Smart college decisions, no is sometimes the best answer

According to the Bureau of Labor Statistics, the amount families pay for college, after adjustments for financial aid, has risen 439% since 1982, compared with a 108% increase in the consumer price index. As a result, many college plans are underfunded, and the stock market decline didn't help matters.

It has become the norm in our society to take our teenagers from campus to campus so they might select a college. These teenagers (considered legal adults in most states at age 18) choose their college based criteria that is rarely rooted in good financial judgment. If they can get student loans to pay for college, they assume that it will all work out. Rarely have I encountered a young adult who had thought thru the consequences of the loans they were taking, before they were deeply in college debt.

The results are young adults paying hundreds of dollars a month for years. These same young adults then have to deal with the consequences of the debt they created by delay having children, postponing their first home, under funding their 401(k) and the like.

The truth is our kids would be much better off if they were told no. No, you may not attend a college beyond your financial means. No, you may not spend the first two years of college out of state when you can get those credits at 1/4th the cost at the local community college while living at home.

Are kids really better off to have fun with their friends for four years only to be saddled with debt well into their 30’s? Is the party really worth it?

It is time we began to look at college as an investment like any other. We need full disclosure of the risks, rewards and long term consequences before we invest. My suggestion is that before student loans are handed out, the student be required to work and pay their own expenses for two years prior. This way they have firsthand experience in what it really takes to get a job, pay your bills and make ends meet. At the very least, young adult should be required to do the math for themselves by creating their post education budget before they take their first dollar of debt.

Our favorite debt is usually the one we did not take on. Do your kids a favor and tell them no. They might be upset in the short term, but they will thank you in the long term.

May prosperity be yours,
Mackey McNeill, CPA/PFS IAR
President and CEO
Mackey Advisors
www.CultivatingProsperity.com
859-331-7755
Mackey@CultivatingProsperity.com