Not everyone saves for college. But maybe they should.
It’s spring, that special time of year after April tax deadlines and before June graduation. A season of fresh mown athletic fields, parental pride, and money. High school graduation is the most important graduation there is. So many things have to be in place to move from high school to the next stage of life. Like a college decision. And a way to pay for it.
The admission offers for the high school seniors start early in December, just in time for holiday parties. Last December, I drank moonshine in my friend’s kitchen while we talked about the first batch of acceptances. My husband and I, parenting a gap-year kid, were a year away from our own round of acceptances and disappointments. We felt removed from the angst. In the kitchen, one daughter was reported to have gotten in early action to the University of Alabama. Another mother’s daughter got into Syracuse, early decision. No more waiting! A third mother was disappointed. And bitter. Her daughter—special, beautiful, valued—got into Tulane, without a merit scholarship offer. The mother wanted a free ride for her kid and didn’t get it. That was her college savings plan.
So it turned out there was another reason my husband and I were removed from admissions anxiety: we had set up UTMA (Uniform Transfers to Minors Act) accounts for the kids when they were little, and in most years had made contributions. Actual money. The accounts grew. We could pay for most or all of college. So, at the holiday party in December, I was surprised. It would be great to send a kid to Tulane. And here was a parent, part of a two-income professional couple with one child, angry that Tulane expected her and her husband to pay for the privilege. Doesn’t everybody save for college? No, they don’t.
Maybe I shouldn’t have been surprised. The parents of current high schoolers grew up, went to high school and college, and if they were like roughly half of college graduates, got a diploma and a set of loans to pay. These loans are such a centerpiece of life after graduation, that when I was in school, it seemed that every successful person invited to speak at Wellesley, my college, mentioned the year she graduated and the year she finally paid off her student loans. So it almost seems okay to let our kids borrow to go to school.
But the kids going to college now are not us. And we are not our parents. My parents grew up when it was possible to work on campus, and over the summer, and pay tuition. One of my parents’ friends drove a milk truck in the summers between years at Harvard. My dad drove a cab and went to Case. My mother drove the local school bus while taking classes towards her doctorate at Boston University. (There is a sub-theme here: let your kid get a license.) Today, a student, even with grants and a work-study job, paying her own way, could graduate with tens of thousands in loans, if not more, before she even gets a job or an apartment.
College costs more now. We all know it. Every year, colleges post their tuition, room, board and fees in their brochures and on their websites. It’s not a secret. Thanks to U.S.News and World Report’s need for people to pay attention to them, the magazine continues to collect data and publish lists of colleges ranked by every metric possible, even some almost-imaginary ones. You can pick the right college for the right price. But there are two caveats: you have to get in, even to the ones that cost the least, and if you don’t get a free ride, you and your child will have to pay.
And you will probably need to pay out of savings and income. We are not in the 80s, with rapidly inflating housing prices and magically-growing equity. My house is worth less now than what we’ve paid into it since 1997. There is no home-equity piggy bank ready for the taking, to be paid off when parents sell the house and downsize to a bungalow in Florida. We live in a time when housing prices are essentially stagnant. There is no pot of tuition gold in those mortgage payments.
So it’s time to use the other way to pay for college: save. Save it for your kid, not you. Open an UTMA account, and contribute as much as possible in the form of non-taxed gifts to a minor. Contribute. These accounts are easy: pick a low-risk fund, receive quarterly statements about how much is in the account, and contribute at any time. There are two catches, both in your favor: 1. The money is a true transfer to your child. You cannot borrow from the fund to pay for your own life events. 2. When your child turns 18, he or she has a significant degree of control over the account: in other words, can spend the money. You have 18 years to teach your kid to use it responsibly to pay for college. Or, you can hide the statements and the checkbook. Both methods work.
It is late spring, and college acceptances continue to come in for our small high school of less than 200 seniors. At a lacrosse game last week, another parent and I were on the sidelines, talking about the benefits of small versus large high schools. Our lacrosse players were not having a winning season, which we felt free to attribute to the small size of the school and not to any lack of ability on the part of our players. We noted another downside to a small school: there weren’t enough AP classes. Sometimes it seems like the purpose of high school is to collect AP classes.
Another mother piped up that at least students don’t have to take the AP exam after an AP class if they get into a school that doesn’t take AP credits. Apparently Princeton is one of these schools. And apparently her daughter had just got in.
The mother went on to say her daughter “might” go to Princeton. My ears perked up. Why might you go to Princeton? Gigglingly happy that her daughter was accepted, this mother wasn’t sure about the actually going part. She was proud her daughter got in. But they had applied to a school that they couldn’t pay for. She wasn’t even embarrassed.
So this is what I am writing about: be embarrassed. Save money for your kid to go to college. Don’t worry about whether it’s enough. Don’t say, because you couldn’t possibly save $200,000 to go to an expensive private college right now, that you won’t save anything towards what it may cost in the future. Open an UTMA account while your child is still a baby. Make those one-way payments to it, and contribute to your self-respect.
At graduation in June, I will be looking at parents who didn’t. Who threw big bat mitzvahs, who took family trips to the Caribbean. Who decided to chaperone Spring Break and take themselves to Cancun with their graduating seniors for one last high school fling. All this before they and their kids take on debt to pay for the next four years, at a school that wasn’t their best or first choice.
This sounds harsh. But you are not your parents. Your kid is not you. If you graduated from college, you have already benefitted from it. The goal of that college in taking you on, and using its endowment to educate you, was to make something better. That same college—your alma mater—still has an endowment and financial aid to offer: but these are no longer for you. You are already in a better world. The financial aid now is for someone else’s kid, working long hours at an after-school job; for the parents who don’t have white collar jobs, and who aren’t favored alumni. The financial aid is not for you to go to Cancun on your child’s spring break.
So be embarrassed. Consider it your obligation to set up an account in your child’s name for college and contribute to it. Because it is. If you have a child, paying for college is something you do every year, not just in those four years from ages 18 to 22. Because who do you want to be, on the lacrosse field, in the spring of senior year? Do you want to be the parent bragging about your talented student going to a great school? Or the parent bragging about her getting into a school she would have gone to, if you had done things differently? Yeah, me, too.