Financing of Higher Education – How Are People Doing It?

This September, our eldest child will be heading off to University. It is an exciting time and also a very expensive one.

Over the course of this past year, we have been asking our friends and acquaintances about the financing of a higher education. Specifically, who is paying the bill? The parents or the child? Yes, there are students loans and scholarships, but who will be paying the debt of the loan? And for most students, scholarships are not attainable or do not cover the complete cost of 4 years of tuition, food and accommodation.

I thought I would share a number of the situations that were told to us and perhaps one of them will fit well with your family.

Just on our street alone, there are a number of different views with regards to paying for a child’s higher education:

* The parents are paying for everything. The child does not have to contribute toward the tuition, room and board, or social expenses. There are also no requirements set for graduation or grade point averages. A free ticket.

* The child pays for the tuition and the parents pay for everything else. Parents pay for room and board, meal plan, $200 a month spending money.

* A sliding scale. The parents pay 80% of all costs the first year, then 60% for the second year, then 40% for the third year and 20% for the fourth year. The philosophy behind this is that during the summer months the university student will be getting better paying jobs and can afford to pay more for their education.

* Child pays and parents reimburse for success. This is a pay-for-performance method. Their son must pay all expenses and at the end of the first term, he must show his passing grades to his parents. Once he has proven that he has passed all of his classes, then the parents will give pay him for his first term expenses (spending money excluded). Should he fail or drop a class, his parents will not pay for that class.

* The child/student pays for everything. This would require for the child to take out a student loan and to pay the complete debt themselves once they have graduated and are working.

Ideally, we would like our children to finish school without debt. As parents we have been saving to a “university account” since the children were small, but we won’t be paying for everything. So our kids must work to save money for university.

I hope this gives you some ideas to work with regarding your situation. Each family must try to figure out what is reasonable and affordable for those involved.


Can A Debt Consolidation Loan Restore Order To Your Personal Finances?

A debt consolidation loan is one that takes your existing credit balances and rolls them into a new loan. Usually, the payment on the debt consolidation loan is considerably less than the total of all the individual payments you have been making. These can sometimes be a good way to regain control of your personal finances, but there are some points you should consider first.

Before you take out a debt consolidation loan, see if there is another way to handle your personal finances. Can you reduce expenses and make larger payments on existing debt? Could you and/or your spouse take a second job for the express purpose of paying down debt and restoring order to your personal finances? Are there other ways to raise cash, such as the sale of a boat that hasn’t been in the water for years or a vacation cabin you never use?

You also need to know how much the monthly payment on your debt consolidation loan will be. While it is normally less than your total payments, if it is still out of reach of your personal finance picture, you are not doing yourself any favors by taking one.

If your personal finances can be restored, and debt eliminated, in a relatively short period, you might want to stay with the debts you have. For example, if your financial problems are due to paying for a child’s last year of college, you can probably survive without incurring a debt that may have a longer repayment term than you currently have.

You will also have to exercise control over your personal finances if you take a debt consolidation loan. Old habits will have to be changed, or you can quickly wind up in even worse circumstances than you started with. One example is when people take out a debt consolidation loan, pay off their credit cards, and then run their balances up again. Now they not only have the same payments they couldn’t afford in the first place, they also have a payment on the debt consolidation loan to deal with. If a problem with your personal finances has been chronic, no matter what you did, you need to be sure that you are willing and able to change your spending habits before you take out a debt consolidation loan. Otherwise, your personal finances will continue to be a shambles and your debt load will keep increasing until there are no options left except bankruptcy.

If you take out a debt consolidation loan, it is a good idea to close as many accounts as you can. Keep one bank card for emergency use only, and close the others. Expect to be deluged by enticing offers from the department stores, who want you to reverse your decision and keep the account open. They may offer you huge discounts on your next purchase if made with their card or several months of no payments and no interest. Stay strong, and follow through on your commitment to regain control of your personal finances.

A debt consolidation loan is not for everyone, or a solution for every situation. But for many people, it is the best way to restore some sense of order to their personal finances. It can also bring peace of mind to others, and that is something that cannot be bought.