Dave riffs on this on page 171:

[T]hose precious kids can probably get a good degree if they will suffer through lifestyle adjustments and get a job while in school. Work is good for them. In past generations, students lived with relatives, slept in dorms, ate cafeteria food, and endured other hardships to get a degree.

I do not want the path my children have to college to be incredibly easy. For me, the aspects of college where I actually learned things were the areas where I was pushed and challenged. Having everything paid for makes big swaths of college incredibly easy – and many college students, especially those lacking self-motivation, will fill those gaps with gratuitous wastes of time and money.

Obviously, the path shouldn’t be impossible, but no path that is a cake walk is one worth taking.

Tuition Inflation
College tuition goes up by leaps and bounds. On page 174:

College tuition goes up faster than regular inflation. Inflation of goods and services averages about 4 percent per year, while tuition inflation averages about 7 percent per year. When you save for college, you have to make at least 7 percent per year to keep up with the increases.

In other words, if you want your investment today to actually grow faster than the rate of tuition growth, you need to be making more than 7% on your return.

How can you do that? Well, there’s no guaranteed way to get that kind of return. However, if you start early in your child’s life, you have a period of almost twenty years to watch your dollars grow in a long-term investment, which means you can take on more risk than you could if your kid is fourteen.

I have my children’s college savings almost entirely in stocks (the oldest child is three years old). As they get older, I’ll slowly begin to shift their savings towards bonds and safer things, but for now, the potential growth of the stock market and the time frame I have for saving makes stocks a great choice.

Will Baby Life Insurance Work?
I know of several grandparents who have written to The Simple Dollar asking whether buying whole life insurance for their newly-born grandchildren is a good option. I told them no – I suggested starting their grandchild a 529 if they’re saving for college and if they really wanted life insurance they should buy a small term policy for the grandchild. Dave seems to concur on page 174:

Baby life insurance, like Gerber or other Whole Life for babies to save for college, is a joke, averaging less than a 2 percent return.

Whole life insurance is never a good deal. If you’re tempted to invest in it, consider something different. Instead of dumping, say, $100 a month into a whole life policy, buy a similar insurance policy for $10 or so a month, then invest the other $90 or so into a dedicated investment – a 529, a Roth IRA, or even just a taxable account. Put it into index funds through Vanguard (that’s what I do with my dollars) and just sit back.

You will be ahead. Why? The $90 you’re investing in index funds won’t have commissions taken out – the cost of a typical index fund is about 0.2% a year, while whole life funds have commissions so large that they often eat the entirety of your first few years’ worth of contributions.

If you’re thinking about it, get the information and projections from your insurance salesman, step back, and run the numbers yourself. Compare your investment in that policy with an investment in an index fund like VFINX and see where things wind up.

What Kind of Account Should I Use?
On page 175, Dave points towards a Coverdell account:

I suggest funding college, or at least the first step of college, with an Educational Savings Account (ESA), funded in a growth-stock mutual fund.

An ESA is often referred to as a Coverdell, named after the late Senator Paul Coverdell.

I usually recommend a 529. What’s the difference? The Coverdell has the advantage of enabling you to choose your investments on your own instead of choosing among the plans offered by various states. Iowa’s plan, though, is handled by Vanguard, which is who I would choose, anyway.

The big drawback to a Coverdell, from my perspective, is that it has to be used by age thirty or else given to a younger relative. I don’t like this at all, which leans me towards the 529. Many students who go on to graduate school often wind up in school past age thirty; others may make the choice to go back for a different degree after some years in the “real” world. If I invest in my child’s 529 and they have money left after getting that four year degree, I’d like it if that money sat around in case they chose to go back to graduate school or for another degree later on in life. That option is cut off with a Coverdell.

What I hope for is that my children will earn enough scholarships to cover their undergraduate degrees (I earned enough for a majority of my expenses). If that happens, they can keep that 529 for any graduate work they might do.

Do you have any other thoughts on this chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Saturday, we’ll tackle the eleventh chapter – Pay Off the Home Mortgage.

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  1. Jimbo says:

    What happens with the Coverdell or 529 if an only child gets enough scholarships to completely cover the education? Is the money lost? Large tax bite maybe?

  2. Johanna says:

    “I would far rather have a child that went to a small school without a great pedigree, took advantage of all of the opportunities there, built some great relationships with people, and got good grades in an area they’re passionate about than to go to Harvard and flunk out after two semesters.”

    I don’t think that this is a useful comparison. Realistically, pretty much the only way you are going to flunk out of Harvard or any similar school is if you don’t even try (don’t go to class, don’t complete the assignments, and either don’t show up for the exams or show up completely unprepared). And if you are the type of person who would go to Harvard and not even try, you’re probably also the type of person who could go to Tiny State U and not try.

  3. Ruth says:

    I have to disagree that college “only teaches you a bit of what you’ll actually need to know in the workplace.” While that maybe true for majors like history, anthropology, english, etc, where most students do not expect to graduate and become a “historian,” it is certainly not the case for majors like engineering, biology (premed), architecture, etc. I’m not saying that a degree is an absolute necessity for these positions, but most of what you learn is necessary and having a degree in the field makes it much easier to enter.

  4. Josh says:

    I have to agree with Johanna, but for different reasons. There are some schools that if you graduate from there with a certain degree, you have a huge advantage over other people when it comes to the first 1-2 jobs you’ll have after college.

    I’m thinking along the lines of business (Indiana, Cornell) and journalism (Mizzou, Ball State, Northwestern).

    That’s not to say that someone graduating from a smaller school doesn’t have the chance for Job X, but they’re at a disadvantage for some of them because those mentioned schools normally have alumni who can get your foot in the door.

  5. Des says:

    “Where are we at now? I’m doing just fine, with just one college loan remaining, and my parents are safely in retirement, leaving me without worrying about how they’re going to make ends meet.”

    Yes yes yes! As a twenty-something who will ultimately need to care for her parents who were too irresponsible with money to plan for their own futures I BEG everyone with kids to please plan for their own retirement. My parents retirement strategy was for us kids to get good jobs and take care of them…literally!

    I would MUCH rather come up with $40k for tuition than come up with $40k per year for the duration of my parents lives to take care of them. (In actuality, they didn’t cover any of my college either, but for the sake of example…)

    People think they are being selfless by putting their kids college education ahead of their own needs, but it really is a short-sighted and selfish plan. It may give you warm fuzzies to see their 529 balance increasing, but the responsibility of taking care of you will ultimately fall on them. That is much more weight to shoulder than student loans.

  6. Amber says:

    “For me, at least, it makes sense to focus on retirement savings and make absolutely sure that it’s covered before even considering college savings. I think we’re there.”

    This is exactly why saving for college is after retirement savings in his baby steps. Its been awhile since I read TMM, but I thought Dave’s stance was not that you *must* save for your children’s college education, but that this is the proper place in your financial planning to do so. He also doesn’t tell you how much to save. It is up to each set of parents to determine how much they want to pay for their children.

    Personally, I don’t want to hand a college education to my kids on a silver platter. But I also don’t want them to graduate with a mound of debt and if tuition keeps increasing an its current rate, it will get harder and harder to work your way through school without some sort of scholarship (or perhaps making a full time job of applying for scholarships.) I also don’t want $$ to be a major deciding factor in their choice of school. My husband is a teacher and we see a lot of kids choose to live at home and go to the local community college. It is a perfectly frugal choice, but the kids lose out on the lifestyle adjustment!

  7. This is an interesting dilemma, based on what the previous two commenters have noted about retirement vs. college savings. My wife and I had our three babies two months ago and the first thing I did was back off on my 401k contributions to the minimum where my company would match, and I started pouring several thousand dollars into their 529’s (New York State plan). Now I’m thinking this is a horrible idea because I am 36 and only have $40,000 for retirement right now ($70,000 between my wife and I).

    I also put a hundred a month in my Roth, but that’s not doing much to get me to my retirement goals.

    I don’t want to leave my children high and dry but as DES pointed out, I don’t want to be sponging off my kids in my waning years. A better present to them would be to not feel burdened to care for me and my wife.

    I think I need to adjust the percentages again.

  8. AC says:

    I am currently half way through my university degree. I am paying for half of my tuition and living expenses and my parents the other half. Last semester I had 30 hours of classes and was able to receive half of this years tuition in scholarships.

    “I do not want the path my children have to college to be incredibly easy.”

    I know that if I needed to pay for the whole shot I would need to work throughout the school year. My goal is to finish university without any student debt. This would take too many hours away from my studies to get those scholarships. Also working would take away from the other sport activities which I enjoy.

    Also I agree for the most part that when you go to college or university that that is your time to move out of your parents house.

  9. Bill says:

    @#2 Ruth

    They don’t let engineers or architects fresh out of college do anything with out years of real world supervised training. I’m a computer programmer and I’ve been hiring young programmers for years. What they have been taught in school is mostly theory and is valuable but it takes months of hand holding before they are of much use.

    What’s worse is how many young programmers aren’t really cut out to be a programmer or want to be a programmer. They where just thrust in to it by their parent because it pays good. These rarely last and wont be happy.

  10. Marsha says:

    There’s no one right path on this one.

    Bachelor’s degrees in engineering, education, and accounting are probably much more likely to actually prepare people for jobs than many other degrees.

    On the one hand I favor the idea of working one’s way through school. But if you ever want to go to graduate school, you should aim to have the highest grades possible for your bachelor’s studies. Yes, that’s a generalization, but you should presume it’s true for medical or law school – probably many other fields as well.

    I personally value a liberal arts education, but trying to put an economic value on it is impossible.

  11. Bev says:

    I think the single worst financial mistake I made was going to college. I got a IT degree and a huge amount of debt. As Bill said above, very little I learned was useful in the real world, and I truly became a programmer in my first 2 years of work. I don’t know how I feel about my kids going to University, it was one of the best experiences of my life in many ways, but if left me in a very precarious financial position. I often wish I’d chosen the state school rather than the private one, but when you are 18 and college counselors tell you to choose the best school you can, and you will get Financial Aid so don’t worry about it, well you believe them.

  12. Matt says:

    I have to disagree with the claim that tiny college = big college or pedigree really doesn’t matter. My gf and I both graduating from a fairly “prestigous” school and because of that we have gotten well paying jobs less than a year out of school. Without the high degree (btw our grades were not the greatest) we certainly would not have been employeed so quickly and at such high salaries.

  13. Georgia says:

    In a world where a Bachelor’s Degree is expected for many positions, not having one can be inconvenient. However, most entry level salaries will not give a return on a college investment that people expect. I went to our top state school, had the life experience of dorming away from home and even studied abroad. I got a fantastic education, for a fraction of a private school cost and my loans are by no means crippling.

    Scholarships and Financial Aid are important. I have heard that if a family puts money in a “college” account that is set up solely for college costs, it will lower their eligibility for Federal Financial Aid. Trent, perhaps you are more familiar with this?

    For recent graduates with loans, there are loan forgiveness programs for certain professionals, such as teaching. Just food for thought.

  14. Mike says:

    My son is currently attending a junior college and living at home & working. He will be going to 4 year college next fall.

    What benefit is there in having his degree from an accredited program Journalism rather than an just an accredited university?

    There is only one university in our state that has an accredited Mass Comm/Journ program and would require him to have housing and find another job there It’s still a state school and slightly cheaper than the University close by.

  15. Mike says:

    As someone who did not go to college.

    If you are looking for work most jobs have a degree as a requirement. If you do not have one your resume is not even looked at regardless of your experience.

  16. I really like Dave’s take on college and doing a cost/benefit analysis on it. Not many people do this. They automatically go to the “best” college they can get into and don’t consider whether or not they’ll be burdened with student loans.

    I had the choice of going to an “elite” college where I would have graduated with about 100k in debt. Instead I choose a less well regarded college that gave me a scholarship. There’s not a day that goes by that I’m not happy about going the debt-free route.

    -Gen Y Investor

  17. Marsha (7)–“Bachelor’s degrees in engineering, education, and accounting are probably much more likely to actually prepare people for jobs than many other degrees.”

    I have to disagree even with that assumption! I have a degree in accounting, and it did not prepare me for work at a CPA firm! 75% or more of the knowledge needed comes “on the job”. (I’ve heard this from other professions too.) You get a degree, then the real education begins, and it’s more like an old world apprenticeship.

    College prepares you for book answers. In the real world, the book doesn’t come close to addressing what’s going on out there. In fact the CPA exam is an academic exam, and it’s often said that you can pass the exam and still not know how to be an accountant.

    You do need a degree for basic entry, but once you’re in the door–well, that’s when you have to start figuring it out.

    Also, I completely agree with Trent that the intangible skills you pick up along the way are much more valuable as career skills than the raw knowledge you get in college.

  18. MichelleO says:

    College isn’t the only option immediately upon high school graduation.

    My parents couldn’t afford to pay for my college and I’m very grateful that they couldn’t. Instead, I joined the military first. By doing so, most of my college was paid for via the G.I. bill and I gained experience and maturity to take into the civilian workplace. Further, my parents were able to focus on their retirement, so I don’t have to worry about their financial needs as they get older.

  19. WilliamB says:

    There’s much I disagree with here.

    1. As someone who’s been on both sides of the hiring decision, my perspective is that a good college education teaches (or should teach) the candidate to read actively, think critically, and write persuasively. This can be done in a wide range of majors and a range of schools.

    2. It’s easier to get this education at an elite school. The professors are more senior in their fields, the resources better, the classmates are more motivated and provide a better network after graduation.

    3. There are plenty of exceptions to this. Life experience counts too.

    4. College is no longer a genie in a bottle; that thought is a couple of generations out of date. College is more like a minimum basic requirement. There are still white-collar fields for which this is not the case, but the number is shrinking. Even in IT, a college degree is common.

    5. One can borrow for education, one cannot borrow for retirement. Remember this when deciding your savings strategy.

  20. Brendan says:

    In regards to devaluing the pedigree:

    While I agree that it is harmful to see things in absolutes, I do not think that the most prestigious schools should be regarded as a bad deal based solely on tuition costs. These same schools also tend to have the largest endowments, prolific alumni networks and some of the most progressive financial aid policies.

    While yearly tuition at the prestigious school I attended was close to 50K, the majority of my financial aid was in the form of need-based grants, allowing me to graduate with less than 15k in loans. Alumni of the school are always eager to meet and talk with me, and most of the time will bend over backwards to help. Finally, in my biased opinion, the same motivated and open minded student would simply have more opportunity at the school I attended.

    I am not trying to demean a state school education, but the value-minded should not rule out prestigious and expensive schools.

  21. Doug says:

    A college degree is only worth something if you learn something you can’t learn in the real world. Math, science, infomatics, engineering – these things are worth going to college. Why? Because I can learn more about chemistry in 2 years than in 2 years of chemistry job.

    Journalism, English, history, social studies are degrees that lead to jobs where the one thing you’ll ask every customer is “What can I get you to drink?”

    I have a liberal arts education. I took poli sci, English, history (love the Middle Ages!). But there’s a reason why I make the money I do, and it has squat to do with those classes.

    My experience with elite school graduates is that they tend to think that anyone without an elite school degree is somehow less than human, and those without college degrees are no better than hilljacks. I have an elite school degree, and I’ve seen the behavior. One coworker, with a degree in electronics from ITT Tech, knows more about computer system validation than our master-degreed quality rep from an elite college. But that quality rep won’t have anything to do with the non-degreed expert.

    My “elite school” degree has done nothing to better my career. I spent a whole lot of money for the convenience of smaller class sizes, but in the end I moved 1500 miles away from home, and no one had heard of my alma mater.

    Finally, if you are not saving for retirement but are worried about your kids college costs, you need a good slap upside the head. Your kids can find a way to pay for college. Maybe they’ll have to work AND go to school. Maybe they’ll join the military. Maybe they’ll go off to a tech school instead (I think ‘vocational college’ is the correct term). Maybe they’ll decide to use other people’s money and get loans. But, as WilliamB (14) said, you can’t use other people’s money to fund your retirement.

  22. David R. says:

    @ Mike #9

    I’m a print journalist, and I *STRONGLY* recommend that your son pursue any other degree than one in journalism or communications. The pay is very low, and frankly, good journalists become good journalists through experience, not the academy. Tell him to write for the school paper, get an internship at a local daily or weekly, test the broadcast waters reading news for the local radio station, etc… Just do not waste money on a degree in journalism. It’s utterly useless. He would be better served studying Web design and doing the things I mentioned above.

  23. J says:

    Journalism, English, history, social studies are degrees that lead to jobs where the one thing you’ll ask every customer is “What can I get you to drink?”

    Your experience is not universal.

  24. Meri says:

    “…but when you are 18 and college counselors tell you to choose the best school you can, and you will get Financial Aid so don’t worry about it, well you believe them.”

    I’m sorry you had this experience. Any school counselor worth their credential should help a student and his/her family look at many options and determine what is realistic and appropriate.

  25. Lisa says:

    I wrote a very long reply to a previous post *https://www.thesimpledollar.com/2009/07/26/review-the-wall-street-journal-financial-guidebook-for-new-parents/) that discussed these very issues.

    As someone who works in at one of those high-priced liberal arts institutions and sees the massive impact of financial decisions on both parents and their students, please please please deal with your own retirement first.

    There are scholarships, loans, grants and other financial assistance out there for students, but zip for retirees *unless you create it for yourself*. To me, that’s a no-brainer.

  26. Dan says:

    Im fully funding my retirement right now. I dont have kids but plan on having some in the future. Can i start funding an ESA or 529 plan before the child is born?

  27. Jennifer says:

    Trent- My guess is that you are comfortable paying for your own schooling because you basically didn’t, scholarships did (I realize you earned these but you didn’t write the checks). I went to a good state school and although I was a very good student in high school and participated in many activities & a varsity sport I got limited scholarships because I wasn’t deemed to have ‘need’. I graduated with ‘only’ $46k in students loans. This is quite a burden in my life (~$400 every month). It has made other financial missteps even harder to overcome. And will impact things like when I’m able to buy a house, when I can afford my next child, if I can afford to stay home with my child, etc. If my parents could have paid for half my education it would have been an enormous help in my financial life. I am saving some for retirement and some for my daughters education.

  28. Kelly says:

    I don’t think it’s a parent’s responsibility to pay for their children’s college education. My parents did not pay for mine, although they did pay my car insurance and provided room and board while I attended college.

  29. David says:

    My thoughts on a college fund for my 2 year old son, which I have contributed to almost since his birth, is not that I want to make him paying for college a non-issue, that is, having it taken care of completely, I just want to make it easier for him.

    The way that I see it, the price of college is going to be so much more ridiculous then than it is now, that it doesn’t matter HOW much I contribute, it still won’t be enough. Which I am fine with. I do not plan on paying for ALL of his college, just a portion of it.

    I was torn between investing in a 529 verus putting the money in a more traditional generic investment. The reason being is that one question that came to my mind that I think a lot of people might not think about is this–

    What if my child doesn’t want to attend college??

    If your money is tied up in a 529 or other similar plan, you’ve got quite an issue on your hands. Plus, if you do stick with this type of investment, what kind of pressure would that put on your child, on the off-chance that he/she is thinking of NOT attending college?

    Just some food for thought. I personally now have my money in a Roth IRA, which by the time I am able to take it out, my son will be at the age for college if he so desires.

    PS–Life insurance for a child is a complete absolute waste of money, no matter how you look at it. Isn’t the reason for insurance to take care of the people left behind after a loved one’s death?? If so, what extra expenses would you have if a child of yours should die? Not many at all, as I see it.

  30. Ivan says:

    Your entire discussion on Whole Life policies and 529’s is full of errors and half-truths.

    1. One major difference between a 529 plan and any whole life policy is that any money in a 529 plan WILL count as an asset when the child applies for financial aid. Any cash in a whole life policy does not. This means that the child will qualify for less financial aid because their parents saved money in a 529 plan. Given the ever rising cost of tuition, financial aid will be a necessity for 90% of students in the future.

    2. Not all whole life policies are the same. If the commissions are large, then you are probably dealing with a poor whole life policy.

    3. Whole life is NOT an investment vehicle, nor was it ever intended to be. It is intended to provide a death benefit. It has a savings component to it which makes it ANOTHER option.

    4. Term is a waste of money. Only 1% of term policies ever pay out. The other 99% lapse, expire, or the person simply becomes uninsurable and cannot renew. Your life insurance company loves term. It is PURE PROFIT for them.

    5. Buying term and investing the difference is fallacy. Good whole life policies not only grow in cash value, they also grow in death benefit. That means that you may start with $25k in death benefit for a child, but that will grow to $75k by the time they’re 65. Find me another TAX FREE method of saving $15 a month that will be $75k in 65 years. Remember, TAX FREE.

    6. The final point is that whole life is permanent life insurance. Term is not. If you want to throw away your money, go ahead and buy term. Its like renting life insurance. You only buy it when you can’t afford anything else.

    Investments in the stock market under 401(k)’s, IRA’s and 529’s are not a bad idea. But adding whole life with a solid mutual company will pay many returns. Speak to an agent from any of the mutual companies: Northwestern Mutual, New York Life, Mass Mutual, and Guardian. You will notice that they will have a higher rating than any company you are currently buying stock in, their projections on growth are accurate, and, if you buy, you will be an owner of those companies. What stock gives you a death benefit for ownership?

  31. plonkee says:

    One of the things that annoys me (and I’m probably about the same age as Trent) is when older people claim that it should still be possible to work your way through college. College tuition has been increasing above inflation for years and years – it is genuinely both more expensive and more necessary than it was in the 70s and 80s (let alone earlier).

    Without my parents’ assistance there’s no way I would have been able to go to college – but I am grateful that they didn’t skimp on their own retirement to do so.

  32. Tyler says:

    If you are putting money in your 401(k) and it is a good plan then perhaps you don’t need to bother with a 529. Consider factors such as how old you will be when your kids are in college (if you’ll be 59 1/2 then there is no penalty for withdrawal), whether or not your plan offers loans against your account balance, or even, as a last resort, the chance to take a hardship withdrawal. If the money is to be used for education there is no 10% penalty although the income is taxable.

  33. Daria says:

    Personally, I find it amazing that you are quoting Dave Ramsey who advocates getting out of debt, not using credit cards, ect… but you advocate saddling your children with loans and possibly having a great deal of debt when they get out of college. I raised my children under Larry Burkett and Dave Ramsey’s principles. One child went to private school but earned a $34K scholarship to a state school and graduated with $3k in the bank that he saved from that scholarship. He lived at home for two years because his first job didn’t provide health insurance and he stayed on our insurance till he was 25 and then moved out. He paid rent to us and saved $20k. The second child also went to private school and earned a $44K scholarship to the same state school. He wanted to go to another school but we told him that he had to take the scholarship. He saved enough from the scholarship to pay for his tuition for the extra year for a master’s degree and we paid his living expenses for the extra year. The third child went to public school and chose a college in Wales. We used money from a rental property we sold to pay for her tuition, room and board. She used money from summer and christmas jobs to pay for her socializing and traveling around europe. The school discounted her tuition 50% for the last two years. She just married a boy from the UK who doesn’t have school loans either and we gave her a budget of $5k for the wedding. The fourth child went to public school. She moved out because she didn’t like our rules and pays her living expenses. We pay for her tuition. She went to community college for the first two years and now she is in a state school for the remainder. She is engaged to a boy who knows how we feel about debt and he is working to pay off his credit card debt before they get married. Based on what we learned from Larry Burkett, and Dave Ramsey we paid off our house before the kids started college and before we bought the rental property. My husband works at a state job, teaches at the local community college one day a week and has a small book keeping business with 6 clients. I work part time cleaning houses and help in the book keeping business. I had also worked at the private school while my children were there to earn the tuition money and also as a crossing guard. I don’t want my children marrying people with a load of college debt that limits their opportunities and to be stuck paying for others debts when we raised them to be debt free. We contribute the max that we are allowed to my husbands 401K, and I contribute to a Roth IRA from my part time earnings.

  34. Ilah says:

    #10-Mike – I couldn’t agree more, no degree, no job. I was the accountant for a large nursing home, I worked my way up, but I have no degree. When we moved, I could not even get an interview from some places although most of the accounting jobs I applied for would have been like playing compared to the job I had done.

    Also, a prestigious school can get you nothing. My son went to an expensive private school out East, but he doesn’t have “a name” so his schooling means nothing. You can’t get a job out east unless you have the right connections.

  35. Brad Martin says:

    I think a reason so many people value a college degree is it gives you options. Many jobs now have a college degree requirement. I look at my employer, a state law enforcement agency. I make $35000 a year with 2 years of experience. A co-worker of mine has nearly 22 years of experience and no college degree and makes $40,000. Other employees I work with have years and years of experience but make less than $40,000. Its all about options!

    1. Save for retirement first!
    2. Once you are saving for retirement and paying off debt, then look at the 529 plans. I want my son to have options so my wife and I contribute $150 a month to his 529.

    My wife and I contribute $468 to pre tax plans and max out one Roth IRA. My wife also gets a match, so a total of $1062 goes into retirement. We are government employees so we have good pensions. But who wants to work for the government for 30 years? So we have plans of maybe starting businesses in the future.

  36. Nick says:

    #22 – “You can’t get a job out east unless you have the right connections.”

    That is about the largest generalization I’ve ever heard. I live in DC and even though politics are the talk of the town, I meet people every day who are where they are not because of “connections” but because of hard work.

    Hard work may have led to connections in some cases, but the work almost always comes first.

  37. Liko says:

    One of the guys in my carpool is paying $50k/yr to send his daughter to some preppy school (Whitman College) to study liberal arts. I don’t think he realizes that people average $30k/yr with that degree. And that $200k invested at 8% for 45 years is $6,384,089.88.

  38. megscole64 says:

    I think that getting a college degree is highly overrated. We’re about to have our first child in a couple of months and I have no intention of putting any of my hard earned money away for his education. If he wants to go to college then he can get a job and start saving when he’s 16 and work his way through. That’s what I did and it is what my husband did when he was 35 years old.

    I got a few scholarships but they didn’t even add up to $10k. I got two loans and I’m still paying one off (it’s less than $3k now). The rest was earned through my full time employer, who also offered tuition reimbursement after I’d worked there for a year.

    My mom (a single mom) did not pay my tuition. She did not buy my books. Every once in awhile she’d give me some money but nothing that actually covered my bills. That was my responsibility and I learned more about life from having to take care of myself than if she’d paid my way.

    I also don’t expect my kid to go to college if he doesn’t want to. He might want to become a plumber or other special trade. Or join the military. Both legitimate … and often looked down upon by people who think you’re nothing (and certainly not successful) without a “degree”.

    My degree has done jack for me. It has nothing to do with my job and I would have gotten my current job even without a degree. It’s about experience and things learned on the job. I recognize my blessings because most white collar jobs do require a degree of some sort, but my boss values experience and skill over a piece of paper. More should.

  39. Liko says:

    …to continue that though… $200k at 11% (S&P 500 average) is $21,906,048.31 in 45 years.

  40. sophia says:

    I don’t think that anyone thinks you can work your way through school, pay for it, and be totally debt free. But you know what? You *can* work your way through college and significantly reduce your student loan debt. Many of my friends lived off of student loans, using them to pay for cell phone bills, food, rent, etc, when even a part time job could have fed them and paid for their misc. expenses. Furthermore, there is absolutely nothing wrong with going to a community college for the first two years, and you actually *can* work and save to pay for that- here in Dallas we have some great community colleges, and 15 hours + books is less than $1,000 a semester total. Plus, more and more programs are offering awesome transfer scholarships from community colleges to 4 year colleges- so clearly those 4 year colleges aren’t looking down on the two year schools. The bottom line is, if your kids want their degree badly enough, they will be able to work and go to school and make good grades. I kept a full academic scholarship while working 45+ hours a week and going to school full time as an undergrad- with a very large and active group of 15+ people, dating, social life, etc. I’m now working full time and taking 3 or 4 grad classes a semester, in a field that has nothing to do with my undergrad, and still making A’s and B’s, because I *want* my degree. I enjoy school, it’s my hobby. I knew so many kids just getting their degrees because it was a good excuse to live off of mommy and daddy for another 4 years.

  41. J says:

    Let’s not also forget that lifestyle inflation has applied to college, as well. Students don’t show up with a suitcase and bed linens any more. It’s more like they show up with a car, cell phone, full A/V system, computer, iPod, enough clothing for a family of four and at least one gaming system. Then, of course, they co-ordinate decor with their roommate and have a list of other stuff they “need”. Then, of course, add in all the other “needs” — expensive haircuts, beauty treatments, massages, going out to eat, spring break, summer trips and so on.

    College used to be a pretty monastic pursuit. Now it’s a full fledged lifestyle that’s sold to by big advertising firms and Hollywood, and a lot of kids really buy into it (or put it all on the credit card they get the first day on campus)

    College should be a transitory period — the student not only takes classes and gets involved with activities, clubs and so on — but they learn to live on their own. Mom and Dad are still in the picture, but the little bird is definitely getting nudged out of the nest, and that means it’s time for a few bumps along the way. It’s highly likely that Mom and Dad didn’t start out with the nice lifestyle they have now (house, car, vacations, security) and they had to claw their way up. The students, though, are sold that you CAN have it all — just put it on the VISA card.

  42. At the risk of offending those who believe a college degree from a top school is mandatory, the question needs to be asked, whatever it’s merits, how far can you afford to take this?

    I’m starting to think that we’re experiencing some ‘irrational exuberance’ here.

    $50,000 per year for four years? $200,000 educating your child? How many kids do you have? Two kids means $400,000!!! Three is $600,000!!! Very few households can or will ever accumulate that kind of money. The median household income in the US is only around $50,000/yr!

    So why are kids coming out of college with mountains of student loans? Even if mom and dad are dilligent, and save $50,000 for junior’s education, he’s still short $150,000. Maybe he can get a scholarship and cover part of that, but it’s unlikely he’ll cover it all.

    What happened to working your way through college? When I was in college back in the late 70s/early 80s, many kids commuted to a community or state college, and held a part time job after hours. Full time in the summer often. Few of us graduated with any debt at all, let alone five and six figures.

    Are kids today too delicate to handle that? Are we so convinced that they might not be able to hack it in life without a gold plated education? I know peole in sales, small businesses and the trades, with no degrees, who make more than most college grads. There’s a message in there somewhere.

  43. Marsha says:

    Response to Kevin@outofyourrut: good point about 75% of job learning being on-the-job learning. Still, I bet you were more prepared for the working world than many of the rest of us with degrees in History or English or psychology. At least this is what I observed for myself and the people I went to college with.

    Point well taken, but I stand by my comment on a relative basis.

  44. GayleRN says:

    For Mike @ #9 My son went to a college with an accredited Journalism program graduated and went on to find a job writing for a newspaper. He went on a full academic ride to this particular state university which is in fact why he went there instead of the other more prestigious more popular state university (Big 10) with a program. He hated me for it at the time and thanks me profusely now for that forced decision. What made the difference for him was that he worked the entire 4 years at writing for the school newspaper, editing, and any other writing jobs he could scrounge up, plus an internship at a magazine. Now he works for an IVY league university as a writer and editor. He is also getting a free master’s out of the deal.

    What makes the difference in a writing career is actually being able to write, write well, and write quickly. Your son will have to produce a portfolio of published materials in order to get hired for a real writing job. If he is not working on the yearbook, college publications, local radio and tv right now, I would question his choice of majors.

  45. Marsha (31)–“Still, I bet you were more prepared for the working world than many of the rest of us with degrees in History or English or psychology”

    Mmmmm, maybe! Someone in the office would often shout out (to no one in particular), “I didn’t learn about this in college, what did I waste my money going for”.

    Most of what we did was putting square pegs in round holes! College doesn’t prepare you to deal with people on a business level, which is very different from social interaction, it doesn’t prepare you for the out-of-the-box situation, which are more common than not, and believe it or not, it doesn’t prepare you for myriad tax and audit problems.

    Your point is well taken if you mean that you need a degree to get into the field, that’s generally true. But as far as preparation as a practitioner, college is very limited.

    Once you get past the basic undersdanding of debits and credits, and balance sheet and P&L accounts, the rest of college is theory. The problem with theory is that it only works in…theory ;-)

  46. AnnJo says:

    Shouldn’t the first question be whether any particular child should go to college at all, or go right after high school? Far too many young people are racking up tens of thousands in debt and not completing a degree through lack of motivation (or lack of funds), or they graduate with a major that will do them more harm than good in many employment markets.

    Someone with significantly below-average intellectual gifts and a hands-on learning style would do much better as an apprentice in a trade. (It’s not an insult to say that someone’s intellectual gifts are below-average. By definition, 50% of the population will fall in this category, and I’m speaking here of the bottom 35%.)

    Such a person could spend five years and $100,000+ in debt for a B.A. (or more likely, not graduate at all), when they could be earning a good living, learning a valuable trade and learning how to deal with customers, co-workers, employers. At the end of that five years, they may even have the tools they need and the capital they need to start their own business and be on their way to significant wealth as well as independence.

    Even quite smart kids often waste their college money (at least in relation to future employment). Let’s face it, a degree in “social justice” or “human rights” (both of which I saw last time I was looking to hire) is going to torpedo your chances of getting a job in the private sector – if I hired someone with that kind of degree I’d pretty much assume I’d need to add a staff lawyer at the same time. A degree in “interdisciplinary studies” (of which I saw two) is basically worthless in the private market, unless it produced some meaningful thesis or project you could “sell” in your resume.

    The only reason many employers gave any weight to a college degree at all was that it was proof that the person was literate and could succeed in a competitive environment that required sustained effort and conformity to a set of rules. With most colleges allowing rampant grade inflation and abandoning the concept of standards of scholarly discipline, the bachelor’s degree is losing its power to prove anything, even literacy.

  47. AnnJo says:

    Should have said “quite intelligent kids” in my post #34. It’s obviously not smart to waste many thousands of dollars.

  48. Evita says:

    The harsh reality is that many interesting, lucrative fields are closed if you do not have a college or university degree. And if you are ever hired, you will be stuck at a low level forever if you cannot upgrade your education. I have seen that happen many times to smart, clever, able people.
    In an slow economy, it stands to reason that many employers will hire what they think is the best value for the money….. a degree becomes a big asset.

    By the way, I totally agree with AnnJo on trade apprenticeship which is vastly undervalued in our north-american society.

  49. Jim says:

    I absolutely think that most people will get a better deal by going to a reasonably priced state school over most private schools. Most expensive private schools simply aren’t worth the extra cost. If you can go to an elite school like Harvard then that is a different matter. And BTW the graduation rate at Harvard is 97% which is very high.

    Saving for retirement should absolutely be a priority over funding your kids college. Your kids are adults at 18 and they can fend for themselves if need be. You need to ensure your retirement first.

    I do think working through college is possible. A part time job should cover tuition at a state school and people can always live at home with mom & dad. But working too hard in college makes it extra hard. My wife did that and it was difficult. I think a part time job during school to pay for at least part of the expenses is the right balance.

    I really don’t understand why Ramsey recommends ESA’s over 529’s. 529’s are usually a better option. 529’s are more flexible and have tax advantages.

  50. Liko says:

    Is Ramsey expecting kids to work during summer months… what about the euro trip, how are they going to have time for that??

  51. Todd says:

    My favorite thing about The Simple Dollar and other good PF sites is that they work against social class stereotypes. College is THE ticket to the middle class in this country, just like other expensive pursuits–summer vacation trips, sports like skiing, golf, boating, etc. You’re marked by class as someone who has been to college or not, but just as importantly by WHERE you went to college. The Ivy League vs. state university vs. community college. None of this necessarily makes much sense, financial or logical, but it’s how people judge one another. I’m glad people here are willing to look at this sensibly and to decide for themselves whether or not they think college is worth the price.

  52. Liko says:

    According to University of Washington (local state school), you’ll need $13k per year to cover tution, books and living costs. If your kid can’t come up with $13k per year by working part time during school and full time in the summer than they are not cut up for school. He should be looking into construction or some apprenteship program.

  53. spaces says:

    Mike — In many places, and in many respects, journalism is a dying field. Traditional employers are shuttering their doors, freelancers now do the work of employees for very low rates, etc.

    Accreditation only matters if the job market says it does. IMO your son should look at where each school’s very recent graduates (graduated within the last year or two, no more than the last five years) went to work after graduating, and then compare those placements with where he himself would like to be 1, 2, 4 years out. Does the program take him where he wants to go? If it doesn’t, then it’s not really important how cheap it was.

  54. JE says:

    I have trouble trusting someone who’s bashing a college education when they misspell “hear” (see first quote in Trent’s article).

    @Doug (#15): My English degree landed me my first editorial job out of college. No connections, no previous experience, nada. Just an English degree. I’m now a senior editor for one of the biggest educational publishers in the country, and I bet I make as much, if not more than you every single year. Do bash non-science degrees. They’re valuable to people who know how to use them.

    Ditto Mike (#10). My husband is really struggling to find a job in his field (technical theatre) because he never finished his degree. It doesn’t seem to matter that the most recent employement listed on his resume is a management level position at one of the most elite theatres in the world. His resume gets immediately tossed into the slush pile because it doesn’t list a degree.

  55. JE says:

    I meant “don’t bash non-science degrees.” (You’d think an editor would proofread her post before hitting “submit”!)

  56. Lisa says:

    Some have noted the generation gap in the differences between parttime job earnings and the current cost of college (ie: if we were able to pay for college on our own is that possible for our kids?). Obviously the cost of college has increased faster than parttime pay.

    Current tuition is $4,350 and the typical cost of tuition, room and board at a SUNY (State University of New York) school is about $15,000 a year for a state resident.

    NY minimum wage is $7.25/hr. But lets say your kid makes double that ($14.50/hr), worked 20hrs/wk during the school year (16 weeks + 16 weeks; nothing over winter break), and 40/wk during the summer (12 weeks). This is all just an estimate so no need to nitpick. Gross earnings is $11,200 per year. That is ~75% of the cost of the SUNY bill. If they only got minimum wage, then about ~40% of tuition, room, & board are paid for.

    So before taxes, books, and any entertainment, car/transportation, new cloths, spring break trip money, or whatever may interest them, AND not including scholarships and gifts, they could accumulate $15-40K in debt over 4 years. No too bad. Living on campus can be extremely expensive.

    I’m not trying to make any point, just sharing some numbers I played around with.

  57. Liko says:

    $11k should be enough income coming in from work. The rest can be made through grants and scholarships. If you’re parents are completely broke, then tuition is completely free through federal grants. If parents aren’t broke, than then can pitch in too for part of the living expense.

    I went through my first 4 years of school without a single loan, and without my parent’s help either. I lived really close to college with a bunch of roommates, so I didn’t need to drive. A college student should not have a car or cell phone when they are broke. I didn’t bought new clothes, and never ate out. I was living off less than $350/mo.

    I ended up getting stupid and started taking out loans for my last 3 years of college. My tuition was all paid for but I was tired of living within my means, so I got a car, cell phone, my own bedroom, new clothes, laptop, xbox, digital camera, etc… basically started living like all the other kids in college with student loans. I ended up with $20k in loans, in which I could’ve totally avoided.

  58. Jojo says:

    I just came to to website to look this up and was surprised to see this posted.

    Here is my situation: I just got into my dream school (I’ve wanted to go to their law school since I was 15). I already have a degree from this same school that my Mum paid for along with a government subsidy. The problem is, the law programme has no subsidy and works out to US$10,000 for tuition. With inflation here, that works out to about JA$1,000,000 a year. My whole B.A. didn’t even cost that much.

    There is another school that costs about US$5000 for the 3 years. It ain’t my dream but it does teach me what I need to know.

    I will have to work full-time and go to school full-time however. And that is scary for me.

    I just made a decision though. Debt is slavery and to take on $3 million dollars in debt for a fancy campus and a pool is not in my budget.

  59. Johanna says:

    @Lisa: 20 hours a week is a lot for a full-time student. I know there are people who manage it, but I sure wouldn’t want to be one of them. I had a 12-hour-a-week job for one semester when I was in college, and I found even that to be really draining.

    If a student really has a spare 20 hours a week, another option I’d suggest they consider would be to take an extra class or two each semester, and to graduate in three years, or even 2 1/2. That saves them a year’s worth of tuition and lets them reap whatever financial benefits their degree offers a year sooner.

  60. Doug says:

    JE (41) – “Do bash non-science degrees”? And you’re an editor? :)

    Seriously, congratulations. However, I would wager a year’s salary that while I could do your job, you can’t do mine. That’s the value of a degree with an emphasis on math. Granted, I do pay a mechanic to install a transmission in my vehicle, but that’s the value of a vocational degree. And the vo-tech guy probably doesn’t have student loans, either.

    As for graduating without student loans: yes, it is possible. It does require that one not spend his free time partying like a rock star. If a student were to work instead of do the normal ‘college thing’ he would have boatloads more experience to offer a potential employer.

  61. J says:

    @Johanna — College students goof off 20 hours a week, at least, easy. I somehow made it through engineering school while also holding down a job for 20 hrs/week for all four years. I also had plenty of time to participate in clubs and activities, in addition to a fair amount of goofing off and also getting in workouts, dates and going out to movies, concerts and parties.

    There were tons of kids I went to school with who would schedule all their classes in three or four days out of a week. That leaves three or four days with nothing at all on the schedule. In addition, some would schedule things so the first class was at 10 or 11 AM. There’s plenty of time to work a couple 6-8 hour shifts and then pick up a few more hours on the days you have classes or the weekend.

    And it’s not like the typical college job requires you to “take work home with you”.

    The only possible exception I would make for this would be an internship. I was lucky to have the job I was working also be an internship that was related to my major. I didn’t get any credit for it, but I did get paid. I know in some other fields, internships are typically unpaid, but they do open doors and give valuable work experience that are going to help with the future — be it in academia, the public sector or the private sector.

    But really, you can cut out 20 hours a week of XBox, Facebook and television and not really miss out on that much.

  62. spaces says:

    J, not every college student can do that. My B is a BM in music. The program I attended had academic classes in the mornings, ensembles in the afternoons, and performances and rehearsals in the evenings and throughout the weekends. I was in class every morning, and my afternoon, evening and weekend schedule varied on a daily basis. As a result, it was very difficult to work outside of gigging, since it would require an employer to go to great scheduling lengths to accommodate my classwork. Now, I, and folks like me, did gig, but the work I was able to get in was erratic at best, and I worked more than most. Not to mention that the time commiment to practicing your instrumentS in a music degree is quite high — the time commitment for all fine arts degrees is quite high IMO.

    Also, it sounds like your degree was easy for you to get, either because you are quick and don’t need to study too much, or because you took an easy degree. I don’t think it’s safe to assume that someone else could necessarily take 20 hours a week away from studying and have respectable grades.

  63. Johanna says:

    Here are my numbers for working part time versus taking extra classes to graduate early:

    My assumptions:
    – A full-time student takes four classes per semester for eight semesters, meaning that 32 classes are required to graduate.
    – An average class taken during the semester requires 15 hours a week of effort for 16 weeks, and an average class taken during the summer requires 40 hours a week for 6 weeks – either way, that is 240 hours total, per class.
    – Before you graduate, you can work part time for $15 an hour for as many hours as you want. After you graduate, you can get a full-time job at $20 an hour, or $42,000 a year.
    – This particular college doesn’t charge extra tuition for taking summer classes or extra classes during the semester – tuition is only charged by the year.

    So taking an extra class means spending 240 hours studying that you would otherwise spend working – that is, giving up $3600 in income from your part-time job. To graduate early, you need to take eight extra classes (say, one per semester for six semesters, plus two during the summer sessions), for a total of $28,800 in lost income.

    But in return for that, you save a year’s worth of tuition payments, which can be anywhere from $4000 on up. (You still have to pay for food and shelter, whether you’re in school or not, so I’m not counting room and board as savings.) Plus, you get an extra year’s worth of full-time income at $42,000, putting you at least $17,200 in the black ($42k + $4k – $28.8k). Taxes will eat some of that difference, to be sure, and the interest on the extra student loans you’ve had to take will eat some more. But there are other benefits to starting your $42k job early – like an extra year’s worth of seniority – that I haven’t included.

    So, for a motivated student who can make the extra time for either work or study, it looks to me like it’s as least as good an idea to take the extra classes and graduate early as it is to try to work your way through school. And the more expensive the tuition, the more attractive the early graduation route becomes.

  64. J says:

    @spaces — I got a degree in Mechanical Engineering. Most semesters were 18-20 credit hours, and engineering degrees are not generally known as “easy” ones to get. I’m not stupid, but I’m not all that quick, either — I did have to devote time to study, pretty much an hour to an hour and a half outside of class for each class. I didn’t end up sleeping as much as I should have :)

    The example you cite for fine arts would fall under the “internship” category — devoting time to practicing the music, instrument and working with other (while unpaid) is definitely part of becoming a better musician.

    But that’s not the type of student I’m getting at. Anyone who has spent time on a college campus knows that for a lot of students, there is a LOT of “downtime”. I’m not even suggesting that all that “downtime” be given up — but that it’s not at all hard to find if you are willing to look. Where I went to school a lot of students spent a lot of time sunning themselves on the quad and playing Frisbee for a few hours a day. I’m not going to say that this was an entire waste of time (I like to sun myself and play Frisbee, too), but spending 3 hours a day playing on the quad every day speaks to having a lot of free time, doesn’t it?

    The real problem, of course, is that the debt being piled up by these students will severely limit their ability to chart their own course after graduation by saddling them with hundreds of dollars a month in student loan payments, in addition to the reality of paying rent, buying food, getting to work, and so on. It can be the difference between pursuing a passion you love that doesn’t pay well and having to take a job that does pay well but isn’t your passion.

    Life is really a series of trade-offs, and while paying your own way entirely through school may be entirely out of reach for many people, it’s not unreasonable to do things like only take out the absolute minimum amount of loans possible, and find some sort of way to defray costs while in school by working a little bit — or working a lot in the summer. Maybe you can graduate with $10K in loans instead of $40K using tools like budgeting and work, for example, which works out to a lot less to get through when you are starting out.

    It’s just so astonishingly easy to come by student loan money, and people will sign up for it and spend it on cars, stereos, TV’s, drinking and so on. The sad part is when they are still paying for that car or TV for ten years after they graduated.

  65. Lisa says:

    There are other ways to get those credits and save money. I was not a high school valedictorian nor even a straight-A student. Yet, I took college credits while still in high school. I suppose these days it would be like AP classes. I took a class remotely and some others during the summer. I had friends who were doing their senior math class at the local JuCo (very cheap, college credit). I still did 4 years of undergrad at a picturesque 4-year liberal arts college, but I never took summer credits which gave me lots of time for $ummer job$. If I had it to do over again, I would have taken more foreign language in high school when it was free since my degree required that and the foreign language classes seemed to require the most extra time for me.

  66. Liko says:

    Good point Lisa. I forgot about programs that let you do 11th and 12th grade in College. Our state calls it Running Start. The tution is 100% free for everyone. Some of my friends came out with both a 2yr degree and High School degree at the same time.

  67. J (51)–Same here, accounting degree, 15-18 credits/semester, 23 in my final semester (I wan’t to get it over with!).

    Worked at least 20 hours per week at the same time. I’m not saying it was easy, only that it’s doable. That’s often preferable to graduating with a boatload of debt or bankrupted parents.

    I’ll concede that you probably couldn’t do this if you were in a pre-med program, but 99% of college students aren’t.

    It’s also a matter of adjusting your plans to fit your financial circumstances, and that’s never a bad lesson to learn early in life.

  68. sophia says:

    I would heartily agree with the many comments about how much downtime the average college student has. Even in the demanding degrees of electrical engineering and music degrees- I’ve had friends in both, the time commitment is ridiculous- you do still have ridiculous amounts of time doing nothing. And furthermore there are tons of jobs in cities that cater to this specific category- college students with weird ass schedules that want to get paid well in two to three hour chunks. Lots of jobs around here pay $18-20 an hour, but you’re talking Mon-Wed-Fri 12-3, or 6 to 10p.m., etc. Again, if the motivation is there, you *will* make it work.

    Also, a personal quibble- I have an interdisciplinary studies degree and I’m getting an interdisciplinary studies master’s degree. I think it has fundamentally improved me as a human being, because I approached my studies from a classical liberal arts education standpoint. If I wanted to do electrical engineering, or medicine, of course I would have gotten a specific degree, but barring that the vast majority of jobs require extensive on the job training. I think my degree made me into an educated, well rounded person. I have taken difficult honors classes in subjects from science to government to psychology to economics. I thought that I should get a specific master’s degree, so I embarked on an International Management program- a year in I was bored to tears with the same ideas recycled over and over. There wasn’t enough variety. I made mostly A’s and a few B’s in graduate level management, accounting, and marketing classes having absolutely 0 experience in anything like them from an undergrad. I’ve worked in the financial sector, I’ve taught English in Japan, I’ve done sales, I’ve managed large groups of people- my degree gets me over the “college degree required” hump but after that I know how to sell myself, relate to people from many different backgrounds and cultures, I’m autonomous and hardworking, etc. I personally don’t like the idea that one has to have a college degree to get a job, because I really do think that as high as 90% of jobs just require dedication and hard work and a commitment to learning and training effectively.

  69. kitty says:

    @#6 Bill @ 3:40 pm July 29th, 2009
    “They don’t let engineers or architects fresh out of college do anything with out years of real world supervised training. I’m a computer programmer and I’ve been hiring young programmers for years. What they have been taught in school is mostly theory and is valuable but it takes months of hand holding before they are of much use.”
    Then either your particular job requires some very specific knowledge e.g. a specific system (although any a bright young CS graduate should learn something like this in a week – I could) or you don’t get the right graduates.

    I am a software engineer with MS/CS and 25 years of experience working for a major technology company (IBM). We’ve been hiring new graduates for years. They are perfectly capable of doing productive work right away. Not only that, but we’ve also been hiring students to do work for us in summer. Sure, we are careful to separate out small stand-alone projects that can be completed within a month or so. But these are still useful projects. Most of the students we’ve had were perfectly capable of doing so.

    Sure as I now work in research, we mostly get MS or PhD candidates, but I’ve seen people with BS/CS – both in research and before I transferred to research. Nope, they don’t just learn theory in school. In fact, some of the projects I did in college – way before I got hired by IBM many years ago – were more difficult than some of the assignments I had at work, at least initially.

    One other thing: I am very good at what I do, and I can learn new technology quickly. Still, I have to work hard to keep up with new graduates and their up-to-date knowledgeable and to prove that I do know more.

  70. Robin says:

    I would really, really like to see a thourough evaluation of the financial aid process as it relates to college savings. I know that every school is different, but I also know that in general students are penalized incredibly heavily for having money in their name, and for parents with money in things like 529s it seems like the same thing. As a college student I had a lot of jobs, and I put (what I thought was) a lot of money away for college. In the end the college I went to only ended up deducting, dollar for dollar, the amount that I had in my bank account from my financial aid package. It was like all that work was for nothing, they just assumed I was going to use it to pay for college and so that I didn’t have “financial need” in that amount.

    Now I’m getting ready to make two major life changes – get married and go to law school (yeah, you need a degree to be a lawyer, I can’t avoid that). It turns out law school finaid wants to shaft you in the same way – since I’ll enroll after I’m married, they’re looking at my spouse’s income, my parent’s income, my income from the past years and my savings (which are for a house and retirement and NOT for law school so much) and using all of that to determine my financial need. Would saving anything actually help me? It didn’t in college.

  71. Robin says:

    A lot of people seem to be doing some math here trying to figure out what a college student can actually make – let me help you out. I worked 30 hours a week during my last two years of college. I held down 4 jobs during the summer of my junior year. I was an Resident Assistant (it paid for housing, but was a good bit of a time commitement) and I had a job on campus (there weren’t any jobs off campus in my podunk college town). I did NOT make $15 an hour. Really, can people make that much at a part time job? Like, waitressing or casheiring or whatnot – on average? Maybe if you’re a really good bartender at a really popular bar or something. I think I made great money – I made $10.25 an hour, I had THE highest paying student job on my campus. I probably could have earned more full time in the summer, but there were personal things that prevented that (couldn’t live at home and things like that). Anyway, I think I made about $9000 around that time (some of which went to food and TAXES – don’t forget those, you don’t take home that money). Money made during the summer is taxed for students, and the gov’t taxes student income after the first $4500 or so – they don’t think students ought to make much more than that. This isn’t that long ago, I’m a recent grad. Also, my GPA dropped dramatically during that time, I sacrificed taking full advantage of things like lectures and other very worthwhile academic things I wanted to do. I scheduled my classes around times that were convenient for my work schedule so that I would be able to make that many hours at all, so I didn’t take some classes I might otherwise have liked to take. I don’t regret it, it was what I had to do, but if it can be avoided I don’t recommend that path. I really would have rather had more time to study, my coursework was pretty demanding. Also, as I mentioned, my financial aid office docked me dollar for dollar off my scholarship for whatever I made, so it was a small trade-off for not having to take that all out in loans and not really “income” at all.

  72. Jeroen says:


    Maybe I missed something here. I read about the low-interest debt debate (https://www.thesimpledollar.com/2009/03/25/the-low-interest-debt-debate/) and I read this. As a mortgage is (all things considered) a low-interest debate, why is it treated differently?

    I love your site, btw. Not all of it is applicable here, but most is.

    greetings from Belgium,

  73. Sharon says:

    Re: life insurance for children. Yes, it can be well worth getting. Unfortunately, you don’t usually know in advance if the child will need it.

    If the child develops health problems that will make him/her uninsurable as an adult, that life insurance policy you buy will the the ONLY way they will be able to get life insurance for their own family later. It is pretty darned cheap to get this for them. Since you don’t know if your child will be in this small but critical group, I would purchase it.

  74. NYC03Grad says:

    I get the feeling most of the readers of this blog are viewing college as an option – thinking that was normal for 1950, not 2009!!!

    College is not an option – unless you are a blue collar worker, or are very serious about starting your own business. How many serious employers, facing a stack of dozens of resumes, would pick a high school only educated prospect over a Harvard grad?

    Graduating from an elite school is not mandatory, but acts as a great filter for employers – all else being equal (such as GPA), would you rather interview a ‘no-name tiny state school’ applicant over an Ivy? Employers only have so much time to spend on hiring – they can not give everyone a chance – having an elite school on your resume acts as a huge horn blaring “Look at me!!!!”. It is the same reason schools look at SAT scores – being in the 99% percentile might not mean you are going to succeed over someone in the 50% percentile, but without knowing more about the students, and faced with thousands of applicants, they have to go with the higher scores!

    Sure there are exceptions, but for the most part having a college degree can mean a difference of 10s of thousands on your salary as you progress in your career! If you are viewing college as a bad investment, think of how it is rare to see someone at Goldman, JP Morgan, PWC, E&Y, KPMG, etc. with only a community college degree – or who did not graduate from a ‘top 50’ program! Making $150k+ a year before the age of 30 because you spend $200k on an Ivy is not a bad investment, if that investment nets you an additional $50-100k+ on your yearly income!

    By the way, I totally agree that the education you get in any college is, for the most part, wasted. The experience of being at school is what is important – the connections you make, the friends you meet. It gives you a chance to ‘grow up’ without really doing so – a needed transition from childhood to adulthood. When you think of the rest of your life – growing older, having children, financial struggles, the death of loved ones, and any of the other issues that come with ‘growing up’, wouldn’t you like to look back at the few years of care-free, uninhibited fun you had? And it if ends up netting you a few thousand more on your salary annually, the more the better!

    I will never regret my college experience – and after 6 years I am now going back for my MBA (part-time) at a top program. Again, it is not cheap – but my predicted jump in position will allow me to progress 10 years in my career path, with an anticipated $50k salary bump to go with it.

    Still don’t think it is worth it?

  75. Technophile says:

    My parents have been nice enough to help me a bit with tuition payments, as far as financial aid and some loan payments, but they also left the majority to me. I got a campus job (that I still have in my senior year) the August before college started. It’s been really nice and this last summer I got a job offer at a large corporation, so I am set.

    That wouldn’t have happened without getting my degree, I am going for Management Information Systems. I think it has a lot to do with it being in technology and everyone wants MIS or similar. Business schools probably churn out more grads that get jobs right away than the lib arts college here, even IT does pretty well, I know a bunch of CSci people at my internship got offers too.

    I think it’s different for other majors. A lot of my friends are living in dingy apartments during the summer, etc. I am fortunate enough to have some good skills, but it could have been a lot harder. It is very true that many majors don’t offer a clear career path after graduation. My friend is an Film major and he graduated and is working at Blockbuster (ironic?). I think it also depends on your own experience, my other English major friend is a project manager at her dad’s company, but again, she doesn’t necessarily like it but doesn’t want to leave it because she doesn’t think there’s anything she could do. They aren’t dumb either, they’re all smart people…

    The economy just kinda sucks for jobs at the moment, I was lucky enough to get an “in.”

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