Should Your College Kid Live At Home?

By Bobbi Dempsey | July 16, 2010 AAA

If your child is about to head to college, one of the first decisions they will need to make is choosing where to live. This is not just a lifestyle choice or a matter of convenience - there are financial issues that should be considered, as well. Here are things to keep in mind when thinking about how your child's choice of living arrangements can affect your household budget.

IN PICTURES: Financing For First-Time Homebuyers

Dorms Can Be Expensive
The cost of a dorm varies widely by school. Don't assume there's any correlation between the luxury level - or lack thereof - of the rooms and the price. Many parents are often shocked at the cost for a bare bones tiny dorm room.

"Room and board at private universities averaged $9,363 and at public universities it was $8,193, according to the College Board's 2009 Trends in College Pricing," says Joseph Orsolini of College Aid Planners, Inc. "At an urban college, room and board can run between $13,000-$15,000." (For more, see College Dorms: Good Value Or Ripoff?)

Get the Real Bottom Line
At many schools, students who live on campus are also required to have a meal plan. There may be other costs involved, too - such as a "facilities fee" or added charges for extras like internet access. Be sure you know exactly how much it would cost for your child to live on campus before making any decisions.

Consider an Overall Savings Strategy
College costs in general are soaring, and many families are having a tough time affording all the related costs, not just housing. So you might want to work the housing issue into a larger plan of figuring out how you will afford college. One option that's growing in popularity: having the student live at home - and attend a cheaper school - for the first two years.

"Living at home certainly fits into the junior college or two-and-two plan (attending a junior college or community college for two years and then transferring to a four-year university) strategy that is becoming increasingly common," says Orsolini. (For more, read Top 4 Reasons To Not Leave The Nest.)

The Effects on Financial Aid
If your child will receive any financial aid, the amount of their award may depend in part on their housing costs. Some schools assume students who live at home need less aid because they have lower expenses. It is probably a good idea to consult with the financial aid office to ask what effect (if any) your child's living situation will have on the financial aid award.

Take Transportation into Account
Depending on how far you live from campus, your student may incur transportation costs if they live at home. They may need a car of their own, and there's also the cost of gas, maintenance and insurance to factor into the equation.

Living at Home Isn't Free, Either
When running the numbers, keep in mind that - even if your child lives at home - there are still expenses involved, and most likely you're the one footing the bill. Calculate the costs of groceries, utilities, spending money and other expenses involved with having a college-aged child living in the house.

Think About Employment Opportunities
If your child plans to get a job, their housing location could make a difference. At some schools, on-campus jobs are easy to come by, while at others there are lots of students competing for a few precious openings. In the case of the latter, your student may have better luck if they stick close to home.

"Plus, the student is better known in the community and might be able to keep a part-time or summer job they had in high school," Lynn Ballou of Ballou Plum Wealth Advisors in Lafayette, California. (If you're scrambling for tuition, check out these last-ditch options to come up with the cash in 7 Last-Minute Ways To Pay For College.)

An Off-Campus Investment
When it comes to housing, a dorm or staying at home aren't the only two options. Lots of college students live off-campus. Depending on the area, these apartments can be costly, especially if landlords think several students will be sharing the place and thus base the rent accordingly. Instead, some families decide to invest in buying a property near campus. They will often then recruit a few other students as tenants, and use that rent to pay the mortgage.

This was especially popular when the recent tax break for first time homebuyers was in effect, in situations where the property could be bought in the student's name. Other families buy a home with the intent that the parents will use it as a retirement property once the child is done with college.

Evaluate Your Insurance Coverage
One aspect often overlooked in this situation is insurance. This can be a costly oversight, especially since college students often have expensive electronics and other costly belongings.

"From an insurance perspective, it's cheaper for college students to live at home," says Amy Danise, senior managing editor of Insure.com. "Their belongings are covered under the parents' home insurance policies. If they live off-campus, they should have renter's insurance." (Learn more in 7 Things Every Student Renter Should Know.)

The Bottom Line
There are many factors that go into deciding whether it would be better for your budget to keep your college kid at home. Be sure to consider all the angles before making any housing decisions. (For more tips, check out Survival Tips For The College Bootstrapper.)

Catch up on your financial news; read Water Cooler Finance: Goldman Fined, Financial Fixes And Apple's "Apology".

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