My Kids College Contract, Given a Few Years Before College

[mxt0133]

Oh, BTW, my friends kid is going to Illinois next year for $55K a year.  When I told her she inspired me to get something typed up, she said at least something good came of their situation.

May I ask what university in Illinois costs $55k a year?  Never mind I just looked up Northwestern and tuition alone is $50K, no room, board, or other fees.  Total for one year at Northwestern is $70K, jaw fell to the floor.  However, if you are a only child with a single parent making $25K a year with no assets, then they would get $66K a year in aid.  Not bad at all.

http://undergradaid.northwestern.edu/types-of-aid/aid-package-examples.html

Moral of the story, some how raise your kids to get into competitive private schools while making poverty level wages and tuition is covered, easy peasy.

[Bikeguy]

Oh, BTW, my friends kid is going to Illinois next year for $55K a year.  When I told her she inspired me to get something typed up, she said at least something good came of their situation.

May I ask what university in Illinois costs $55k a year?  Never mind I just looked up Northwestern and tuition alone is $50K, no room, board, or other fees.  Total for one year at Northwestern is $70K, jaw fell to the floor.  However, if you are a only child with a single parent making $25K a year with no assets, then they would get $66K a year in aid.  Not bad at all.

http://undergradaid.northwestern.edu/types-of-aid/aid-package-examples.html

Moral of the story, some how raise your kids to get into competitive private schools while making poverty level wages and tuition is covered, easy peasy.

U of I.  And they earn more than 24K.

[Bikeguy]

But you bring up an exceptional point.  If you are close to FI when you have a sophomore in HS, you are just about required to bail.

[Bikeguy]

4)   Mom and I will pay for up to 85% of your college if the amount is the same or less than the University of Michigan.

   Chart showing roughly $27K a year room and board.

Two questions on this: first, does the U of M have different tuition levels for different branches of the system? If so, might be worth specifying Ann Arbor versus Flint or whatever.

Second, the incentive seems to be to go to a school that is as expensive as the U of M and no less. If they have a choice between U of M and some other school at half the cost. (Let's say that it's a less prestigious school overall but with a very specific program they want, so it's not a matter of quality.) Choosing the cheaper school saves you $46k (assuming a 3.0) and saves them $8k. So they're going to be looking at it as an $8k difference, not a $54k difference. You could align the incentives by saying that you will pay the given fractions of U of M tuition and if they find something less for a comparable education, they can spend the difference on other education expenses subject to negotiation. Like, maybe the cheap school is not in a transit-friendly area and they buy a car. Or if the program is has an overseas component (they're going to study Chinese and political science with a required year in Beijing, to get a job working for the State Department), it could pay for the study abroad expenses.

K.  I've been thinking about this.  I feel like there is an advantage to going to a more competitive school.  Not sure I want to incentivize the cheapest school.  Would be interested in others feelings on this.

[galliver]

K.  I've been thinking about this.  I feel like there is an advantage to going to a more competitive school.  Not sure I want to incentivize the cheapest school.  Would be interested in others feelings on this.

I went to a small private tech school, not widely known, and I chose it largely because they offered me a full-tuition scholarship. My other alternative was the state flagship, where I just so happened to end  up going for grad school. In retrospect, knowing what I know today, I would have chosen the small school even if they were the same price; if money was not (as big) an issue, I would have gone to the smaller school  even if it was slightly more expensive. I liked the small classes from day 1. I liked the number of project and lab classes in the curriculum. I liked the kind of people it seemed to attract (I got to live on campus for a weekend when I interviewed for my scholarship and meet many of the students). It was easier, for me, to find a niche on that campus; I expect I would have gotten lost at the state school, but as it was I got to tutor and research and even TA as an undergrad and lead some student groups. I liked that the school was in the city and not a cornfield, so there was much more to do on the weekend than get drunk and hook up (though those who were after this did find opportunities).  And while, nominally, it was less competitive, the classes had plenty of academic rigor; having TA'd a senior year lab course at the state school, I can say with certainty the students were no better educated than my classmates and I from the small school. The state school is in the top-10 for engineering...there's just not that much difference in academics, at least until you get to the very elite level schools (I know a few people who went through MIT, and they have a lot more depth to all their coursework).

I partly agree with you; depending on the degree of "more competitive" and "more expensive" it might be worth it. But one important thing to note is that college has a significant "you get out what you put in" component. A student that's not particularly driven to seize upon additional opportunities won't get a significant benefit from a marginally more competitive school in terms of education. Only, perhaps, better job fairs and entry-level employment prospects due to name and alumni recognition. But a motivated student will create those opportunities for themselves even at a less recognizable school. All the graduates of my cohort and the years on either side are gainfully employed using their degree, or pursuing/nearing completion of graduate work (some have finished masters and are now working).

I think what ends up being more important, as far as education rather than reputation, is not how competitive or selective a school is but some of the details people forget to consider. What classes are in the curriculum? How many are hands on, project based, laboratory courses, or otherwise emulate the real world (whatever that looks like for non-science/engineering/CS)? What resources are available for students to pursue extracurricular projects? Is there a "fab-lab"  or shop, site licenses for key software, IP/entrepreneurship office? What kind of student groups are active (robotics, student consulting group, school newspaper, volunteering, etc)? How good is the career center (at educating and catering to [desired major])?  I didn't know to ask some of these going in, and I'm sure there are many more. But these sorts of considerations give you insight into what people *do* on campus, and at the end of the day, doing is the best way to learn and being surrounded by people doing things (besides going to lectures) is a great way to be motivated to do them oneself!

I think it might be hard for you to put the right incentive into the contract because Kid 1 might be super-motivated and academically inclined whereas Kid 2 might be smart but disinclined toward academic structure so they'd get all they need/want academically from a lower-tier state school (e.g. CSU vs UC system for CA). But it probably wouldn't look fair to them if you said "Kid 1, have $5k extra to go to Prestige School because you'll benefit from it, but Kid2, you should go to a cheaper school." So maybe you just leave it open to reasonable negotation. So Kid 1 comes to you and says "look, I got into Prestige University and I got these scholarships but I'm still $5k short but PU has all these benefits:" you can say, "ok, you've convinced me, that sounds reasonable" (or "ok but this is a loan" or whatever you want) and when Kid 2 comes to you and says "parent, I can clearly see I am saving you $10k by going to Community College and then Cheap College, and I know you gave Kid 1 $5k to go to PU, why don't we split the savings" you can be like "that sounds fair, yes" I just don't see a way to "lock it down" in your contract and still motivate your kids to make good decisions...

[rocklebock]

Honestly, I would stick to making this about the money, and leave the rest out. This seems very controlling to me, and like you're projecting your own experience as a student onto your kids. If your kids are well-prepared for college, I don't see why it needs to be more complicated than "We can pay $x per year for 4 years, and the rest is on you." Other than that, let them make some mistakes and learn to be adults.

As a kid, I was very independent, responsible, and a good student, plus I also had a huge "You're not the boss of me" streak. If my parents had presented me with something like this, my reaction would have been resentment and distrust, followed by either a) telling them don't worry about it, I'll pay for it myself instead of agreeing to their stupid contract, or b) shrewdly figuring out how game their little system to accrue the maximum financial benefit to myself. Both of these reactions would have been counterproductive to the intended goal.

That said, it would have benefited me as a kid to have the financial picture spelled out more clearly, because it was a black box to me. I was also a first-generation college student, so my parents didn't necessarily understand or think through all the options.

[Bikeguy]

I just don't see a way to "lock it down" in your contract and still motivate your kids to make good decisions...

Excellent points about the difference in kids and what each would get out of different learning experiences.

As a kid, I was very independent, responsible, and a good student, plus I also had a huge "You're not the boss of me" streak. If my parents had presented me with something like this, my reaction would have been resentment and distrust, followed by either a) telling them don't worry about it, I'll pay for it myself instead of agreeing to their stupid contract, or b) shrewdly figuring out how game their little system to accrue the maximum financial benefit to myself. Both of these reactions would have been counterproductive to the intended goal.

That said, it would have benefited me as a kid to have the financial picture spelled out more clearly, because it was a black box to me. I was also a first-generation college student, so my parents didn't necessarily understand or think through all the options.

If my kids had an established track record of being independent, responsible, and good students, the write up wouldn't need to be so detailed. Both have had relatively recent excursions.  Both are great kids, but they got the bad DNA with the good from both my wife and me.

I appreciate the "just give them the money crowd", but it's not a responsible thing to do.

And if they think we're too controlling with this, they are welcome to self fund.

[galliver]

Scholarships have GPA, often major, and sometimes even  coursework or extracurricular requirements. No reason parental scholarships can't have similar strings attached.

I do think parents should think about higher ed and plan to help their kids achieve their potential (whatever that might be). But that doesn't mean kids are entitled to that support unconditionally...

[Need2Save]

Man, this is a lot of pressure to put on a kid..   Assuming that they will go to college, then select an appropriate degree, then pressure for specific marks, .... maybe leading to pressure to decide what you want to do NOW!   What will you be?

Teenagers these days have a lot of pressure already.

I 2nd that.  My son who is now 18 went through a period of very acute depression at age 16.  At the heart of it was overload of academic and social pressure from high school, and Mom and Dad were always harping on him to find a PT job.  He felt like a failure and hadn't even finished HS yet.  The truth is, in our little town, none of the jobs were available to those under 18.  The business owners figured they had plenty of 18 and up kids to choose from so wouldn't even consider hiring a 16 year old.  So finding a job was very hard for him.  He lucked upon one last fall and it's been great experience for him.  Now our other son who is 16 but will be 17 in a few weeks, is having the same difficulty.  It's not for lack of applying.  A manager at one store literally told him that hiring a 16 year old was out of the question because they are too young and immature and can't be trusted.  What a crushing thing to say to a young man! 

As our oldest goes to college this fall, he has been able to save money. He's spent hardly anything of what he made working over the last year.  He's not a spender really. But if he graduates and has to live at home for a little bit to look for a job, we will support him.  Perhaps consider a small amount of rent.  But we want him to 'launch' one time and be successfull.  It will be close to our FIRE date by then and we have our own plans, which involve selling our current residence and doing some travelling before settling to a LCOLA.  What I mean is that his bedroom will only be available for a limited period of time and he is aware of this.  It's tough for some graduates to find jobs these days and the pay in some professions starts out so low.  I'm not compelled to add to his stress levels at this point.  Our contract is more general in nature as in, "we expect you to work hard for your own future happiness and success" not to make your parents happy.  We learned important lessons about crossing over the line between support and encouragement vs. being a source of extra stress. It's his life after all. 

[ender]

If my kids had an established track record of being independent, responsible, and good students, the write up wouldn't need to be so detailed. Both have had relatively recent excursions.  Both are great kids, but they got the bad DNA with the good from both my wife and me.

I appreciate the "just give them the money crowd", but it's not a responsible thing to do.

And if they think we're too controlling with this, they are welcome to self fund.

One consideration is that kids often learn by making mistakes. If your attitude is, "I will prevent my kids from making mistakes" they cannot learn.

You should make any plan so it incentivizes your kids themselves making reasonable decisions. Not mandating and dictating decisions to them.

Of course, the ideal outcome here is that you lovingly teach them how to make large life decisions throughout their childhood, guiding them and mentoring them in that process. Then when college comes around you can say, "we'll pay $X per year for school" and not have to make a long detailed list of legalese about how you are going to prevent them making mistakes in life.

My parents did something like that. But you know what I would have preferred? That my parents actually help me think through the process of deciding what school to go to. Thinking about the financial aspects (my parents never talked to me about money so I made a $100k decision without any clue what I was doing). Talking about how to think through career options vs "do what you want!" and how that works after school. Talking about how to value cost of school vs location vs educational outcome.

The money vs contractual plan for college is not even remotely as important as the parenting aspect. Parenting isn't just "we're going to write up a plan for your life and give it to you." It is lovingly and patiently helping enable your kids to make their own decisions in a responsible manner. I would have loved for my parents to talk through things with me instead of just throw their perspective over the wall to me, such as your approach.

But you know what that lack of parental involvement did do for me? I spent more money than my siblings, who happened to go to in-state schools where their cost was less than $X and so they paid nothing out of pocket. But I learned a lot about how important it is for ME to learn what I need to know and not expect it to be given to me. Maybe it cost me $40k to learn - but that $40k mistake in total will pay a huge return in my life overall.

[sheepstache]

I 2nd that.  My son who is now 18 went through a period of very acute depression at age 16.  At the heart of it was overload of academic and social pressure from high school, and Mom and Dad were always harping on him to find a PT job.  He felt like a failure and hadn't even finished HS yet.  The truth is, in our little town, none of the jobs were available to those under 18.  The business owners figured they had plenty of 18 and up kids to choose from so wouldn't even consider hiring a 16 year old.  So finding a job was very hard for him.  He lucked upon one last fall and it's been great experience for him.  Now our other son who is 16 but will be 17 in a few weeks, is having the same difficulty.  It's not for lack of applying.  A manager at one store literally told him that hiring a 16 year old was out of the question because they are too young and immature and can't be trusted.  What a crushing thing to say to a young man! 

Oof. Well the kid was probably better off not working for him. I had trouble finding work at 16 too, though with a mall nearby I eventually did. One of the managers mentioned to me that he preferred not to hire 16 year olds, no matter their character, because legally there were more limitations on the hours they could work than 18 year olds.



I agree with those saying that talking out the college decision in a rational way is the really important thing, but what I like about the contract is that it opens the door to this conversation and the OP and his wife can always modify it based on the response they get. Even if the kids hate it, it gets them thinking about the decision in a nuts and bolts kind of way, rather than the vague aspirational way schools and other families tend to approach it.  Giving money conditionally can infantilize kids who should be moving into an adult role, but so can unconditionally giving money if there are unspoken assumptions (e.g., you have to go to college; you have to go to the best college you can get into, etc.), it all depends on the intent. Best to have things laid out clearly.

[MrsDinero]

This thread has got me thinking about what I will do in the future for my kid but I have a question about the purpose of this or any college contract?

Is it to help prevent your kid from failing?  Or is it to protect your monetary investment in your kid?

[Bikeguy]

This thread has got me thinking about what I will do in the future for my kid but I have a question about the purpose of this or any college contract?

Is it to help prevent your kid from failing?  Or is it to protect your monetary investment in your kid?

I agree with those saying that talking out the college decision in a rational way is the really important thing, but what I like about the contract is that it opens the door to this conversation and the OP and his wife can always modify it based on the response they get. Even if the kids hate it, it gets them thinking about the decision in a nuts and bolts kind of way, rather than the vague aspirational way schools and other families tend to approach it.

Sheepstache nailed it. The write up has opened the discussion of college with my 9th and 10th grader.  We will still be working out what they want to study and where it makes the most sense to go.  But they now know what their Mom and I are thinking is reasonable.

The most interesting thing is they both loved the idea of 25% cash for any scholarship they earn.  My son says he will now study for the ACT, because scholarships open up academically at a score of 32, and his PSAT score shows he should be close. I can guarantee the idea of studying for it didn't occur to him before this discussion.  My daughter is also exploring scholarships she may be eligible for.

This exercise started out with me wanting to be crystal clear there was a cap, and not getting ourselves in the position of my friend who is shelling out $55K a year for her daughter.

Stuff got added that makes it so money won't be wasted if the kids lose motivation or aren't interested in coming up with their 7.5% (the amount they need to cover if they work and we match dollar for dollar.)

If my kid fails, I don't want to be having a discussion about how I'm being unfair by not offering another chance.  It's all spelled out.

I find it interesting to guess who has kids and who doesn't based on what they post to this thread.

Again, I really appreciate all the feedback and feel this will benefit my kids and our family to have this document in place.

[GizmoTX]

We started an irrevocable education trust for DS when he was a year old, funded with our annual gift exclusion & invested to take advantage of the compounding time. At the time, 529 plans didn't exist. We would still do the trust again, because in our case it allowed us to pay tax on the earnings at the trust rate rather than the higher kiddie tax rate, gave us control as trustee even when DS became of legal age, & has an exit strategy if all the money is not used for college. DS was responsible for covering anything over the trust for his college expenses. Upon receiving a full degree (Bachelors, not Associate), he is allowed but not required to claim 50% of any residual, with any remainder due to him on his 30th birthday. We wanted the funds to be there for most if not all of his university expenses, with an incentive for DS to preserve it by graduating on time or early.

DS received 2 merit scholarships from his undergrad university, so that meant substantial savings for his trust. He has no student loans. He graduated last week & plans to return next fall in a 4+1 program that will allow him to get his Masters degree in just 2 semesters rather than 2 years. His trust still has more than enough to pay for it, but he is likely to get a scholarship and/or TA position to pay for most if not all of grad school.

He lived in an apartment for all but his first year of college, when he was required by his university to live in a dorm on campus. We transferred a monthly amount to his checking account to cover his apartment, utilities, & basic food -- anything beyond this amount was his responsibility. He still managed to save money out of this, & it was his to keep. We didn't require him to work during the school year but he found paid part time research & TA jobs within his college that were interesting to him. Every summer since sophomore in HS was spent working full time in an internship, which was invaluable in shaping his degree choice, & he started funding a Roth account to the max that his earnings & the limit allowed.

[meyling]

This whole contract thing seems crazy to me but I guess everyone is different and is able to succeed in different ways. I always tried hard in school but if I were given a contract like this, it would just freak me out.

I didnt start thinking about college at all until after my junior year of high school. I think it worked out well though (:

[TomTX]

But you bring up an exceptional point.  If you are close to FI when you have a sophomore in HS, you are just about required to bail.

"Son, my college funding gift to you is having a low-income family. Get into Stanford - it will be free!"

[Bikeguy]

But you bring up an exceptional point.  If you are close to FI when you have a sophomore in HS, you are just about required to bail.

"Son, my college funding gift to you is having a low-income family. Get into Stanford - it will be free!"

Love it!

That is actually a plan I am considering.  If I quit working, a lot of this goes away.  Wife and 3 kids that currently don't qualify as mustachian are causing me pause before I take the plunge and quit.  And I really do enjoy my job most days.

So, I'm currently talking out the changes necessary with the wife, who is supportive of my goal to retire early.

[Typhoid Mary]

FWIW, there are many means to the same end, college-wise, for certain careers. I am an RN - BSN (Bachelors of Science - Nursing) as are my coworkers, but we all got there different ways.

Nurse 1 - 4 years of Univerity of Nebraska, $80,000 in debt at graduation. Passed NCLEX, is an RN, and has a BSN.
Nurse 2 - 2 years of community college, passed NCLEX, is an RN. Did the last 2 years at University of Nebraska, $50,000 in debt at graduation, has a BSN.
Nurse 3 - 2 years of community college, passed NCLEX, is an RN. Used employer tuition reimbursement and worked full time during last two years old school. $30,000 in debt at graduation, has a BSN.
Nurse 4 (me!) - one year of community college, got my LPN. Worked as an LPN, finished second year of community college on employers dime, is an RN.  BSN also on employers dime.  Roughly $6000 in debt at graduation.

4 nurses, 4 levels of college costs.  I'm sure this isn't limited to just nurses.  Sometimes you don't have to work harder, you have to work smarter.  I'd encourage my kids to find out if the field they want to work in has any incentives to pay for tuition costs.  If I had taken college classes my senior year in high school, I bet I would be debt free.

[elaine amj]

FWIW, there are many means to the same end, college-wise, for certain careers. I am an RN - BSN (Bachelors of Science - Nursing) as are my coworkers, but we all got there different ways.

Nurse 1 - 4 years of Univerity of Nebraska, $80,000 in debt at graduation. Passed NCLEX, is an RN, and has a BSN.
Nurse 2 - 2 years of community college, passed NCLEX, is an RN. Did the last 2 years at University of Nebraska, $50,000 in debt at graduation, has a BSN.
Nurse 3 - 2 years of community college, passed NCLEX, is an RN. Used employer tuition reimbursement and worked full time during last two years old school. $30,000 in debt at graduation, has a BSN.
Nurse 4 (me!) - one year of community college, got my LPN. Worked as an LPN, finished second year of community college on employers dime, is an RN.  BSN also on employers dime.  Roughly $6000 in debt at graduation.

4 nurses, 4 levels of college costs.  I'm sure this isn't limited to just nurses.  Sometimes you don't have to work harder, you have to work smarter.  I'd encourage my kids to find out if the field they want to work in has any incentives to pay for tuition costs.  If I had taken college classes my senior year in high school, I bet I would be debt free.

Yep - my DH got his community college diploma completely subsidized (low income family). So 2 years for a full RN degree. He started working full time at a hospital and they paid for his BSN - which he did part time. It took him 10 years to get his BSN but he was in a good job so no big deal. His hospital also paid for half of his Masters degree in nursing (we did have to pay it back when he found a really good job less than a year later). Not a big deal as his Masters was only like $20k through an online program which he did full time while also working full time.

I've found out that our local community college has a lot of agreements with our local university. I recently met a student who got a 3 year business diploma and transferred to the university - one more year and he gets his bachelor's degree. I've already brought it up with my kids that this might be the better (cheaper) way to go.

[Penny Lane]

Wow, Typhoid Mary, good on you for your path!  This is a really smart way to do it.  My sister was an LPN for years before getting her RN and now has a good job managing out patient pediatric home visits.  She had very little debt as well.

Such a different $$$ world now.  I went to a top tier liberal arts college in the 70's, still under $4000 my senior year, all on scholarship, grants and my own earnings.  At the time a summer research position paid about $1000-1200.  I rode a bike, made all my own vegetarian food( could not afford meat) and saved virtually all of it which was a meaningful contribution to my tuition.  Now, the stipends for summer work seem virtually the same, but no one is going to get very far paying for tuition with $1000. 

We did pay for our 2 kids college but not for any spending money, no cars.  They had worked summers in high school and had some good savings for their college future selves.  Now in their 20's, they express gratitude all the time for this, watching their friends struggle with debt.  So we have no regrets, even though my own parents were not able to help me through those years financially.

[Bikeguy]

I've found out that our local community college has a lot of agreements with our local university.

There was a program before where if you were accepted, you would do your first two years at Washtenaw County Community College and were guaranteed admission to finish your second two years at university of Michigan.  That is a great way to get a name degree, if that will help you.

That particular program was cancelled, due to lack of interest.  I think it was cancelled before MMM started his blog. I should ask to get it brought back.

[KBecks]

Great topic. 

My concern with the contract is the number of points involved.  Can the contract be simplified at all so that it is more easily absorbed and understood?

Another question -- are you sure you will have the funds to back up your promises?

I appreciate the discussion on encouraging kids to have jobs in high school if possible.  I did not, but had a lot of activities.  My husband thinks our kids should work many hours as soon as they are old enough.  I would like them to have friends and grades too, but basic work experience is good.  I am wary of having them work in a low-paid, poorly managed environment where there might be people who are bad influences at a young age.   A low paid environment with a strict, positive culture is fine. I think getting a job with some good people and good managers is more important than the money earned. 

Right now I cannot say with certainty that I will have funds to cover 50% or 25% or 80% of school costs.  Perhaps I need to sit with a calculator, but market returns are not guaranteed, and I'm worried about that.  I do not want to tell my children that we can pay X if we don't have X immediately available.

Dave Ramsey often talks about conditions on his family's behavior both for college funding and for inheritance.  I agree with this.  I was just thinking about the swimmer who got let off for rape and how I might want my sons to stay the hell away from fraternities in college.  I cannot think of any good coming out of any fraternity, save for job connections, but that's really not much of anything.
Can I tell them that they can't join a frat?  I can tell them that I think they are stupid, immature distractions.   

I have listened to another podcaster who says that colleges will be reinvented in the future and that it will be more about skills building than the 4 year degrees.  More online, more part-time, cheaper, etc. etc.    My oldest currently wants to be a veterinarian and I am sure there are no shortcuts for that.  The other kids are too young to know.

Also just a note that first semester in college can be a wake up in terms of what it takes to be focused and get the grades.  For me it was a time of meeting a lot of new people and I was not as focused on study as I should have been.  I struggled in a few classes, not all, but a few. 

I want to stay in touch with my kids when they are in college, visit them frequently, talk to them frequently, etc. etc. etc. but also give them some space.  I will be watching and monitoring. 

I also want my kids to have their adult skills in place for college.  They should know how to cook to sustain themselves.  They should manage laundry and basic life.  They will maintain their checkbook (ha! does that sound old fashioned.)  No credit cards.

Note: Kids will change their minds about majors and careers.  In middle school I wanted to be a lawyer. (My mom discouraged me.) At the end of high school I considered teaching and broadcast journalism. I went into school thinking I was going to triple major and become an industrial psychologist.  I ended up with a communications degree and graduating in a recession.  Slow start to the career. 

My parents did not attend college and did not have a lot of experience with choosing careers.  I hope to help our kids a little more.

[KBecks]

But you bring up an exceptional point.  If you are close to FI when you have a sophomore in HS, you are just about required to bail.

"Son, my college funding gift to you is having a low-income family. Get into Stanford - it will be free!"

Love it!

That is actually a plan I am considering.  If I quit working, a lot of this goes away.  Wife and 3 kids that currently don't qualify as mustachian are causing me pause before I take the plunge and quit.  And I really do enjoy my job most days.

So, I'm currently talking out the changes necessary with the wife, who is supportive of my goal to retire early.

You know you cannot count on that working out, right?

[Matilda]

2)   You will need to get a job in the summers, starting the year you are 16, unless there is a reason this is a non optimized idea.

Examples? My teenage brother would say getting out of bed before noon in the summer is a non optimized idea.

This was my thought, too.  During high school and college, working can be detrimental to academic success. 

When I was a teen, my parents pushed me hard to get a "real job" (aka retail) as soon as I was legally old enough.  (I'd been babysitting and etc for years, but that didn't 'count'.)  I did, and worked retail/ coffee/ restaurant type jobs through the rest of high school and college.  It was basically all I did.  No real extra-curriculars, mediocre grades. I got a scholarship to college anyway, because my SAT score was excellent (1530 back when it was a 1600 scale), but my GPA was only somewhere around 3.1.  This trend continued into college-- working was so ingrained in me by then that it wouldn't have occurred to me to "just
 go to school.   

In retrospect, I don't think this did me any favors.  Yes, I have a good work ethic and always had spending money in high school and college, but I would have been better served by working on my grades and extras. 

My brother is 10 years younger than me.  Our parents did not encourage him to get a job in high school, and he never did.  Here's what he did do: He was an Eagle Scout by the time he graduated HS.  GPA was 4.0, SAT scores excellent (runs in the family :)), he was on his school's robotics club that went to nationals that year, as well as a few other clubs, Spanish etc.  Needless to say, he also had a full scholarship.  He didn't work menial jobs in college, but focused on his degree (computer science), and did some internships towards the end of his college career.  By the time he graduated, he had a job in his field. 

He also has a great work ethic, and I don't think he lost anything by not waiting tables or brewing coffee for hours and hours every week when he was learning code. 

It's definitely given me food for thought with regard to my own kids, and I think that in many cases, working on their "careers" in high school by doing the things my brother was doing is more valuable than the kind of work I was doing.  And he was certainly not lazy or unmotivated-- becoming an Eagle Scout takes tremendous effort, and looks better on a college app than 4 years working retail-- and so do things like that robotics club.  They spent hours and hours on those machines, and ended up with one of the best teams in the country.  Definitely a plus for a kid that was always destined to end up in computer science! 

[GizmoTX]

IMO, being productive in the summer is important. Ideally, this should be something the teen wants to explore, such as a job or course in a field s/he is interested in as a career, to hone choices or even eliminate it. Any money earned helps but is not as important as figuring out a plan for post-HS & learning life skills. High school itself should be considered job #1. No "feeding a car".

[The Happy Philosopher]

This is an interesting thread. I struggle with the right amount of subsidy, right amount of work, etc. What I have circled around to is roughly paying the cost of a 4 year degree at an instate school regardless of the actual cost of education. So if early college credits, scholarships, etc. reduce the cost the extra would just be a cash gift with no strings. If there was an expensive out of state school with no scholarships, or graduate school involved then there would need to be some student loans. I think this puts much of the decision making and power with my kids as to what they choose to do. It is something that I  struggle with though. I think what I teach my kids about money and life in general is probably worth more than any tuition I could pay for them, but maybe that is delusional thinking on my part :)

[Bikeguy]

Great topic. 

My concern with the contract is the number of points involved.  Can the contract be simplified at all so that it is more easily absorbed and understood?

Another question -- are you sure you will have the funds to back up your promises?

 

You know you cannot count on that working out, right?

Agreed about the number of points.  You haven't met my son.  He has never met a loophole he doesn't try to exploit.  I still remember at 4 he kept touching the windows.  I asked him to not touch them.  He instantly put his finger on the window frame, about a quarter inch from the window and just stared at me.  He also once said no to going out for ice cream when he was like 8 or 9 just to see the look on my face.

They now each have a copy.  The quick summary I gave them was we'll pay for 90% roughly, as long as they get a B average or up.  If they get a job, we match dollar for dollar.  The detail is absolutely necessary for my son.

We have the funds to back up the promise.  I was mustachian well before this blog started.

I realize I can't count on the scholarship.  Especially with assets being higher and income potentially being really low.  I'll need to find an old article I read.  Something about 5% of assets being used per year for college, not including retirement accounts or home equity.  I've funded 401k and Roth IRA to max for a while, to get more money into these asset classes that aren't considered.

[Pigeon]

This thread has got me thinking about what I will do in the future for my kid but I have a question about the purpose of this or any college contract?

Is it to help prevent your kid from failing?  Or is it to protect your monetary investment in your kid?

In our case it is both. Knowing that funding will stop if they don't work hard is motivational. My oldest did not do as well as she needs to do her first semester for what her stated career goals are. A come to Jesus meeting about us discontinuing funding if she didn't improve and reminding her of  admission requirements for the professional programs she wants after her undergrad resulted in Deans list grades the second semester. I'm not pouring money down a black hole.

[Bikeguy]

Just wanted to follow up with the choices kid one made.  I think the contract influenced his decision, but can never be certain with him.

He applied and was accepted to Michigan State, Eastern Michigan and Washtenaw Community College.  He applied for and received a full ride scholarship to WCC, which is tuition and books for both years.  WCC also has a list of courses that is accepted at University of Michigan, so you don't end up taking courses they won't accept.

He ended up going to WCC and just completed his first semester.  When I asked why he didn't go to MSU or EMU, he replied why would he spend way more money and get the same education.  His goal is to transfer to U of Michigan and get a degree in computer science.  Several younger friends have also gone this route, graduating from U of Michigan.  They feel strongly that it is better to have professors that want you to learn the material (WCC) versus the 200 person lectures U of M has.

Kid two will be graduating in June.  Will be interesting to see what she decides.  Pretty sure WCC is already out of the running, which is fine.

[Plugging Along]

Interesting points of view.   Before kids, I used to think that my kids would have to pay for most of University themselves in order to appreciate it.   I knew some kids who’s parents paid for everything and then partied it all away.  However, seeing my nieces and newphews who turned out great, and reflecting my situation, I have reconsidered. 

We have decided the following, it may may as our kids are still 10 and 13

We will help for tuition and books for the equivalent up to a graduate degree, providing they choose area where they can show there is employability and they can support the lifestyle they want to live.   We will not pay for ‘wasted’ courses.   So if they have to retake a coarse or change their minds, they have to pay for that. 

We expect their ‘job’ is school and that includes earning scholarships.
For summers, I expect them to find jobs that will help them on the future, or they must do something useful in terms of building skills, like volunteers, or learning.  Paid work is a bonus. 

For costs payments
- we will pay for the books and tuitions
- living costs will be shared, we will do a base so they can live a student life cooking foe themselves on a budget, they can earn money or use their scholarship money or earned money.
- wasted classes or additional credits paid for by them
- we haven decided on an average yet, but my oldest has already indicated she wants to get into med school, so I think an A is all they will accept otherwise, it’s wasted credits.   Both of them have already indicated they will probably go into touch programs, so I won’t put added pressure.

Who else knows what the terms will be, but this post has given me a good start.

[LiveLean]

We live in Florida, where between the terrific Bright Futures scholarship program and the Florida prepaid college program, your kids are highly incentivized to stay in state. It's also why the University of Florida has become one of the toughest schools in the US to get into.

Thus, here are our rules for our guys, ages 16 and 13.

1. Go to a Florida school. Max out Bright Futures scholarship, thus costing your mother and I basically nothing beyond the Florida prepaid plan we've done already.

2. Graduate in four or fewer years.

3. Major in something with value in the marketplace: STEM, computer science, business.

Want to go somewhere out of state? Here's the rule:

1. Your Proposed School (Insert Cost) must beat Florida/Florida State $0.00

For instance, Stanford or Harvard at $75,000 per year does not beat UF/FSU at $0.00

Stanford/Harvard, or similar (and there aren't many schools that are going to fit this equation), written down with scholarships and grants (not loans) to $30,000 or less....we'll talk.

[SavinMaven]

Many excellent schools, public and private, will give full tuition for a 32 ACT.  That high a score would also make a student eligible for consideration for scholarships for full tuition, room and board, and a semester abroad, especially if a student is willing to go away from home since every school wants students from every state.  So time spent prepping can be a good investment.

I got a 32 on the ACT and did not get a full scholarship anywhere. Granted that was years ago, but the point is I don't think there's any one credential that guarantees you anything.

[Bikeguy]

I got a 32 on the ACT and did not get a full scholarship anywhere. Granted that was years ago, but the point is I don't think there's any one credential that guarantees you anything.

With a 31 and 4.0, full ride here.

https://umdearborn.edu/students/financial-aid/types-aid/scholarships/freshman-scholarships/freshman-scholarships-2018-19

Here is another example:

Oakland University Freshman Merit Scholarships - Class of 2019
PLATINUM PRESIDENTIAL SCHOLAR AWARD

    Amount: Full tuition for four years
    Requirements
        High school GPA: 3.90 or higher
        SAT score: 1450 or higher
        ACT composite score: 33 or higher

[Goldielocks]

Many excellent schools, public and private, will give full tuition for a 32 ACT.  That high a score would also make a student eligible for consideration for scholarships for full tuition, room and board, and a semester abroad, especially if a student is willing to go away from home since every school wants students from every state.  So time spent prepping can be a good investment.

I got a 32 on the ACT and did not get a full scholarship anywhere. Granted that was years ago, but the point is I don't think there's any one credential that guarantees you anything.

Same happened to me, it is state specific.   Years ago, only the student (top one for the high school) with the Principal's personal recommendation had a chance at a full ride scholarship... they were quite rare in my region.   I think the school I went to only gave out 16 of them, for high achieving academics, out of a entry class of over 6000 students. They had quite a few 50% scholarships (maybe 50?).  I did get several scholarships independent of the school, however, with my scores plus volunteer work.

[tralfamadorian]

Another piece of anecdata that excellent grades =/ full ride scholarships in all situations. 4.0, 1560, accolade that starts with V and no scholarships at all. I applied to a lot of standalone scholarships but in hindsight my parents, school counselor and I were rather naive in shopping the schools themselves.

[TomTX]

Another piece of anecdata that excellent grades =/ full ride scholarships in all situations. 4.0, 1560, accolade that starts with V and no scholarships at all. I applied to a lot of standalone scholarships but in hindsight my parents, school counselor and I were rather naive in shopping the schools themselves.

I was totally naive shopping schools and scholarships, my parents and counselor gave zero guidance.

Still turned out OK (50% scholarship, good school) - but it could have been a LOT better.

[soccerluvof4]

I read parts of the thread not all of it but since I have 2 in college I thought I would add what we did.

We have a DD in College thats on a 100% out of State Athletic Scholarship BUT she graduated a semester Early from HS so we borrowed her money for that despite have plenty in her 529 and wrote her a contract on the loan. It was about 19k.

We have a DS that just transfered this winter break who over the course of his 4 years will have slightly above a 50% athletic scholarship.

Both schools are around 50k a year DD's a little more. And we did contracts despite as i said having 4 years of State college saved in there 529s because over the years we more than paid for college with all the traveling we did plus we still have 2 more to go.

For us /me it was a combination of both a morals clause and financial. And i found that for the moral part of it , the best thing was to just put it in there once and dont bring the things up and it wont be a big deal.

Were not helicopter parents BUT if I am going to borrow somebody money there has to be conditions and while we want them to experience and enjoy college it to us was just not taking things to far.

So couple example in the moral part was there allowed a tatoo but it must be no bigger than 4x6, they can have 1 and only in places that are covered by clothing. Earings one in each ear for my DS and 2 in each ear for my DD. There going to Drink theres no denying that but they cant fail any substance abuse test or I will call in there loan.

On the loan part I put incentives for my DD whereas if she takes full advantage of her Scholarship and gets her masters she doesnt have to pay back the 19k. I also set it up where over the 4 years with certain GPA's and accomplishments she can graduated as well not owing us a dime and or if she does make payments they count as double under certain circumstances. I did this with her because besides her full ride she gets about 3k a year in a stipend for spending money plus jobs for her at school are easy to get and like I said she pays for NOTHING.

For my son since I borrowed my DD the 19k to be fair I helped him get a car. So his contract is pretty much the same as hers but he will probably graduate between 30-40k in debt. My son got a small piercing in each ear and a small italian written tattoo on his rib cage and my DD has just the earnings. I never bring the contract up other than when there home for break and the day they leave let them know where there doing but in more of a positive way.

So imo its fine to have a moral/Financial clause , my kids appreciate and understand it as well as the opportunity to pay less or have to weight out the what if's and I never have to harp on them. But being in college there are always still the worrys and plenty of other things to harp on! haha. 

[Goldielocks]

soccerlovof4 - A question about the athletic (soccer) scholarship.

My friends with kids with athletic scholarships (other than just a few specific sports*) found that the kids are training all summer and could not reasonably get work to help offset the tuition.  For them, the 50% scholarship essentailly made up the lost working income, plus a bit.

Have your kids been able to work during summer?  I am curious because my sample set of info is very low.

* One person I know on athletic scholarship -- he was offered a football as well as a track scholarship, and took the track one because the core season allowed him to still work co-op terms during the summer, whereas the football would have even struggled to take 5 classes a term and only play sport all summer.   The soccer golf and swimming kids had similar challenges.