How much do I owe my parents for my college education? I thought we had this all figured out, but I'm not so sure anymore.
Right after I graduated college and started my first full-time job, I sat down with my parents to talk about finances. During my college years, my parents had paid their expected family contribution to tuition, room, and board after the financial aid grants were applied, partially through taking out $45,000 in loans. I had a work-study job and worked summers, and paid for books, entertainment, and other personal expenses, including my groceries and a couple hundred dollars a month towards rent when I moved into an apartment my senior year, plus I took on the $13,000 in loans in my name that the financial aid forms suggested. Now the month-to-month expenses were over, and we were all left with the debt, them a lot more than me.
My dad suggested I just pay "what you can afford, what feels comfortable to you" in any given month, but I said no way... I wanted something defined, a number I could think about and plan around. I didn't care what it was, but I wanted to us to settle on an amount we all thought was fair and stick to it.
So we decided I'd give them $16,000. It was elegant and satisfying-- together we owed $58,000, and half of that was $29,000, so giving them $16K on top of the $13K in my name evened things out. $16,000 sounded like a tremendous amount of money to me, and with our tentative $250/month plan, that meant over five years of payments, which felt like forever.
Fast forward to 3 1/2 years later, and thanks to some accelerated payments, the $16,000 will be paid off by the end of the summer. I'm really excited about the prospect of having another $250 a month to put into savings. But I'm also left thinking, is it fair for me to be done already, or should I offer to pay more?
- On the one hand, I'll have accounted for my half of the balance. On the other hand, my interest rate is several points lower than theirs, so it isn't really half of the total cost.
- On top of that, there's the fact that they paid much more out-of-pocket during college than I did. But then again, they were adults with jobs and I was a college kid making a couple thousand a year, and they were paying what the financial aid formula said they could afford. But the formula expects parents to spend a pretty large fraction of their income and assets, so I don't know if it's fair to just say "They could handle it."
- If I stop now, they'll still be making big payments on those loans for almost another decade, with no help from me. Of course, I will still be paying for my own loan-- but that's only $70 a month, and the interest rate is under 3%, so I barely count it as debt.
- I'm pretty sure I'm in better shape financially for my age than they are for theirs-- and they have retirement coming up in a decade or two. On the other hand, a lot of that is because of their own choices. But the cost of my college education is certainly a significant part of it too. But then again, they're hardly destitute, and while they have debt from paying for college for my sister and me (and are behind on saving for retirement), they have pretty high incomes-- and my sister graduated from college last month, which will really help their cashflow so they can catch up more quickly.
- When I was applying to college, my dad told me, "Go to any school you want, and don't worry about how much it costs, we'll make it work. I had to give up going to the college I wanted because my parents said it was too expensive; I've worked hard all these years so that you don't have to be in the same position." (My mom was not as gung-ho, but they eventually agreed on my dad's take on it.) So I did, and there was never any real discussion or expectation about how much of the cost I'd share-- if I'd expected I'd have to pay for a lot of it, I might have chosen differently. But in the end, I did choose an expensive school, and just because they said "Go ahead, it's okay" doesn't make it any less costly to them.
- When it comes down to it, there are just two issues: they're my parents... but it was my education.