Nancy McKenna - Nancy McKenna ––

All posts by Nancy McKenna

Why Are So Many Middle-Class Families Taking Out Student Loans?

Seventy percent of parents in the United States intend to pay their children’s tuition in full, but they are not on track to do it. On average, they can only cover 29 percent of the cost of tuition by the time their kids enter their freshman year of college. How does this happen?

This is a terrible problem for middle-class families. Students from middle-class families typically aren’t eligible for financial aid, so they have to pay out of pocket or take out loans when their parents can’t cover the bill.

While the problem might be serious, it’s fixable. Families can make some changes to boost their college savings and eliminate the need for student loans.

Ask yourself some questions, and then get ready to save for college.

What Are Your Priorities?

If your child isn’t ready for college quite yet, it’s easy to push thoughts of saving money into the background. There are so many things you want, so you decide you’ll start saving next month or next year.

If you’re serious about getting your child through college without debt, you have to make saving a priority starting today. That means you need to skip the yearly vacation and wait to get that new house. There will be plenty of time to spend money on yourself. Right now, you need to focus on saving for college. Your mantra needs to be, “College first. Everything else comes second.”

Cars or College?

A whopping 107 million Americans have car loans right now. To put that in perspective, that’s more than 40 percent of the entire adult population in the country.

These loans aren’t cheap, either. The average cost of a new car loan is $31,099, while people pay an average of $19,589 for used vehicles.

Add in the fact that many middle-income families have multiple auto loans, and it’s easy to see why people have such a hard time saving for college. People are putting hundreds or thousands of dollars into their vehicles every month and then sweating bullets when it comes time for Junior to go to college.

Add in the fact that many middle-income families have two auto loans, and it’s easy to see why people have such a hard time saving for college. People are putting hundreds or thousands of dollars into their vehicles every month and then sweating bullets when it comes time for Junior to go to college.

Fortunately, there is an easy solution. Families should not have more than one auto loan, and if possible, they should own all their vehicles outright. Simply putting off getting a new vehicle can help you send your child to a four-year university without acquiring any debt. That will make things much less stressful for your entire family. Plus, you’ll have a new car to look forward to when your child gets out of college. It’ll be like a graduation present for yourself.

Do You Know How Much You’ll Owe?

Knowing your priorities and limiting your debt will help you prepare for college, but you still have to know how much you’ll owe. Many parents simply do not understand what to expect when their kids go to college, so they are woefully underprepared. They think they have enough money saved, when in reality, they aren’t even close.

A survey conducted by Fidelity Investments found that 45 percent of parents don’t know how much they should put away for college each month. They are confused about the future cost of college, the impact of saving on financial aid, and the basic fundamentals of college savings plans.

If you aren’t 100 percent sure how much you should save for college, you need to enroll in a workshop. Virtual workshops are an easy way to evaluate where you are and where you need to be. Once you know how much money you’ll need, you can develop a blueprint to reach your goals. Then, you will be ready when your child enters the dorm freshman year.

Is Your Child’s College of Choice the Right Choice?

Kids don’t really understand money. Because of that, they are prone to falling in love with schools, regardless of the cost. Unfortunately, many parents allow their kids to attend whatever school they want, even if it doesn’t make financial sense.

While your child should certainly have a say in the matter, don’t let your kid go to a university just because he or she falls in love with it. You need to be practical, so you can avoid falling into debt.

That means you need to consider the school’s location. Your child might want to go out an out-of-state school, but that can cost you thousands of dollars more in tuition each year. That’s an easy way to get into debt.

There are a couple of exceptions to this rule. First, some schools have a neighboring states’ reciprocity agreement. Such an agreement means your child can attend the out-of-state school for in-state costs. These agreements are rare, though, so research them in your area before allowing your child to even tour out-of-state schools. There is no reason for your child to get his or her hopes up if attending that school isn’t going to be possible.

Second, sometimes, going to an out-of-state school located in the South or the Midwest is cheaper than going to an in-state school in your area. For instance, schools on the coasts are extremely expensive, so you might save money by going out of state.

Does the School Match the Degree?

Don’t allow your child to attend a school that doesn’t match the degree. For instance, your child doesn’t need to go to NYU to become a teacher. He or she would assume unnecessary debt for the teaching degree. It would be hard to pay off that debt since teachers don’t make a ton of money.

To put it simply, don’t overpay for a degree. If your child is going to be a social worker or a teacher, a degree from Harvard isn’t necessary. He or she can go to a state school and get the necessary degree.

My Son Joined The Marine Corps Instead of Going to College

My son is a senior in high school, and he has decided to forgo college to enlist in the Marine Corp right after graduation.  He was sworn in to the Delayed Entry program today.  

This isn’t the path I had planned for him.  When Tommy first told me he wanted to join the military I was so proud!  I also started researching  ROTC programs for the various military branches.  

  • This is a child who scored in the 96th percentile on the SAT exam – with NO test prep.
  • This is a child who grew up in a 3,200 square foot home
  • This is a child who has a college fund
  • This is a child who was pre-ordained to go to college

Yet he wants to join the Marine Corp, rather than go off to experience college life.

It's been an interesting experience, reconciling myself to his choice.

Am I A Snob?

This desire of his to enlist seems to be a calling of sorts.  I've decided to support him.   I think the fact that I'm concerned that his future will be less advantaged if he enlists may say more about me than it does about him.

Why do I feel my child need to be the boss (an officer) rather than an enlisted person? 

College life today

Tommy could have chosen an easier path.  A college life with fancy dorms (some colleges now have water parks!  movie theaters!  pet-friendly dorms!) , Spring Break in Cabo, then a move into today’s corporate world where, well if isn’t fun, we’re doing something wrong!  Where companies must keep young workers engaged!    

Well, my son will be spending his time rising at dawn (or earlier) sharing barracks with how many sweaty souls, writhing through the mud, and not knowing where he'll be shipped off to.  He wants this.  He wants to push himself. Most don't.

I drove from my office to the recruiting station one evening last week.  What a contrast!  Our office with the video games, exceptionally lax dress code, lights-out environment to the recruiting office.  The recruiting office was brightly lit, filled with high-energy people with their ramrod straight posture, calling me "ma'am".  The contrast was striking.   I began to think that maybe his decision isn't a bad one.   


I have raised my two kids without a father.  One of my sisters suggested that the fact that Tommy was raised by a single mother may play into this decision.  Perhaps he’s been craving a testosterone-laden environment.  Maybe she's right?

My website

I have been preaching the debt-free degree gospel for some time.  Did I put too much emphasis on this?   I had to ask him if he is enlisting simply to help me avoid cost of college?  I would feel terrible if that were the case.  He assures me that it is not the reason.

Where we live

Seven years ago we moved from the San Francisco Bay Area to Northwest New Jersey.  We live about 45 miles northwest of Manhattan in Sussex County.  Sussex County is a beautiful, "semi-rural" area.  Our house has a well that provides our water, a septic tank and we use propane.   Point is, it was a big departure  from how I grew up, and where we lived previously.  It's more of a small-town American environment.  Some might call it Trump Country.  This has definitely played a role in Tommy's decision to enlist.  A few of his classmates are also enlisting.

Will he still go to college?

In speaking with the recruiter, I feel more more comfortable with this decision to enlist.  The recruiter told me that two of his fellow Marines got aeronautical engineering degrees while enlisted.   You can go to college free while enlisted.  Up to 5 courses per semester.  Every base offers college courses.

Another of the recruiters at the local recruiting station finished her undergraduate degree while stationed in Japan.  She is now working on her Master’s Degree and has zero student debt.

Then there is the GI bill.  There are two:  the Montgomery GI bill that you pay into a little each month, and the 9/11 GI bill which is not only at no cost, but is transferable to a spouse or child.  And there is no time limit to its use.

My son asked if I would give him the college fund for use as a down payment on a house in the future.  I said yes. This was my plan anyway. I swear.  

How can we give him this college money without a big spanking from the IRS?

I can:

  • Shift the funds in his 529 to his sister 
  • Start a new savings fund for him earmarked for his future house, and stop putting funds into his 529 
  • Give him the funds in the 529 plan and take the 10% penalty on the earnings.  This would be loads of fun to calculate, as I’ve contributed since he was a baby. 

I will likely do a combination of the first two things.  Of course, this assumes he does graduate from college. He has promised me that he will.

Examining my feelings

One friend counseled that "it's his path.  Support him".   If I keep telling him to go to college instead of enlisting, what purpose would that serve?  His heart won't be in it, or he'll simply stop talking to me about it and sign up when he turns 18 anyway. 

Plus I think of today's young college grads. Of this generation that grew up never hearing criticism - from a parent, teacher or, now, a boss.  I am not certain this has been a good strategy. And my son wants to volunteer for the ultimate in physical rigor and discipline.   And from the movies I've seen, he'll be hearing plenty of "feedback" from the drill sergeants.

I think this says a lot about his character.  

Marine Corp drill instructor

He has a sense of purpose and drive

I see him maturing faster already.  I think of a quote from Winston Churchill.  The beginning part is a bit dated, forgive Winston, so I'll skip it, but the last part is the part I believe to be true: something to the effect of  “...but a boy is as old as he is treated”.  

Parents today "manage" their children so closely that I feel we retard their growth.  Well not my son.  He will be away at boot camp for 13 weeks with no cell phone.  He can call home twice, I believe.  

Even throughout the recruiting process there have been appointments to keep, proper forms to be completed, tests to endure – 100% of which he did on his own.  Mom didn’t have these in her calendar, nor did I prompt him to complete anything.

I believe his maturity will be light years ahead of his peers who will be in today's universities. 

In closing

I am excited that my son has found his path. I am very proud of Tommy and his very adult choice.  

And I thank him for his (future) service.

How to speak to your child about your college budget

have you had "the talk" with your teen yet? The one about your college budget?

When you were a child, your parents probably didn’t talk to you much about your college budget. That’s likely because college used to cost a whole lot less, and that difference has little to do with inflation.

For instance, take the average amount that public college students paid for the 1987–88 school year. When adjusted for inflation, those students would have paid $3,190 in 2017.

As tuition continues to go up, it’s more important than ever before to talk to your child about his or her college budget. 

You just need to know when to do it and what you should discuss. Get the skinny so you’ll be ready to have the talk with your college-bound child.

How Much Can You Afford?

More than 70 percent of students took out loans of the 2017–18 academic year. Those loans came out to an average of $37,172 per student, and that was just for one year. Imagine that going on for four years.

Don’t let your child fall into the student debt trap. Instead of taking out loans, look at how much you can reasonably afford to pay out of pocket. If you are unsure of how much you can afford, sign up for a virtual workshop to get the tools you need to figure out how much you can spend on college. This will give you the perfect starting point for talking to your child.

When to Have the Talk

Once you know how much you can afford, it will be time to have the talk. Some parents try to put off having the talk as long as possible, but that can lead to a lot of anger and confusion. Kids get their expectations up, and the closer they get to college, the higher those expectations will be if you fail to manage them. That’s why it’s important to talk to your child early.

By the time your child is in middle school, he or she is ready for the talk. Let your child know how much you can reasonably afford for school, so he or she can plan accordingly. For example, if that quaint little private school is out of the question, let your kid know right off the bat. Then, he or she will have a realistic view of what to expect after graduating from high school. Once you are on the same page, it will be so much easier to make the transition from high school to college.

Community College Is a Viable Option

Your child will likely want to go to a four-year university right away. It’s normal to want to start at a university, but community college is often the right decision. That’s especially true if you’re committed to staying out of debt.

Tuition at community colleges is often thousands of dollars less than it is at a four-year university. Your child can also save money on room and board since he or she can live at home while attending community college.

Then, at the end of the two years, your child can transfer to a four-year school. That way, you’ll only have to pay for two expensive years of college.

Let Your Kid Add to the Kitty

When you have the talk with your child, he or she might not be happy with the budget. Your child might have dreams of going to a more expensive college. Remind your child that he or she has some control over the process. Your kid can always add to the college budget by getting a job.

You do need to approach this carefully. A study published in the American Educational Research Journal found a correlation between working long hours and reduced academic performance. Long hours can also lead to negative behaviors and other issues.

Of course, allowing your son or daughter to get a summer job is a lot different than letting him or her work 20 hours a week during the school year. Come up with ground rules before you let your child get a job. Then, monitor his or her performance outside of work to make sure it isn’t interfering with anything.

Jobs aren’t just for high school, either. Your child can continue to work while in college. That will allow you to add to the college budget since you won’t have to pay for his or her living expenses.

Start Prioritizing

You can also change some of your own behaviors to help add to the college budget. For instance, you might want to buy a new car this year, but what if you waited? How much more could you add to the budget?

Write down a list of everything you want and need, and then prioritize it. Hold off on big-ticket items until you get your son or daughter through college. That’ll make your life much easier. Then, when he or she graduates from college, you can make yourself the priority once again.

The Bottom Line – Avoid Debt at All Costs

As a parent, it is your job to get your child through college without accumulating any debt. Students who take on lots of debt are more likely to have financial and relationship issues down the road. In fact, 1 in 8 divorces is a result of student debt. That’s a staggering statistic, and it should tell you everything you need to know about student loans.

You can keep your child out of debt by determining how much money you have to spend and then having the talk. Set expectations early and reinforce them often. Also, explain why student debt is so dangerous.

The more you educate and inform your child, the less likely he or she is to take on crippling debt. Then, you will have the satisfaction of knowing you helped your child make it through college without taking on debt.

If you have to borrow for freshman year…

If you have to borrow for freshman year of college - won't you have to borrow for all four years?

This just isn't a good idea.  There are lower cost alternatives, and freshman year is the best time to try one of these alternatives.

Community College

Of course - community college is the best known solution.   Heck, many kids aren't ready emotionally to go away to college at age 18 anyway.  It sounds exciting - but today's kids are used to living "a certain lifestyle" - and sharing a bedroom is not part of that lifestyle!

And, how many of us know kids who have gone off to college only to come back home for one reason or another.   If they had borrowed money for the semester, it really stinks.

Why not skip the dance, and just have your child stay at home and go to community college freshman year?  

Community colleges are a great way for kids to segue into college.  They can also, perhaps, get their grades up and be better qualified for aid when they go to a 4 year college.  Your child should also be working and saving for the four year school.  (So should you).  

Tuition Rembursement

Did you know that there are many nationally-known companies that have terrific tuition reimbursement programs?  Your child can work at Starbucks, UPS, Fed Ex - and many other companies, and get tuition reimbursement right away.  Check their websites for information.   Your child can live at home and work at one of these well-known companies and begin profiting right away!

Uncle Sam

Does your child have a patriotic bent?  I wouldn't suggest this unless your child wants to go this route, but wow - the tuition benefits are really outstanding.  My son is interested in joining up.  The question is how this will happen.  I want him to go to college, try the ROTC program freshman year to make sure it's for him, then try for a scholarship sophomore year.   He is not as forthcoming as I would like, but I fear he will enlist right out of high school.  

Love Europe?

Did you know that there are hundreds of English-language programs  at universities in Europe that are downright cheap?  Cheaper than many community colleges!  Of course, the student would have to live somewhere, but what a crazy wonderful thing!

Is that new car causing your child to take out student loans?

Are cars your thing?  Why?

  • because you think they're such a great deal?
  • because you like having a nice shiny car that reflects your status? 
  • because interest rates are so low?
  • because you can trade them in every three years for something new?

Or maybe you actually buy cars, but "like to have a new car".

Or maybe you have multiple car loans?  Are you a multiple car household?

Have you stopped to think how this impacts your ability to save for your college?  Car payments take a huge chunk out of the monthly budget.     Multiply that by a few car loans, and ouch.  

Maybe you've been making car payments so long that you accept them as normal.  They aren't.

If you have kids heading to college, you need to make saving for college a priority, so they don't have to borrow.  That may mean you get rid of the new cars.  And the boat.  And the motorcycle.   And the jet ski.  

It seems a bit unfair to have unnecessary costs coming out of the budget each month and then tell your kids that you just couldn't find extra money to save.

I worked with someone who had a stay-at-home wife and a daughter who lived at home and went to a community college.  I asked why the mother and daughter didn't share a car, rather than have two car payments.  He wouldn't dream of asking them to share a car, because one of them would be inconvenienced.  I helpfully explained that this is exactly what families across this great country of ours do every day.  

It is exactly decisions like this that are the reason many families borrow for college.  They spend money on things that aren't a necessity, then don't have money for things that are a necessity.  Then they throw their hands up and say "college has become so expensive!" without examining all of the other choices they make.

Imagine a world where student loans didn't exist.

What would you do if student loans weren't available? Would that have changed your car-buying behavior?   

Please - think of your child - aren't you passing the buck to them?  Literally?    Cool it on the car payments!