In Short
I’m wondering if there is any research to support the idea that paying for a child to attend college leads to a more desirable outcome than allowing them to pay their own way (either via working, via scholarships, or via student loans). This could be shown in terms of mid-career income, unemployment numbers, happiness index, etc. An answer that compares and contrasts the advantages and disadvantages to each side (as supported by hard evidence) would be even better.
Background
I believe I had an atypical upbringing that I erroneously assumed was normal. Most of my aunts and uncles, and my parents, worked their own way through school. I always believed this was the norm, though I’m now questioning that assumption.
When I started my associates degree I choose a community college for cost efficiency, but refused to let my parents pay after the first semester. I worked 24 hours a week around schooling, then moved up to full time work while attending night school at a local university to earn my BS. I believe that this experience was immeasurably valuable as I graduated with 5 years of industry experience on my resume, no debt, and a working understanding of how to apply classroom theory to industry practice, leading to good career prospects and high pay. Further, a 40-hour workweek with nights free after graduation seemed like a vacation to me which reduced my long-term stress levels, and knowing that my parents didn’t need to sacrifice of their retirement did wonders for my happiness (not to mention confidence in myself).
I have several friends who paid most of their college tuition via scholarships, and this seemed to provide different valuable benefits. As the scholarship was a results of their own accomplishments it provided a sense of agency in their lives and provided a boost to confidence and pride. I don’t know anyone who came out with substantial student loan debt, but I would imagine that paying it off could have a similar effect to my working my way through college: a sense of ownership and agency and pride.
I now have two children and I’ve heard a lot from seemingly everyone about planning for their college, and almost every other parent I’ve met has created college accounts for their children. This mindset seems both alien and counterproductive to me, and anecdotal evidence from my own past and family history indicates that this may not be optimal to my children’s long-term success. However, I also seem to be in the extreme minority and I’ve learned that when in that position it makes a lot of sense to question your own position and fully research and understand the other side to make sure you’re not simply biased towards the familiar. So I would like to know if there is validity in setting up a college fund and helping my children pay for college or if this is just an unsupported fad of our parenting generation.
I’m not sure if it’s relevant, but my children are currently in their early teens. I have setup small investment accounts for them that I'm trying to contribute to more and more, but those accounts are currently set to transfer well past college age. The kids know about them and I always refer to them as retirement accounts, but I’m wondering if there’s value in modifying them to be college accounts instead. Before considering doing so I’d like very clear evidence that it would make a substantial positive impact, as $50,000 (for example) put into college now takes $1,500,000 (~$400,000 in today’s dollars adjusted for expected inflation) away from their retirement.
Addressing College Cost
I'd like to take a moment to address a common theme in the comments and answers that I don't think has been properly fleshed out.
I think we can all agree that education is extremely expensive. However, I feel it is tangential to the heart of this question, if we assume that paying for one's own education is at least possible, even if difficult.
According to http://www.topuniversities.com/student-info/student-finance/how-much-does-it-cost-study-us studying at a Community College will run $3,347 per year, plus room and board. Studying at a state college will run $9,139 per year, plus room and board. For the purposes of the question we can assume that we're talking about financial assistance with tuition, and that students are welcome to live at home and commute. Therefore we can place a lower limit on a four year degree at $24,972. Even with room and board the numbers work out to $59,990.
We can reasonably assume a work schedule of 15 hours per week during school semesters (9 months of the year) and 40 hours per week during breaks (3 months of the year) for a total of 1020 hours per year. If we assume a student attends 12 credit hours per semester all year round and works 30 hours per week, that comes to 1440 hours per year. I know several people that put in more hours than this, including myself in the past and my nephews in the present, so I believe it to be more than reasonable.
Assuming a pay rate of $10 / hour, the student will have a annual gross income of $10,200 - $14,400, or $40,800 - $57,600 over the course of the four year degree. Alternately, setting aside 10% (average tithe suggested by certain major religions, showing that it is possible to do for many) of the US average annual income of $50,000 (those with degrees average much higher) would allow a student to pay off a fully financed degree at a rate of $5,000 per year, or 5-12 years. Based on these numbers it is clear that with the proper choices the student can come out with no debt load or a manageable debt load, even if they don't stay with parents.
To be clear on a few points:
Average budgets for college students are higher than this, but it doesn't necessarily follow that they must be if there are financial pressures on the student to budget responsibly and control costs.
I do not mean to imply that this is in any way easy. It will, in fact, be very difficult. But it is often the most difficult challenges that allow us to grow and succeed.
All points about costs, difficulties, long-term debt, etc are valid concerns, but they are not necessarily salient to the question as they may be offset by positive consequences of equal value (industry experience, practical time/life management, etc). Which leads me to:
The crux of the original question is what hard evidence tells us about whether the long term results of paying for college for our children are overall positive, and if so if they are positive enough to offset a massive loss in retirement savings. This is regardless of whether life might be difficult during or recently after.
