Don’t pay for all of your kids’ college education

by on January 15, 2013 at 12:39 am in Education | Permalink

…a new study…found that the more money (in total and as a share of total college costs) that parents provide for higher education, the lower the grades their children earn.

The findings — particularly grouped with other work by the researcher who made them — suggest that the students least likely to excel are those who receive essentially blank checks for college expenses.

The Inside Higher Ed piece is here.  The NYT piece is here.  Here is a summary of the research from the researcher, Laura Hamilton.  Here is the paper itself, forthcoming in the American Sociological Review, available to subscribers and university systems only I suspect.

I should note that this piece includes all of the appropriate controls, but still we do not know how good those controls are and perhaps parental paying practices are proxying for other features of the situation.

MikeP January 15, 2013 at 1:20 am

…perhaps parental paying practices are proxying for other features of the situation.

No doubt.

Break the students into 4 groups: those that would pay for themselves but parents pay for them, those that would pay for themselves but parents don’t pay for them, those that would not pay for themselves but parents pay for them, and those that would not pay for themselves but parents don’t pay for them. The fourth group does not appear in the ranks of college students, strongly biasing those who pay for themselves toward the self-motivated.

Howl January 15, 2013 at 1:22 am

Another victory for my father’s wisdom. (I’ll never understand how that man could be so wise when I was a child, yet plummet into stupidity about the same time as I was turning 13, only to become wise again as I entered my 20s….)

Next up, a study demonstrating that young people who purchase their own automobiles keep them in better condition and get into fewer accidents than those who are given cars; a study proving that the reward for doing good work is to be given more work; and a study demonstrating that there’s no sense in throwing good money after bad.

DJS January 15, 2013 at 2:40 am

+1

Nerd January 15, 2013 at 4:10 am

The abstract claims that the study accounts for “alternative funding,” but not having access to the paper itself I have to wonder how well this study accounts for merit-based scholarships. Students who earn large merit-based scholarships will generally receive correspondingly lower parental contributions to their educational expenses.

foosion January 15, 2013 at 6:21 am

As others have said, without an understanding of the exact design of the study and its controls, we don’t know if something else is going on, such as emphasizing merit scholars v. legacy contributors, or if there is a genuine causal relation. Homilies about the virtues of hard work aren’t enough to fill the gap.

Sam January 15, 2013 at 6:23 am

In the distant past, I taught a foundation-level course in a UK university. The foundation year was for people who didn’t have good enough grades, or didn’t have the correct subjects, for entrance to the real degree, and the expectation was that the students would continue on to the real degree the following year. It attracted two kinds of student – kids who had apparently partied through high school and so got bad grades, and returning students who had worked in blue-collar jobs for several years and quit to take a degree.

The difference between the two groups was night and day. The mature students, who had given up jobs and income to be there, were disciplined and motivated, and an absolute delight to teach. The party kids? Let’s just say that they were determined to carry on partying. Somebody else (parents or an interest-free government loan) was paying…

Claudia January 15, 2013 at 6:43 am

Of all the linked pieces, yours is the only title that asserts causality. I think the study’s title was more appropriate and still up to pithy blog standards: “More Is More or More Is Less?” I agree that sensible investments in higher education (looking to maximize the lifetime ROI subject to student aptitudes/interests) is not easy and it often involves parents. One take away of the Higher Ed piece was that money alone is not enough to insure the ‘success’ of students in college…hmm, duh it’s not enough pre-college either. One caveat from the study was mentioned that in my opinion is a way bigger deal than a 3.0 versus a 3.5 college GPA … students with less parental funding are less likely to graduate. That effect could swamp a lot of grade point differences in terms of average income at age 25. Grades don’t strike me as the best metric here. I would much prefer some measure of earnings or life satisfaction out of college.

And since this is the only place I am allowed to reason by personal anecdote, I want make a point about the flimsy causality argument: I was a academic go-getter in high school and had a chance to go to a second-tier liberal arts school on a full ride or a top-tier school with almost no external support. Since I did not get the combine as a graduation gift, I went to the former and my parents paid little. My grades were again perfect, which would not have have been the case at the top school. Oddly those grades got me my first job, though the lesser school was not as big a draw on grad school apps. Fine, it all works out well. My equally smart, okay fine he’s a STEM so he’s smarter, younger brother thought grades were a bit silly and filling out college scholarship forms even more so. My parents paid way more of his college since they wanted him to be in a good learning environment too. His grade were solid, not perfect, his attitude was unchanged. He did just as well afterwards as I did. My parents paid more for one kid than the other because we had different habits and attitudes toward formal schooling, not as an attempt to manipulate our grades. All kids are different. I realize my one odd story may not refute the patterns in the study, but my point is that causality here is very hard to establish and I doubt the money flowing from parent to child is some exogenous shock. I actually think that financial support, up to a point, is important to student’s success.

Bill January 15, 2013 at 8:48 am

++!1 on the causality issue and the drop out for lack of funds issue.

I do favor, however, having the kid put some skin in the game when it comes to initial college selection: ie, making them realize that the highest priced school may give them no better results than a lower priced school.

My daughter was accepted at Harvard, MIT, and CalTech; she was not going to get a needs scholarship, and I was concerned that her interest in organic chemistry would quickly switch to International Relations, etc. if she went to Harvard, which cost more than CalTech. So, I devised a 1/3//2/3rds rule: I’ll pay 2/3, you pay 1/3. She went to CalTech, the lower cost option (with SUN). She’s now a pathologist, and really pissed at me, however, for selecting CalTech (although it was her choice, I point out, hoping she doesn’t realize the significance of incentives) because she had to work so hard learning in school, whereas here husband, the history/chemistry major at Yale, and a doctor also, had a great time as an undergraduate throwing frisbees.

Now, her dad did renege on one thing, or he modified his rule: for her 1/3, I said that if you earn any money working during the summer, I will match it. She came out debt free with honors in organic chemistry from CalTech.

Maybe your parents should have risk shared with your brother.

Marie January 15, 2013 at 2:09 pm

My dad had a matching sort of plan for me too. Any tuition style scholarship I was able to win, he would give to me as spending money (otherwise I was working entirely out of my high school savings account). By my sophomore year I had tuition completely covered.

Of course it helped that my parents had only two rules when I was picking a university: 1) you can go to any in-state public college you like (Virginia resident) and 2) you have to get a professional or technical major. It’s not that I couldn’t have become an art history major, but I couldn’t have ONLY been an art history major.

It was a good set up. I was pretty well off by plenty of people’s standards in school, but I knew exactly how much money I was going to waste if I skipped a class. That was probably more due to my mother’s drilling of “you want those shoes? Those shoes cost six hours of my work day. Six hours of me working.”

Tyler Cowen January 15, 2013 at 8:56 am

My title is advice, good advice I might add, but it does not assert causality and see the end bit of my post.

Claudia January 15, 2013 at 9:43 am

advice that has no effect (or a negative effect) is not good advice. plus if it’s advice there is some implied causality…do smart X and happy Y will follow. that said, I do agree that education should be partially debt financed by the student, but I found this analysis a little short on the ‘whys’. important issue.

Jack January 15, 2013 at 11:03 am

The author writes: “parental aid decreases student GPA, [but] it increases the odds of graduating” so causality is implied, though not stated. I do not see any mention of an instrument or a natural experiment, so I must conclude the findings are correlations, and we are back in pre-1980s research world (pre-Josh Angrist, pre-Krueger, pre-Levitt…)

Andrew' January 15, 2013 at 11:39 am

Economists have “on the other hand” and get paid for both hands. Us people need to do something.

So, don’t pay until they threaten to drop out.

Orange14 January 15, 2013 at 7:01 am

I would note that it’s very difficult to do cohort controlled studies of the sort that she describes and I’m tempted to put this one in the ‘junk science’ category. the availability of large data sets does not automatically imply that good science can be done. I agree with Claudia’s point that ‘the less likely to graduate students’ are not incorporated into this study and that’s a big problem given the numbers here are quite significant.

In the anecdotal FWIW department, we paid the freight for both our daughters’ college education (they did receive a little bit of merit scholarship money) and both graduated cum laude from their respective schools. Both went to to graduate school (that they paid for).

James January 15, 2013 at 7:16 am

My parents paid half of the net cost of my undergraduate education, and a much smaller part of my graduate education (mostly as the lender of last resort). I don’t know what effect it had on my grades, but it did give me an incentive to find a fast route to completion of my various degrees.

On the other hand, my wife’s father (her mother had passed away when she was young) paid zero towards her college education mainly through neglect and his own general irresponsibility. (I am not saying he owed her anything, just that he could barely take care of himself, so helping others was low on the priority list). She took a long time to complete her degree and received lower grades partly because she had to focus more on feeding and sheltering herself. , How exactly you model that type of situation is difficult. In my case, my assistance was limited partly because of incentives, they did want me to have some skin in the game, but partly because of a budget constraint, when I finished college my sister was starting, so the bulk of the help then went to her. But I also had a more nurturing environment.

Andrew Edwards January 15, 2013 at 8:49 am

Seems to make more sense if you reverse the causality:

Smart kids will be in university whether it is paid for or not, but the dumber you are the more help you need from your parents. The dumb and poor are simply out of the study by not being at university.

Maybe they controlled for this…?

Nickolaus January 15, 2013 at 9:14 am

You could tie your contributions to the student’s GPA. 4.0 = Full ride and then scale down from there. Of course that might simply encourage your student to aim low as far as courses are concerned…

Granite26 January 15, 2013 at 9:17 am

This matches my personal experience 100%…

My grades shot up pretty quick as soon as my parents made me start footing the bill (through student loans)

Michael January 15, 2013 at 9:57 am

I suppose it would unfortunately be in poor taste to do a twin study where one twin has their college tuition paid for in full and the other must foot part of the bill.

Bill January 15, 2013 at 11:54 am

Cool. Maybe even measure lifetime happiness. I wonder if the parents would worry about asking assistance from the discriminated kid in their old age, or whether the same amount of assistance would be given.

Will have to ask Gary Becker.

J.D. January 15, 2013 at 10:00 am

This should be called “The Van Wilder Theorem.”

Yancey Ward January 15, 2013 at 11:52 am

+1

sailordave January 15, 2013 at 10:46 am

the obvious answer is that students with richer parents have a higher marginal utility to networking with other rich students than to studying. This was definitely true at all of my private high school, my Ivy League undergrad, and my graduate school.

and the students who got lower grades but better connections have higher median incomes today. if you can afford it, you really really want your children to row crew or play lacrosse at a top school instead of spending 15 hours a day in a microbiology lab — even if they become lab scientists you want them to be the people who know how to get grants rather than the technicians working for the people who get grants.

Vernunft January 15, 2013 at 10:51 am

Legally change your last name to “Cohen”. Guaranteed to raise your grades.

Jack January 15, 2013 at 11:06 am

It would be interesting to compare implicit vs. explicit funding. For example, getting a $15,000 scholarship on a $30,000 tuition, vs. paying only $5000 tuition because the true cost is heavily subsidized by the Government (public university). In Quebec, for example, students went on strike to protest a tuition increase from $2000 a year to $3500 (spread over five years).

Dan Weber January 15, 2013 at 11:09 am

Except the school will expect the parents to pay, and look through all of the parents’ finances in order to determine exactly how much they can bear to pay.

Jodi Beggs January 15, 2013 at 11:14 am

I feel pretty strongly that the advice in Tyler’s headline is potentially dangerous (in addition to not really being supported by the study). First off, I’m pretty sure there’s a lot of the correlation versus causation problem going on here from what I can tell from the data used. (In related news, I really want to teach a course entitled “instrumental variables for sociologists.”) Also, given that financial aid (especially grants) is mostly determined by parental income, I can make a pretty strong argument for wealthier parents being expected to contribute substantially to college costs, since otherwise they’re basically saying “well, you got screwed because we make a lot of money, have fun with that.” I don’t think I had the option of taking loans for what my parents were expected to pay for college (even though I got substantial financial aid), so them not being generous would have either meant me not going to college or me being a terrible student because I would have had to work full time to make up for what they didn’t pay. I don’t know how we’ve forgotten that a student’s job is to be a student- I see so many students who leave class early/miss class/etc. because of work commitments, which I find highly inappropriate (though sometimes necessary) for full-time students, and it obviously doesn’t improve their performance. I think 18 years of data is enough for a parent to tell whether their kid is motivated or not, so I fail to see how enabling the motivated ones to have the time and resources to really excel rather is not better than playing incentive games with them. Granted, the less motivated ones are another story. :)

The effect observed could easily be a result of wealthy and/or snobby parents shuttling their kids off to college regardless of whether the kids actually care about school so that they don’t have to admit to their wealthy friends that their kid didn’t go to college.

Brian Donohue January 15, 2013 at 1:04 pm

I agree with most all of this, except for the lamewads cutting out of class for their jobs.

Even at the time, but particularly after I was thrust out into the real world, I was aware of the astounding amount of free time college students enjoy. I always had a job at college, and it was never close to a problem working 15 hours a week. Like Dad says: “If you want something done, give it to a busy person.”

Rich Berger January 15, 2013 at 1:48 pm

Amen. My experience exactly.

CG January 15, 2013 at 11:27 am

Hard to say what’s worse from a long term earnings perspective. Lower grades or going into debt. Even if the student does get better grades, that doesn’t always translate into getting a better job. 10 years down the road, the student would still be taking a hit from that loan, it’s far less clear to what degree she’d have reduced earnings or fewer opportunities from poor to mediocre grades.

Brian Donohue January 15, 2013 at 1:08 pm

In my experience, college grades becom completely meaningless once you land your first job. In the real world, the only signalling that matters is “are you making money?”

If you spend your life in school/academia, YMMV.

ezra abrams January 15, 2013 at 3:04 pm

If I may say so politely, just because the N Y Times offers an article on a paywalled journal, doesn’t mean everyone should get on board;
In general, there is something offensive about a blog – any blog – that has posts about paywalled research
Maybe offensive isn’t quite the right word; it is sort of how I feel about mankiw’s blog – I just don’t bother with someone who won’t allow comments.
the 18 scariest words in the scholars language:
Trust me, I run a blog and I’m offering you trustworthy interpretation that you can’t check for yourslf

Tim January 15, 2013 at 4:37 pm

Biggest problem with this is that it assumes there’s some value to high grades in a university setting. In my real life experience college grades have had very little correlation to success in the workplace.

Jacky January 16, 2013 at 12:54 am

I haven’t read the paper (cannot access), but one caveat I can think of…

Some of them may not go to college at all if they don’t have money from the parents, precisely because they don’t get good grades at schools.

On the other hand, if you get good grades at schools and have a reasonable prospects of earning a higher future income to cover for your tuition costs, you have much stronger incentives to go to college, even without parental funding.

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