Financial Samurai

Personally I think parents should give their kids the money they saved for an education and if the kids get scholarships they get to keep the money. How else do they have incentive to choose the cheapest yet best school and get those scholarships? If they want to use the money to start a business rather than go to school, maybe that would be a better option. If you are worried about your kids blowing the money you have bigger problems than paying for school.

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investlike1percent Reply:
June 6th, 2012 at 11:41 pm

my entire college cost ~10k. this was 1996. I did bust my buttand finish in 2 years total

i did not live on campus and did missed so much of thecollege experience. i did not miss the college debt experience though.

there are ways to cut the college costs.

i think the costs are way out of line now a days. there hasto be a better way. cant believe the internet isnt addressing a more costeffective way to teach.

1%

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I too am lucky. I went to school in Florida and qualified for 75% state scholarship based on grades/SAT scores (e.g. did your parents pay for an SAT prep class?). I graduated in 2009 and it took my 5 years to do so (mechanical engineering). I’v since learned that this doesn’t really cover much of the cost per credit anymore due to “tuition differential fees” that started the year after I left.

I had zero luck with other scholarships – a no hitter, the bad kind. I applied to as many as possible, had a terrible return on time investment.

My parents also did “Florida pre-paid” – basically, pay now and lock in a tuition rate. At least, that’s how it worked when they started. Between pre-paid and 75% scholarship, I usually got a check back from the school which I used for living expenses. My very last semester, I owed some $ because the engineering program is more than 120 credit hours and I took a couple extra courses that have been extremely high value to me now that I’m working.

I moved to San Francisco shortly after graduation to found a company with some friends I met while interning. We’ve been going for a few years now. Not for an instant do I doubt how lucky I was during my collegiate experience.

——-
Cost versus benefit is eventually going to reach a tipping point (if it hasn’t already). It’s awesome for the lenders that they have minimal exposure to that risk considering loans can not be discharged…

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Financial Samurai Reply:
June 6th, 2012 at 8:25 am

I like this “Floriday pre-paid” idea! I hope more states have this program as it seems inevitable that tuition prices are going to continue to skyrocket!

In fact, I might even be willing to pre pay now, without kids…..

How’s the start-up thing going? How is it funded, if at all, and how do you guys eat? Love start up stories!

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James Reply:
June 6th, 2012 at 3:34 pm

As tuition skyrockets, a pre-paid program might not be sustainable. At least until some sort of balance is found.

Start up, it’s been going for about 3 years now. Product has launched in a few countries (mostly in Africa, soon N. America). We were initially boot strapping ourselves, some of my coworkers were on unemployment at the time (having been laid of due to 2008). After 6 months or so, we secured our initial round of funding from a super angel. Now that we have product, we’ve got a couple more investors behind us and some convertible debt. Depending on sales, we could be financially sustainable within the next year – we could also be out of business (always an possibility with startups). Exciting!

We eat by running the company lean. By lean, I mean a few very dedicated people that are paid fairly well. For a long time, we had a tiny office with cheap rent. “Ultimate salad club” a few times a week too. One person makes lunch for everyone on a rotating schedule. Food is cheaper in bulk.

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I have nothing worthwhile to add to the discussion, but I just wanted to stop in and say thank you for using a photo of the Wren Building. Go Tribe!

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Financial Samurai Reply:
June 6th, 2012 at 8:25 am

No prob Katie. How did you find this post? Are you a regular subscriber?

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That’s William and Mary! Did you google “great AND greatest AND colleges” or just “2012 Best Value Colleges Top 10 Public Schools”* to land on us?

For what it’s worth: My family didn’t contribute a cent to my college education, and while I made a few stumbles (I graduated W&M undergrad with no debt but a few ten thousand in debt from graduate school) I deeply appreciate that they didn’t. I agree wholeheartedly that the cost of higher ed is outrageous and blown out of proportion, but wouldn’t go back and change how I paid for school. I would have gone back and paid more attention to tuition costs while applying, but still would have chosen my alma mater.

* 2012 Princeton Review List: http://www.usatoday.com/news/education/best-value-colleges

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Financial Samurai Reply:
June 6th, 2012 at 9:22 am

Thanks for your enthusiasm. Are you asking me whether I Googled my own post to get to my post? :) Sounds like you went to W&M!

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I literally laughed out loud (which I don’t often do when reading) when I read this sentence: “I’ll just count on them to be dumbasses then.” College is definitely highly debated for good reason. It has the ability to drain our wallets like no other! I don’t quite know where I land yet, but I do think that some form of education is valuable. Heck, I got a crap degree in Audio from an Art School, but am now a tax professional and A/V engineer. The engineer part came from experience and promotions, but the tax part came from studying my butt off (online) and passing the IRS exams to become an Enrolled Agent. Took me a year! With the largest database of knowledge known to man at our fingertips, 24/7, there’s no excuse for not educating yourself. And most of us can do it for free. It does become a problem when looking for a job, though, as most employers won’t hire the “self-learned” guy over the “I have more degrees than fahrenheit” guy.

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Financial Samurai Reply:
June 6th, 2012 at 8:26 am

That’s right Jacob! Dumbass kids for sure! Only upside if they are not!

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Ugh…I can’t stand student loans but they are useful for some things. I think the government subsidiary on the student loan market makes things worse by covering up the true costs of lending in this market. I also think that students should be required to sign a Truth in Lending document that discloses the costs, as well as making it clear that this is a loan against future earnings.

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My parents paid half for mine and my scholarships and summer work money covered the other half. I was 3rd in my high school class and ended up being Valedictorian of the College of Business at my school and I still didn’t have a full ride scholarship. It was a public school though so it was much more affordable.

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The price of an education is quite ridiculous.I’m not sure if States such as Ga still grant free education to those attending UGa but that would be a huge reason to move there. I’m also not sure why the cost of education paces at double inflation. All I do know is that I would have tried harder had I funded my own college. Technically I did through small loans and big scholarships but loans don’t feel real until you repay them. I think less and less people will pay for their kids college.

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funancials Reply:
June 5th, 2012 at 7:43 pm

Sidenote: when did you visit William and Mary? Great campus-

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Financial Samurai Reply:
June 6th, 2012 at 8:27 am

I agree. I’d move to Savannah or Atlanta if I could send my kids there for free and only required a 3.0! That’s a NO BRAINER imo.

Visited W&M in 2010. Campus is beautiful!

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I’m not sure I would pay for 100% of my kids tuition if that time comes. I’d want them to take some responsibility and ownership in their education. I think having their skin in the game in that way will make them less likely to slack off or try to stay in school and be a 7 year senior or something like that.

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Financial Samurai Reply:
June 6th, 2012 at 8:27 am

Skin in the game seems to be a common theme… so I wonder, why don’t people all agree everybody should pay some Federal Taxes??

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My grandparents put away some money for me in a college fund, but I didn’t end up using all of it, luckily!

It is true that in Georgia, if you had a 3.0 GPA in high school you could get the HOPE scholarship which would pay for all four years of tuition at a public university like GA Tech or UGA. They’re making it MUCH more difficult to get nowadays with the state budget cuts, etc. but it’s still a well-funded program.

With the help of a part-time job and the college fund to cover books and living expenses (yay for $300 rent and an appetite for Ramen!), I graduated debt free!

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Leah Reply:
June 6th, 2012 at 4:27 am

@Leah

P.S. to keep HOPE you had to maintain a 3.0 GPA in college, so there were *some* extra stipulations to an otherwise cakewalk scholarship.

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Financial Samurai Reply:
June 6th, 2012 at 7:12 am

I heard about Georgia’s program! That’s great if the HOPE scholarship is true! I’d consider moving there right away if I had a couple college bound kids b/c UG and GT are great schools.

Is the hurdle really just 3.0 in HS and maintenance in college and not a 3.5? 3.0 seems pretty easy no?

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I’ll be following my parents lead…

They covered room and board, I had to pay for the actual school fees and books.

That way if I screwed around in college, it was my money being wasted.

I think there needs to be a shared responsibility, otherwise it creates the “handout” mindset IMHO.

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These questions are exactly why there really needs to be a financial planning/career goal-oriented class in high school. I think more students would make logical decisions and plans; choose the less expensive school, get serious about selecting a major, and limit the student loan pain. Even if parents are footing the bill, maybe a class like this would help alleviate some of the burden on the parents.

I was lucky. I went to a state school and my parents paid the tuition. However, when I went back for my credential, I paid for it myself through student loans. I didn’t want to burden my aging parents and I’m an adult. Had I been counseled early on with career planning, I think I would have just gotten my credential to begin with. Nothing like waiting 15 years later. ;)

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My parents paid for most of my college and I’m really thankful. I have been sending them money every year since I graduated. I would love to pay 100% for my kid’s education, but we’ll see how it goes. If it will cost $100,000/year, then he’ll have to get some kind of loan…
It’s too bad college cost so much these days and still going up. It depends on what he wants to study. Maybe he can go to college in other countries depending on the subject.

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My parents paid for my entire education through college. My children had the same benefit of private school and college. My son paid for law school. Education was important to me and I wanted to give my kids the best education possible. I think this is more important than some inheritance.

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I am with you, Sam. I would want my son to be an entrepreneur not a wage slave. Is college education necessary? Absolutely YES! Is an expensive college education necessary? Absolutely NO! I believe that your college diploma takes you to the door, what you do afterward is up to your talent, not to your diploma. (By the way, I have a BS & MS degrees, so does my wife.)

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Our daughter just graduated from college. She got a large academic scholarship, took out a small loan, and the rest was paid for. Since we only have one child, and she’s a great young adult, we are pleased to help her out. We planned early and set up a 529 when she was a baby.

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I was fortunate enough that my parents could pay for my very pricey prestigious college, but I didn’t realize how fortunate I was when I was in college. It’s only now that am in the real world, working myself that I can fully wrap my brain around just how much it cost for them to send four children to prestigious universities. I don’t plan on having four children, just one or two, but I do very much hope I will be able to pay for their educations. If I can’t, I will strongly encourage them to choose a college where my savings will cover tuition or they can get a scholarship. I don’t want my children to start their adult lives in mountains of debt. When I was in high school I thought going to a prestigious university was of the utmost importance, but I realize now I could have gotten the same education at a less expensive college.

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Financial Samurai Reply:
June 6th, 2012 at 9:19 am

Wow… four children to private uni…. is it safe to say your parents are rich if they paid for all four?

I have a feeling that well-heeled parents don’t care much about the money so long as their kids are doing well and are happy. What is it you are doing with your “price prestigious college” diploma now?

Thx!

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My mom always told us, “one college degree and one wedding,” and we still had to take out the minimums (ending up with $15K of federal student loans after we graduated). Parents paid the difference, but I think having us take out these minimums, my mom got our skin in the game. I have no idea how I’ll do it.

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Berkeley ! I love Berkeley University. Nice article. I am currently covering my university expenses by blogging and programming :)

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Banking on a scholarship, even after you have it, isn’t always a great idea. I’m living proof that you can be awarded tens of thousands in scholarships only to receive roughly 30% of what you expected to receive through no fault of your own.

Shit happens. Plan accordingly.

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Financial Samurai Reply:
June 6th, 2012 at 12:11 pm

JT, I’m not following you. Did the scholarships just get yanked away because?

Like your thoughts on today’s Yakezie.com post btw. Thx

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JT Reply:
June 7th, 2012 at 10:57 am

Financial crises can kill funding. It was a private scholarship (third-party, I guess you could call it) and a series of liquidity problems, etc. can put a damper on things.

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Financial Samurai Reply:
June 7th, 2012 at 11:03 am

Got it. Bummer. At least it wasn’t something you did, and out of your control.

Must also feel good knowing that you got a scholarship too! More than many can say.

JT Reply:
June 7th, 2012 at 6:48 pm

I will say that I like how it looks on a resume. Some forward value in that, no doubt.

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I’ve heard of UoP. We competed against them in Forensics. Sadly, I remember the students as being jerks.
C and I are currently contemplating a 529/ the WA GET plan for our child now. I need to find out if we can start one before we actually have a child.
Personally, I think it’s ridiculous that we expect 18 year olds to be able to make decisions about what they are going to do for the rest of their lives. We all appear to want them to get into a good school, get into a BS program, and graduate in 4 years while working at least part time, and preferably, there will be a cum laude after their name.
I honestly believe it is an unrealistic education, and would be perfectly happy if my kid wanted to take a year or two off from school, or only go part time at the beginning and work some, to figure out what they want to do.
I graduated high school with a 3.97GPA (25th in my class). I had a full ride academic scholarship to our state school. (At the time this was $10,000 total for 4 years. By the time i graduated, that wasn’t full ride anymore.) I was an honors student who had 12 credits from AP tests before I even started school. And I knew exactly what I wanted to do.
And you know what- I lost my scholarship after 2 years, because college was too much fun. I then had to pay for myself. It had never been the paln for my parents to pay for college. It took me six years to graduate because I realized that I was wrong about what I wanted to do. My last semester, I actually had a teacher write on a review that he wished he would have offered that class before my last semester, when D really was for “diploma”. I graduated undergrad with a 2.83.
6 years later, I was back in school for my MBA. I went to school full time and worked full time and graduated with a 3.79 because I finally knew what I wanted to do and why I wanted to do it.

Having skin in the game didn’t make me a better student. It didn’t make me more inclined to get a “useful” degree (my BA is in history with a minor in writing from a school known for it’s mining/engineering degrees). Because I was a kid. At 24, when I graduated, I still didn’t know what I wanted to do, I just knew I was ready to be done.

We’ve sold our society on the idea that going to college is what you do after high school. I believe strongly in getting a college education, but it is one of those things I really think might be wasted on the young. Seeing C and his classmates (he’s on a campus that is probably 90% non-traditional students) go through school, it’s a very different experience from what I had. They are all learning and are excited and passionate about what they are doing, because they all know not just what they want to do, but why, and why it matters.
And that makes so much more difference than money, even your own.

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Financial Samurai Reply:
June 6th, 2012 at 12:46 pm

Thanks for your perspective.

May I ask why you decided to go from a 3.9 GPA all the way down to a 2.8 and lose the 4-year scholarship?

You write that college was “too fun”. Is there more to that?

What if your parents forced you to make the $10,000 before college, would you have not let the GPA drop so much?

My parents basically told me if I don’t do well in college, I’ll be fucked.

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shanendoah Reply:
June 7th, 2012 at 12:32 pm

It wasn’t so much a decision as a growing pain- an expensive one at that. Forget what they say about highschool- my first couple of years in college were the most freedom least responsibility point in my life. Teachers didn’t take attendance, I didn’t have to catch a ride into school with my parents. Sometimes I went to class, sometimes not. School had been easy in high school and I assumed it would be in college. I didn’t do the required reading or study for tests (I’d never had to before).
Instead of going to class, I played cribbage, hearts, spite & malice, magic and other card games with friends. We hung out in the student union and talked. I had an absolutely great time doing everything but my classwork.
I was a kid. I’d never learned study skills because I’d have had to before. (And if I’d gone to class every day, I probably would have been fine in college, too.) It culture shock in many ways. In others, it was my rebellion.

My parents were never going to pay for college. Not for my brother, not for me. So I always knew it was up to me to figure out how to pay for it. As long as I maintained honors student status and didn’t want to drive, my mom figured school was my job. I realize I didn’t receive paychecks, but I did, in fact, work for that scholarship.
I had a job (on campus), lived in an apartment across the street from campus, and paid all of my own bills except my groceries- my mom still covered that. (This was quite a bit less expensive than living in the dorms because of the forced meal plans.)

My parents raised my brother and I expecting us to go to college. My brother left school one class short of his degree to join the military. I took 6 years (two of those only going to school part time while I worked full time) to get my BA.
But my father had no degree and did quite well in government service based on his military degree. My mother had an AA (in library science, I think) and but worked in jobs that didn’t require one.
They both made a decent living. So there was an assumption that my brother and I would go to college, but we also both believed we could do will without our degrees. (And my brother did do quite well, based on his military training, before he became an entrepeneur and is still doing nicely.)

I was in college because that is what was expected of me, because it didn’t occur to me there were other options. I didn’t really know what I wanted to do, I only thought I did. I do not regret any part of my college experience, not even my student loans (which I am still paying on). But I do honestly believe that we should not expect our high school seniors to go right into college. For some, that’s the right choice. For others it’s not, even if college will eventually be the right path.
Sometimes, we need to grow up before we can appreciate an education and the benefits that will bring us.

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Financial Samurai Reply:
June 7th, 2012 at 5:08 pm

Sounds like a good case for the Gap Yea / Walk About our Aussie friends do after high school. A chance to mature and find onself.

I had no idea there were other choices beyond college either. I’m glad I didn’t because the temptation might have been too great.

Fortunately, my parents paid for almost half of my college tuition (’94-’98). The other half came from a 50% scholarship, $9,000 per year, and I added another $2,000 a year from savings. I also worked during the summer so that I would have some spending money throughout the year.

Looking back, the $40,000 my parents contributed to my college education was big chunk of change. Clearly they wanted me and my siblings to get a good education. Now that I am older, I understand the value of a college education, but that value is not infinite.

IMO, a $200,000 investment towards college education seems excessive, even for upper middle class family, and especially if the child has no skin in the game, though I’m not necessarily comfortable with them taking a loan at such a young age either. Certainly, this should be a family decision – one that should be given a large amount of thought – for all involved (not just the parents).

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You make a couple of good points. Being the child of two parents who fully pay for my tuition, I will say the following things.

I’m attending an Ivy league school. Tuition/room and board is roughly 59K this year. I’m lucky that my parents were willing to pay all of it, but they had some conditions.

I wanted to study economics and finance in hopes of getting a high finance job on the street. My parents are highly risk averse people, and this wasn’t nearly enough. In their view, the only degree that guarantees a job right of college was engineering. So they required me to apply to a program where you graduate with both an engineering and an economics degree in four years. The program is notorious for being an insane amount of work, and I can firmly say I barely partied at all my first year of college. The librarians even learned my name. That was the price I had to pay though if I wanted my parents to pay for it – they said I could study whatever I wanted so long as I financed my own degree. But I wanted to be debt free (legally, not from my parents) when I graduated.

I’ll also say this. Both my parents high incomes (engineers the both of them) more or less disqualified me from obtaining any sort of scholarship. This is because even merit scholarships take into account some financial factors. The only scholarship I qualified was a measly $2500 from the National Merit Scholarship Corporation, since I was a National Merit Finalist and this a PURELY merit based award. So in that sense, I couldn’t really finance my own education through scholarships. Going to a state school wasn’t an option either for me, because as you are well aware, high finance companies only recruit from high caliber institutions – nearly all of which are private schools.

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Financial Samurai Reply:
July 3rd, 2012 at 12:41 pm

Thanks for sharing your story. Are you in finance now?

I think you will really enjoy my book coming out in July because of your last point in your sentence!

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