This week is a unique week! My friend, Ellie Kay–a mother of seven–wrote a great article on how to afford college for your kids without relying primarily on school loans.  Her article is lengthy so I’ve split it into five guest posts that I’m going to run Monday through Friday of this week.

If your kids are young, believe it or not, it’s time for you to start thinking about college strategies!  At the very least you and your husband should agree on what your financial strategies for your kid’s college education will be.  If your kids are older, it’s really time to educate yourself.

Hopefully Ellie’s guest posts will be helpful for you to understand the options out there! Mark and I share openly in our Living With Less book that we have regrets about how we led our older kids through the college process.  We’re leading our younger kids very differently than our older ones.  We’re focusing on two primary options: either secure a full-ride academic scholarship or do your first two years of college at a community college then finishing your degree at a traditional university.

In addition to the guest posts this week, Ellie Kay is also giving away 2 copies of her Living Rich for Less book and 2 copies of her Little Book of Big Savings book!  But that’s not all! Since we’re talking about a “living with less” mindset for affording college, I’m going to be giving away 2 copies of our Living With Less So Your Family Has More book this week! To enter just comment on one or more posts this week. Each comment will give you an additional entry into the book drawings!

College Crunches  © 2011 Ellie Kay

     One of the biggest reactions I get from people is when I tell them I’m a mother of seven. They usually ask, “What? You have SEVEN children?” To which I reply, “yes, five by birth, two by marriage and all by love.” Being financially responsible for all those kids has been a challenge, especially when it comes to college.

    When people ask me how we are putting our kids through college debt free, the answer is multifold. First, we train our children from a young age that going to school, doing your homework and getting good grades is their primary “job.” By teaching them a good work ethic, we are laying the groundwork for scholarships and more. Secondly, we send them to schools that we can afford or where they get the best scholarship offers to cover the most expenses. Thirdly, we have saved a modest amount of college money to help them pay their room and board and partial tuition in some cases. Lastly, but certainly not leastly J, we require that they work part time in the summers or during the school year (through a work/study program or a regular job) in order to do their part in paying for college.

By implementing these four disciplines, the Kays kids are set to graduate debt free. Of the two that are going to college now, we have over one million in scholarships and if the last one stays true to his goals, then he won’t have any student loan debt either.

 First Things First

    In any discussion of college costs, it’s important to keep priorities straight:

     You’ve got to leave yourself some fun money for retirement. How else can you afford that mechanical bull riding lesson and those parasailing flights (been there, done that, LOVE it)?

     I really believe that you, as a parent, should try to avoid borrowing on your future in order to pay for your child’s future. After all that information we had earlier in this chapter about investments for retirement, why would you want to take one of your greatest investments and leverage it for college expenses? Yet millions of parents make that devastating financial choice every year. I’m talking about avoiding any college funding plan that includes a home equity loan, a HELOC (home equity line of credit) or refinancing of an existing home mortgage. These options reduce the amount of equity in your home, increasing the risk of possible foreclosure and you incur costs in interest charges that may cost you more if the term on the new mortgage is greater than the remaining term on the existing mortgage. For example, if there is ten years left on the mortgage and parents get a new 30 year loan. Furthermore, if parents choose to pull out enough money in equity for the first year of for four years of college all at once, then parents paying interest on money that won’t be needed until the upcoming sophomore, junior and senior years. Instead, look at the following options to pay for college.

 The College Mantra

     When I was a young adult, got married and began having kids (in that order) I was first exposed to the whole idea of “the college my child gets accepted to.” As a mom of many who has already launched a few college bound kiddos, I’m still hearing, “What college did they get accepted into?” The part of that question that amazes me is that the answer that is most impressive are also the most expensive (Columbia, Harvard, Stanford, Yale, etc). These schools have averages four year costs of $188,000 (Columbia); $240,000 (Harvard); $186,000 (Stanford) $193,000 (Yale). While an average of 40% of the students who attend either get financial aid, grants or scholarships, they only average out to assistance of $9600 per year. This leaves a boatload that the student and mom/dad owe for college. Most of this is usually in loans of some kind.  So then the average student graduating from some of the most prestigious colleges have student loans upwards to $100,000.

    So why is the question: What college did they get accepted into?

    The question should be: What college did they get accepted into that they can afford?

   Why do you want to leverage your future (through HELOCS or loans) or leverage their future (through massive consumer debt) when it will take many years of earning power, for them to pay back those loans? One of the most common problems I hear of have to do with the burden of dual student loans in a marriage. Sometimes, parents have to play hard ball and refuse to sign a student loan for a college that their kids cannot afford. We’ve had to do this in the past as well and it’s not easy, but it’s the right thing to do for everyone involved. You can’t control what your child will do if you say “no” but you can control the financial decisions that you think are best for your family. Remember my mantra – “Our love for you is unconditional, but our money is conditional.”

   The new mantra should be: I will go to the school where I can get the best education possible for the least amount of student loan debt.

    One of the best things you can do for your college fund is to teach your kids a good work ethic at home and school. Ride the homework train on them in the afternoons. Teach them that getting good grades, pursuing passions in sports, academics and the arts and working hard are their main “jobs” in high school.  Plus, be sure to let them know you expect the to not only get scholarships, but to participate in work study programs, have jobs in the summer between college semesters, and actually earn part of their way through school! 

It’s OK if your child has to take a year off between their sophomore and junior years to work (one of ours did that and finished well at Columbia) or if they have to sell their car to pay for school (who can afford to keep a car in NYC anyway?). Sometimes decisions that keep mom and dad debt-free are difficult, but they are well worth it in the long run.

Want to win one of the six books we’ll be giving away on Monday, July 30? Leave a comment below sharing about your experience with college debt! (If you receive my posts by email, click here to leave a comment and enter the giveaway!)

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