Getting your kid to forgo college debt

Here’s an idea on how to get your kids to make the right college choice and not take on a lot of student loans: Bribe them.

That’s right. If good old common sense doesn’t work, bribe your kid to do the smart thing, writes Zac Bissonnette, author of “Debt Free U.” In a recent New York Times article, he says that often he’s asked by parents how to persuade their sons or daughters to go to a community college or a less-expensive, public four-year college.

Bissonnette argues that the decision to take on decades of debt shouldn’t be left up to teens whose brains are not yet fully developed.

 “Adolescents are less equipped than adults to make a rational judgment about the consequences of borrowing $20,000, $30,000, $40,000,” he writes. “This is why teenagers aren’t allowed to buy cigarettes, alcohol, rent cars, or gamble.”

If promising your children a nice dessert if they ate their veggies worked, then why not try the same sort of bribery to get them to make the affordable college choice?

“Offer your child a $1,000 (or whatever) gift card to Neiman Marcus (or Bath & Body Works — which would be easily the most awesome place to spend $1,000) in exchange for avoiding student loan debt and going to a college that’s affordable,” Bissonnette says. “Twenty years from now, you will both look back on it as the best $1,000 you ever spent.”

Even Bissonnette himself says the idea probably won’t work, but, he writes, “think of it as the financial equivalent of a light tap on your 2-year-old’s hand before he sticks it into an electrical socket. It doesn’t make you a bad parent, and it just may save your child’s financial life.”

I’m such a fan of Bissonnette, as I wrote in my column when I selected his book for The Color of Money Book Club. He is a senior at the University of Massachusetts.

Here’s is the Color of Money Question of the Week: Do you think Bissonnette’s idea works, and is it even good parenting? Send your responses to colorofmoney@washpost.com, and put “Bribery and student loans” in the subject line. 

Responses to “College Debt”

For last week’s Color of Money Question, I wanted to know: Would you spend -- or more likely borrow -- whatever it took to send your child to a certain college even if it meant decades of debt for you or your student?

The question was prompted by a recent Bloomberg article that discussed the misconceptions people have about choosing brand name colleges.

Here are some responses.

“My family bought —literally—  into the idea that you go to the best name school you get into, even if it’s expensive, and it’ll pay off in the end,” says Jerveen Mason of the District of Columbia. “But with over $87,000 of college debt and a mother with probably $15,000 in private loan debt for my college, I don’t see the end. Looking back, I realize I had a better option. I was waitlisted for a full ride scholarship to Boston University and forwent it for a better name private college that offered a fraction of that. Our outlook is different with my little brother who is going to college in the fall though.”

“In 1976, I went to Northwestern University. It was breathtakingly expensive for its time,” said Jim Shaffer of Indianapolis. “I graduated with $3,000 in loans that took me a number of years to pay off. I wouldn’t do it again. I sent my kids to state schools, and they got an excellent education.”

“Pick the best school you can afford,” said Larry Nagengast of Wilmington, Del.

“We had this choice with our daughter five years ago: Villanova, her first choice, or the home state University of Delaware. Villanova's financial aid offer was a pittance. Comparing the aid offers for both schools, it boiled down to getting four years at UD for the cost of three semesters at Villanova. For a couple of days, our daughter wasn't happy, but she understood the math. She fell in love with University of Delaware, prospered in the honors program, had great experiences in marching band and a coed honors fraternity, and managed her money well enough that she didn't need a Stafford loan for her final semester. Bottom line: she graduated, got a job with benefits and has a very manageable loan payment of $180 per month. Two of her older brothers went to private colleges and one of them is still swimming in debt.”

“No, I will not go into debt to send my child to college,” said Vickie Wilkins of Stafford, Va. “I have to plan for my retirement. I will help when I can.  I learned this lesson the hard way.  I sent my older child to school and he quit year three.  He is now saddled with college loans and no college degree.  He has since opened his own business, is working for a reputable insurance company and is returning to school to finish the degree he started."

Michael Camiolo of Rochester, N.Y. decided to go to the pricier university.

“!n 1997, I faced a choice between Case Western University at $15,000 and Carnegie Mellon University at $24,000 a year. I chose Carnegie. And I’m still happy with my choice. The extra knowledge and CMU stamp I gained was worth the $36,000 in lifetime earnings for a business major.”

 Answers to your questions about college scholarships

Last week’s online chat with Mark Kantrowitz, a financial-aid expert who authored “Secrets to Winning a Scholarship” and serves as publisher of Fastweb.com, received an overwhelming amount of questions from people trying to figure out ways to pay for college.

Below, Kantrowitz answers some extra questions that didn’t make it into the Web chat.

Q: Where can I look for scholarships for black male students interested in Environmental Engineering for school in the Southeast?

 Kantrowitz: The best way to find scholarships that match your background is to use a free scholarship matching service like Fastweb.com. There are many private scholarships for minority students interested in environmental engineering in the Fastweb database, including scholarships from the National Action Council for Minorities in Engineering (NACME), NAACP, American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE), and American Society of Mechanical Engineers (ASME Solid Waste Processing Division Scholarship). There are also college-specific scholarships, such as the Florida Environmental Scholarship at the University of Florida, G. Ben Turnipseed Scholarship at the Georgia Institute of Technology, Civil and Environmental Engineering Visiting Council Scholarship at Old Dominion University, Asia Khatun Civil and Environmental Engineering Scholarship at Tennessee Technological University, Uniroyal Scholarship at Louisiana State University, Wilson Miller Inc., Engineering Scholarship at Florida Gulf Coast University, and the B.P. "Pete" Barber Bicentennial Scholarship at the University of South Carolina.

Q: Will applying to more than one scholarship from other sources have any impact in getting the scholarship of the college applying?

 Kantrowitz: Winning a private scholarship will affect your need-based financial aid package. Every college has an outside scholarship policy which specifies how winning a private scholarship will affect your financial aid package. Federal over award regulations and college policies require a reduction in the financial aid package when you win a scholarship. After all, the scholarship reduces your financial need. However, the colleges have flexibility in how they reduce the financial aid package. They can use the private scholarship to replace loans, which will reduce your debt burden. They can also use the private scholarship to address unmet need, if the college does not provide enough financial aid to cover the full demonstrated financial need.

 Q: Is there an easy way to determine based on your family income whether there is any opportunity for financial aid?

 Kantrowitz: The only easy way to determine whether you are eligible for need-based financial aid is to apply. There are no income cutoffs.  Families often underestimate their eligibility for need-based aid. It is important to apply for financial aid every year, even if you did not qualify last year.

 Changes in the number of children enrolled in college at the same time can have dramatic impacts on aid eligibility. For example, a family might apply for financial aid when their first child enrolls in college and be disappointed when the child does not qualify for need-based aid. The next year, when their second child also enrolls in college, they decide to not bother filing the FAFSA. But with two children in college their expected family contribution (EFC) would have been cut almost in half, qualifying them for more financial aid.

 About 96 percent of Pell Grant recipients have adjusted gross income (AGI) of $50,000 or less. Less than 1 percent of Pell Grant recipients have AGI over $100,000. But some do qualify, especially if they have several children in college at the same time.

The FAFSA is a prerequisite for the unsubsidized Stafford and Parent PLUS loans. These loans do not depend on financial need.

 Q: We won't qualify for financial aid, so my child will need scholarships to pay for school. What advice do you have for getting enough scholarship to cover the cost at a good school?

 Kantrowitz: About a third of families that say they won't qualify for financial aid actually do qualify, so you should still file the FAFSA. Financial aid formulas change frequently. Financial aid has changed a lot since you (or your neighbor's children) were in college. The only way to tell for certain whether you qualify is to apply.

Less than 0.3 percent of students win enough money to cover the full cost of attendance. It is quite rare to win a completely free ride. About 1 in 10 students will win scholarships, and the average amount used is about $2,815 per year. So scholarships are part of the plan for paying for college, but not the complete plan. Most students will have to rely on financial aid from the federal government, state government and the colleges themselves, including grants, education loans and student employment.

“Secrets to Winning a Scholarship” includes a lot of practical advice on increasing your chances of winning a scholarship. Some of the best tips include:

 -  Complete scholarship matching profiles more thoroughly. Students who answer the optional questions match about twice as many scholarships as students who answer just the required questions.

-  Start searching for scholarships sooner. Many families wait until the spring of the senior year in high school to start worrying about how to pay for college. By then half of the deadlines have passed. Plus, there are scholarships available to students in grades 9, 10 and 11. There are even scholarships available to children in kindergarten through grade 8, such as the Jif Peanut Butter and Jelly Sandwich contest, the national spelling bee, the national geography bee and many art, writing and community service scholarships.

 -  Focus on depth, not breadth. Every scholarship provider is looking for the student who best matches their criteria.

 -  Community service can help you win a scholarship. Most of the members of the scholarship selection committee are volunteers. They will have a greater affinity to applicants who, like them, volunteer in their communities.

 -  Apply for every scholarship for which you are eligible. Often students neglect small scholarships. But small scholarships are easier to win, they add up, and they add lines to your resume that can make it easier to win bigger awards. Don't forget about the Hope Scholarship tax credit, which is open to families with incomes up to $90,000 (single filers) and $180,000 (married filing jointly).

Upcoming Events

Join me on Thursday, April 7th from 7 p.m. to 8:30 p.m. at the Howard County Library, 6600 Cradlerock Way, Columbia, Md. 21045. I will discuss managing your money in the new, less robust economy. To register for the event, call 410-313 7700. Early registration is encouraged.

 

Tia Lewis contributed to this e-letter.

 You are welcome to e-mail comments and questions to singletarym@washpost.com .

Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.”

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