Q: My daughter will be entering the second semester of her sophomore year this fall in Boston. She has received a full scholarship covering her tuition for the remainder of her undergraduate program. When she applied to school she was planning to commute from home. (We live about 8 miles from the college.) Now that she has received the scholarship, she would like to rent her own studio or one bedroom apartment for the next three years. The college has estimated her loan eligibility for housing and living expenses to be about $15,000 per year. Neither my daughter nor we have the income to pay for her living expenses without a loan.
Given this situation, we are trying to support her independence (she is 20 years old), and at the same time, save her from some unnecessary debt after graduation. We have thought about purchasing a studio condo and paying for it with the $15,000 she could take in loans. We do have a home that we owe $85,000 on, that has about $350,000 in equity. We could then sell the condo after she graduates, and pay back the loan with the proceeds of the sale (assuming there is going to be some sort of appreciation). I’d be interested in your suggestions given our situation, where the goal is to keep her debt down, but give her some independence.
A: First, congratulations to your daughter. How wonderful to get such help with her college costs. Good for her.
Now comes the hard part. If I were you, I WOULD NOT take on debt for her to live in an apartment or to buy her a condo.
Your daughter has received such a blessing; don’t erase that with taking on what will end up being about $40,000 in unnecessary debt.
And your plan to pay for a place for your daughter is risky given the current housing market. It involves taking on new debt, as well as some speculation on the future value of your home and a condo in Boston. Why go through all that when having your daughter commute from home is the simple, straightforward, common sense answer to your situation?
As for your daughter’s independence, a little delayed gratification is a worthwhile life lesson for her. Certainly it is worth more than spending $15,000 a year so she can be on her own and possibly get distracted from her studies for the rest of her college life.
You have a kid who can go to college without taking debt. So many other college students can’t say that. She will have plenty of time to live on her own. It’s just a few years more at home. But take on that debt and you are talking about a decade (or more) of paying bondage.
Don’t do it. Let her commute.