This month, the Naked With Cash participants and financial professionals are discussing education, primarily paying for and planning for college, whether it involves paying back their own loans, funding their own education, or saving for their kids’ future college expenses. In August, colleges across the country begin their fall semesters, so it’s a great time to be discussing education.
An undergraduate degree is a milestone for entering the middle class, breaking away from generational poverty or low socio-economic status. The cost of a college degree is an investment in the future and a great asset for building your human capital because, on average, people with college degrees earn about a million dollars more than those with just high school diplomas over the course of their lifetimes, according to the United States Census Bureau.
Because of this value society places on a college education, and because of other economic reasons, the cost of going to college continues to increase. The student loan industry has thrived, with 60 percent of college students borrowing to pay for at least part of their tuition costs according to American Student Assistance. When student loans aren’t enough, parents borrow money, too, to help their kids pursue their education less burdened by distractions like part-time jobs.
When I was in high school, visiting colleges, applying, and making decisions about how I wanted to spend the next several years of my life, I chose to go to the University of Delaware. I had some outside assistance to help pay tuition, but I also needed help from my own student loans. My parents borrowed money, too, most likely through the federal Direct PLUS loan program, an education loan designed for parents instead of students.
After college, my finances didn’t improve much. I was certainly not on the path of the average college graduate according to the federal census. With a career in non-profit and education, I would not be on track to earn the lifetime one million dollars above and beyond high school graduates. It took me a long time to pay off my student loans, particularly because I also decided to pursue a graduate degree.
Thanks to my side business, my time for eliminating student loan debt came sooner than it would have otherwise. In December 2008, about ten years after receiving my bachelor’s degree, I paid off the remaining balance and was free, no longer setting aside hard-earned income for the education and degree I received a decade prior.
It’s possible that at this time, there were still financial remnants of student loan debt in the form of the loans my parents initiated. I don’t honestly know whether any debt remains today, but it does raise some questions about children’s obligations. From a legal perspective, the student is not responsible for these loans, but is there any situation in which the child who benefited from parents’ loans should help with those payments?
The question might come down to one that is more basic. When parents help pay for their children’s education, should those children feel obligated to repay their parents? Or is there an understood agreement that children might “pay it forward” and use the money that could go to repaying parents to funding their own children’s education instead? Some might even say that children have no obligation whatsoever, as the parents’ decision to borrow for college was likely done without asking the student, and therefore the student shouldn’t be responsible for the financial decisions of the parents.
The assumption here is that parents are willing to help their children afford a college education. That isn’t always the case, either out of their judgment that their children should fund their own education, soaking in any appropriate lessons about personal responsibility, or out of an inability to afford to pay, even with loans. These are valid situations, but the question many graduates who did receive financial help might consider, whether to repay parents for their assistance, is just as valid.
These are the questions for discussion among those who did receive assistance from parents or who can empathize with those who have.
- Should children who received financial assistance from their parents endeavor to repay those parents once their financial livers are in order (or sooner)?
- Is this repayment any more imperative (if it can be considered at all) if the parents borrowed money (in addition to the student’s loans) in order to help their children pay for college tuition and costs?
- Would a student who received financial assistance from parents be more likely to be willing to assist their own children as they look towards funding the expenses of higher education?
- From the parents’ perspective, would you ask your children to help you pay back your PLUS Loan? Would it depend on the financial situation of the graduate?
I don’t recall hearing any stories about college graduates paying their parents back for the money they provided to help attend college, especially if that money came in the form of a PLUS Loan, but that doesn’t mean it hasn’t happened. If you have personal experiences to share, please do.