No. of Recommendations: 5
Personally, I wouldn't go overboard paying for the kids' education. Help out if you want, take care of tuition, but running yourself ragged to pay for their room and board is not something I'd recommend. First off, you have bills to pay, and quite possibly a retirement to fund. As Dayana Yochim noted in her prize-that-I-just-made-up-winning article "College vs. Retirement? Retirement Wins":

There are lots of ways to pay for school -- loans, financial aid, the Coverdell ESA, 529 plans and prepaid tuition are a parent's retirement plan saviors. And there are other choices for cash-strapped students pursuing an education (put it off, attend a cheaper junior college for a few years, apply for a work-study program).

On the other hand, there's no retirement scholarship -- no PELL grant for senior citizens or scholarships to gain entry into Sunset Years Retirement Village. If you don't have money for retirement, guess what? You can't retire.

Before you set up your child's golden future, pay off high-interest debt, establish an emergency fund, get adequate insurance, and beef up your retirement savings. After those items are crossed off your list, you can start spoiling the youngsters.

Also, I think letting Junior fed for him/herself is an important step toward the adult world. I worked part-time for living expenses, and took out a mess of student loans to pay tuition and cover for lost wages, and I think that it made me try harder. If I failed a class, I'd have to pay for it again. If I slacked off and couldn't get the job I wanted when I graduated, I'd have a much harder time making ends meet. Of course, fifty people at one school aren't exactly a scientific sample, but the people in my program who worked and paid their own way generally got much better grades than those whose parents paid for everything.

Finally, as for the HELOC, you might want to look at the rates on Stafford loans right now. Last I checked, Stafford rates were lower than for HELOC's, and you don't have to stake your home on it. If your income levels allow, Junior might get a subsidized loan, so that s/he isn't accruing interest while in school. The kid will be responsible for paying after graduation, not you, and if that's too much of a pinch, there are plenty of consolidators who will be willing to lock in the interest rate and stretch the payments out for 20-30 years. I borrowed about $50,000, and I only pay $254 a month. Bear in mind also that your more expensive "name-brand" schools have strong alumni foundations that provide copious scholarships. (I'm told that Harvard students are approached on graduation morning by their classmates, and asked to tithe a portion of their future earnings to their school. What does this add up to? An $80 MILLION scholarship fund in 2004.)

Don't bother me, I'm Ferberizing.
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