Question: What do you suggest is the best way for middle-income baby boomers to support their children’s post-bachelor’s degree educations? Anne, Burlington, VT
Answer: For most parents, my answer is not to support the cost of a graduate school education. Undergraduate, yes. Graduate school, no.
The best support you can give is to use your experience and insight to help your student come up with a realistic plan for achieving their graduate degree. I think the talks my older son and I had about the risks and rewards of his graduate education and the financing of it was still the most valuable contribution I could make. Since most graduate students don’t have much money, you can always help out with some expenses such as a work suit, travel money and some fun money — things that are a huge financial help but really don’t cost all that much. Most importantly, you’re their financial and emotional safety net.
However, I would not be on the hook for any graduate school loans. You need to focus on financing your retirement.
By the way, this approach is a perspective. You may look at it and say it doesn’t work for you. That’s more than fine.
My perspective is shaped by what I see as an important gulf between undergraduate and graduate education. On the undergraduate level, you’re supporting your student, and you should to the extent that’s practical.
One reason is that few of the millions of freshmen about to enter college in the fall have a real clue about what they want to do when they graduate. Parents encourage students to explore, learn and take risks. A son or daughter may like the idea of becoming an electrical engineer or a biophysicist, yet they embrace the humanities after an inspiring course on 19th century Latin American history or modern European literature — and vice versa. Even without taking into account the ups and downs of the economy, many parents and their students really don’t know what kind of job or career they will pursue as they head off to college. And the income and job uncertainty is a major reason for keeping student loans low.
The riskiness inherent in the undergraduate enterprise is why the loan-based financing system we now have is deeply wrong. It is bad public policy and bad economics. But it’s the system we have for now, so the main parental goal is to keep down the amount borrowed as much as possible.
Graduate school is different. Yes, in many professions, students are taking on too much debt. Again, I think there are better ways to finance a graduate education. The April 6 show of Marketplace Money dealt with the difficulties of graduate school debt.
Nevertheless, students are investing in a profession, a career and a lifetime of earnings when they go to graduate school. They can look at salaries in their chosen field or profession. They can make a reasonable guesstimate of how much the education will cost and how much they might earn once they have their graduate degree in hand. There is still a great deal of uncertainty, but not as much as with an undergraduate degree.
It’s a cost for the student to bear — not the parents. I’m wary of parents co-signing on graduate school loans, too. For most parents, the greater need is to focus on building up their savings — especially retirement savings. Time is running short.
That said, you’re going to help out your student in graduate school when and where you can. Depending on how old they are in graduate school, their family circumstances, and your finances, you can help out in a number of ways (from buying clothes for a job interview to helping out with child care costs). You’re part of the student’s safety net. That safety net is incredibly valuable. Being their safety net is the best way to support their graduate education.
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