A few weeks ago, the proprietor of this establishment (J.D. “The letters in ‘Get Rich Slowly' can be rearranged to spell ‘The Sly Cowgirl'” Roth) asked me to address a reader's question — specifically, how should a parent save for college (perhaps because I once wrote a book on the topic, though it's now outdated). But first, let me say this:
College costs too much, it saddles young people with too much debt, and it forces students to “learn” things they'll soon forget — and it won't matter because it wouldn't help them further their careers anyhow.
As reported by InsideHigherEd.com, a new book (Academically Adrift: Limited Learning on College Campuses) finds that 36% of students “did not demonstrate any significant improvement in learning” over four years of college. The authors (themselves professors) write that, for many undergrads, “drifting through college without a clear sense of purpose is readily apparent.”
Do you want to pay $80,000 to $200,000 for that?
Because that's how much it'll cost, assuming the fruit of your loins graduates in four years (only 53% of students graduate within six years). According to the College Board, it costs an average $20,339 a year for in-state tuition, room, board, textbooks, personal expenses, and transportation. For the average private school, that figure is $41,192. To be fair, some of these costs would still be incurred if kids didn't go to college; they still have to eat, board, transport, and read (I hope). But they could do it much more cheaply on their own. Consider textbooks. The average student spends more than $1,000 on these annually updated tomes, because the student has to pay $50 to $100 for the most recent edition. Only people in college pay that much for a book.
Yes, many students get “aid.” But much of that is in the form of loans. Here's a shocker: The value of all student loans now exceeds all credit card debt. Twenty-somethings are beginning their careers with thousands of dollars of debt that has to be paid back with low-person-on-the-totem-pole salaries (assuming they can even find a job).
Here's the problem: College costs lack the normal market-based price controls. If you're told you need something, and someone is willing to lend you the money to get it, and you're told it's a great “investment,” then you'll do it — regardless of the price. The government wants to help, too, with grants, low-rate loans, and tax benefits. That's all very well-intentioned, but it's another reason why colleges can jack up prices and get away with it.
According to James Altucher (who's passionate and articulate about what a scam college has become):
College costs have historically gone up much faster than inflation. Since 1978, cost of living has gone up three-fold. Medical costs, much to the horror of everyone in Congress, has gone up six-fold. And college education has gone up a whopping tenfold. This is beyond the housing bubble, the stock market bubble, any bubble you can think of.
Altucher also takes on the argument that college is a great investment. Yes, people with college degrees earn more over their lifetimes. But if a person invested the cost of college and stayed away from the Ivory Tower, she might have more than the person with the B.A. or B.S.
Save Anyway
Now that I got that off my chest, the truth is I have a student in college now, and I have 529 savings accounts for my other three children (more on 529s later). Like it or not, many professions require a college degree. Plus, it can be a great experience and all that. So if you've procreated, then you should save for your creation's education. However, first make sure you're saving enough for your own retirement, as I explain in this video I did for LifeTuner (AARP's very hip website for the younger crowd):
(Quick summary: A kid can always find a way to pay for school. However, if you reach your 60s or 70s without enough retirement savings, you won't be able to retire. There's no such thing as a geezer scholarship. Plus, you can use some of the money in your retirement accounts to pay for college.)
Which finally brings us to the reader question:
My wife and I are expecting our first child this summer. In an effort to stay ahead of the game, I'd like to start saving for his or her college education. A 529 plan seems like the obvious choice here, but I know little about them.
What are the pros and cons to this type of account? Are there other options I should consider instead? How do I choose a reasonable amount to save so that I'm unlikely to end up either coming up quite short when it's time for school, or overshooting and having lots of money left over in there? One final question: Can I start such a savings account before the child's actually born?
Indeed, the 529 account is the obvious — and, in my opinion, best — choice. The programs are sponsored by states, who hire financial-services firms to run them. There are two flavors: savings plans and prepaid plans. I won't spend much time on the latter — which allow you to pay for a future education at somewhere close to today's prices — since most states don't offer a prepaid plan, and many have experienced financial difficulties. Choosing a prepaid plan might be a good idea if:
- Your kids will go to a state school in your state, and
- Your state's plan is on solid financial ground.
For more on prepaid plans, read this Smart Money article (which also mentions a private-school option).
The Pros and Cons of the 529
529 savings plans are like any investment account in that you contribute as much as you can, on a monthly or irregular basis (though most plans have modest minimums and all have huge maximums — from $235,000 to $380,000).
Here are the benefits of a 529 savings plan:
- The money grows tax-free as long as it's used for qualified higher-education expenses at any qualified institution — in your state or elsewhere (that includes the overwhelming majority of schools in the U.S., and many in other countries as well).
- Some states offer benefits to residents who participate in the state plan. For example, here in the great Commonwealth of Virginia, I can deduct $4,000 per account annually that I contribute to my kids' plans on my state (but not federal) income tax return. Thus, if you're interested in a 529, start by investigating your state's plan. However, you don't have to choose your state's plan, so if it doesn't offer compelling benefits and the plan is subpar (e.g., too expensive), look at the plans offered by other states.
- The investment choices vary by plan, but most are generally low-cost mutual funds, and most offer age-based portfolios that are more aggressive when kids are in the single digits (owning more stocks than bonds), but gradually get more conservative (all on their own — no rebalancing required!) as the Big Day gets closer.
- The assets in a 529 are considered property of the account owner (usually a parent or grandparent), and not the student. This helps when it comes to determining financial aid since assets in the student's name have a more negative impact on aid eligibility. Also, the kid can't decide to take the money and blow it all in Amsterdam.
- When you open an account, you have to name the beneficiary, which is usually the kid who will eventually go to college. However, if she/he/it decides not to, the account can be transferred to another qualified relative. This is actually how you can begin saving in a 529 before your belly of joy is born. Open an account with yourself as both the owner and the beneficiary, and then transfer the account sometime after your offspring is womb-sprung.
Now, the not-as-good stuff:
- If you use the money for anything other than qualified expenses, you'll pay income taxes and a 10% penalty on any earnings (though not the amount you contributed).
- You can only change the investment choice once a year. No biggie, really, but disappointing for you market-timers, and nerve-wracking during a crash (as in 2008).
- You can invest only in mutual funds and, in some plans, exchange-traded funds (ETFs). If you prefer individual stocks (i.e., shares of individual companies), the 529 may not be for you.
- “529” is a boring name. Boring! It's named after a tax code, just like 401(k) and 403(b). But what would you expect from a country that names the mansion in which the most powerful person in the world lives, the “white house”?
How Much to Save
Determining how much to save is difficult, because it depends on future investment returns and college-cost inflation. However, a place to start would be to find out the current cost of attending a school your future Einstein is likely to attend. Then, fiddle with a few online calculators, such as the ones from the College Board and Savingforcollege.com. If you're asked for investment return and inflation assumptions, choose 6% for both (you can ratchet down the former and/or increase the latter if you want to play it safer).
Finally, the absolute best source of information about 529 plans is Savingforcollege.com. You'll learn plenty about the general rules, but also the particulars about each state's plan. But hurry — you'll need to start saving soon to afford a big, fat, hairy college rip-off.
Kris and J.D., back in the Olden Days when college was cheaper
Author: Robert Brokamp
Robert is a Certified Financial Planner, the author of The Motley Fool's Guide to Paying for School, and is the editor of the Motley Fool Rule Your Retirement newsletter service.
College is quite the double-edged sword. Without it, you’ll have a tough time finding a job and will get paid less than anyone else in the field that has their degree. But, with it, you’ll most likely carry that student loan debt and start your career in the hole! My wife and I both went to college and amassed $18,000 in school loans when we graduated (not that much debt compared to most coming out of school). Everyone said it was ok though, because we would get great jobs and quickly pay off that debt. Well, my job is pretty… Read more »
“If you are good at a trade, sometimes it’s still beneficial to skip that degree.” Well said, @MyLifeandMyFinances! I would actually modify your statement to say that a vocational education (whether you feel you’re good at a trade or not) is often-dollar for dollar-the best money spent on an education. If you can apprentice for a self-employed tradesman, you can learn the trade and the business and eventually start your own business. There are cheaper, effective and more practical alternatives to college/university degrees. Sadly, few tout them as viable options to high school seniors. Most real education in both life… Read more »
I am starting to see the whole “Waste of Money” bit. I graduate in 2 weeks with my BS in accounting (Summa Cum Laude, thank you very much) So where is the reward for all my hard work? I’m quite sure my current boss is not going to give me a huge raise just because I have a degree now. And the option of changing job for more money looks pretty bleak. I’ve spent a fortune and now have very little to show for it.
Note that a college degree is more beneficial (necessary) for women than for men these days. That’s probably why more women than men are getting college degrees. (Why? Discrimination in labor and training markets for which a college degree is not necessary.) Even if 35% of kids learn nothing in college, that is not a reason to recommend kids not go to college. It’s a good reason to recommend that unmotivated kids not go to college *yet.* Nobody should be forced to go to college and some people would be better off working for a few years (or trying to… Read more »
Or your could go to Brigham Univeristy. Become a Mormon, live by the honor code, pay 5k a year for tuition. Or get about a 3.8 GPA a get a full tuition scholarship. 300 month in rent. And work on campus which is what the ENTIRE school does. Food service workers – all students. Secretaries for departments – students. Custodians- students. And they have the #1 accounting undergrad program in the nation. And you can’t sleep with your girlfriend until you marry her. But the girls are pretty hot at BYU.
http://home.byu.edu/webapp/finserve/content/page/Tuition.html
I’m 50,000 in debt (after working 40/week all 5 years). I earned degrees in biophysics and chemistry, but honestly could have learned everything to get into medical school in 2 years. And all the extra cultural stuff that was required cost thousands. I don’t remember half the liberal arts stuff and honestly won’t use 90% of the science stuff as it isn’t really medicine related. College has become a money grab for schools proliferated by the professional culture that values a paper degree more than experience and ingenuity. Many graduates will be saddled with crippling debt and be slaves to… Read more »
And don’t have more than one kid! True story: friends of mine have diligently saved since the births of their two daughters to pay for college. Now that their daughters are of college age, they are terribly dismayed to discover that the elder girl has turned out to be a very difficult child, who keeps switching majors/schools at the drop of a hat. Unfortunately the younger daughter, who is very clever and ambitious, is going to have an inferior education as a result … because her elder sibling has sucked up most of the money. Moral of the story? One… Read more »
@Nicole: There are some places where the opposite is true of nurses as well. Hospitals and especially clinics would rather hire LPN’s because they cost less.
“A lot of fellows nowadays have a B.A., M.D., or Ph.D. Unfortunately, they don’t have a J.O.B.” — Fats Domino
Caveat: I’m a college professor. I’d question the “kids don’t learn anything in college” from “Adrift”. The measure they learned was based on reading an essay and thinking critially about it. Liberal arts students showed the most improvement (fr to senior); science and engineering students showed the least. But look at the measuring stick that was used: an out of context passage with no relevance to the science majors. I’d happily give the exit exam we give the students (which includes reading and analyzing scientific literature and a laboratory experiment, as well as tests over the content areas in chemistry)… Read more »
@7 In most parts of the country, LPNs are in huge demand. An RN will still get a big wage premium over an LPN, that will make up for the additional year to two of work if they got a 2-3 year degree. However, for example, in CA there have been some legislative changes at nursing homes that have messed up with that general equilibrium. So if you go on nursing boards and people are complaining about not being able to find jobs, it is important to figure out what state they’re in and what the regulations causing this problem… Read more »
I have a 529 for my son. However, someone recently told me their accountant suggested closing the 529 for their kids and opening Roth IRA’s in your childrens names. The reasoning: A 529 counts toward your childs financial aid, a Roth IRA does not, also not all children end up going to college. Anyone else ever heard of this?
Related: 100 reasons not to go to graduate school:
http://100rsns.blogspot.com/
The U.S. academic system confuses me 😉 What surprised me when I was teaching high school was how few students consider taking a year off to work or travel. Everyone assumes that going to college or university (they’re different here) right out of high school is THE thing to do. It’s what their parents expect, and it’s what their friends are doing. I think many kids would benefit from a year off to earn some money and figure out what it is they really want to do. A lot of students here end up getting a university degree and then… Read more »
@Jasmine:
It sounds like the parents should’ve kept the money for each child separate, rather than mixing them into a single pool and letting the elder child take more than her fair share.
“One child policy?” I prefer the no child policy. It results in even less of a drain on the budget. We also get more sleep.
First off, there is never a guarantee your child will go to or benefit from college. The best you can offer is the opportunity for them to take a shot at it. That said, my kids grew up knowing that whether it was college, trade school, culinary school, etc. they were expected to get some kind of education or training post high school. To that aim I only promised the equivalent of two years community college and two years at a local four year college. They have to make up the difference. Currently both my first two kids decided to… Read more »
I’m a PhD student and have taught undergrads as both a Teaching Assistant and a Course Director. I would say that there are many students who just shouldn’t be in university. They are either not academically prepared or they are not motivated enough. Granted I teach in a university where you can get in with a B average, so I’m sure things would be different at an Ivy League school. Many would benefit from taking time off before attending university Most students would also probably benefit from going to community college first. And I’m speaking from my own experience here.… Read more »
@Kevin, the reputable fee-only adviser who created my financial plan strongly advised MrP and I to put most of our money into the 529 for our older child. That way, if she decided college wasn’t her thing, we could transfer it to our younger child. If #1 did go to college, we could still xfer some money plus pay out of current cash flow. (By then our mortgage will be paid off.)
First, Anonymous, a 529 plan counts as the parent’s asset in financial aid, not as the child’s. A Roth doesn’t count for the FAFSA (federal aid) but most private schools you’ve heard of do take it into consideration in their aid formula. Second, I think a Coverdell is well worthwhile, especially if you start early. For many people, saving that $2,000 a year would already be a struggle, but, like the “Debt Snowball”, could give a feeling of something actually accomplished. The other advantage of a Coverdell is that it can be invested in anything a brokerage might handle. If… Read more »
@Marilyn,
I’d rather pay the money and have a life at another school. 😉
I feel like the education system in the US is totally screwed up. Costs to much, matters too little and the entire philosophical approach to what were teaching young minds is backwards. I’m a recent grad, I’m also $100k+ in debt. If I paid that debt according to the lovely payment plan that Sallie Mae laid out, I’d end up paying over $300k. $300,000. Three hundred thousand dollars. I’m now three years out of college and have worked my ass off and am nearly making six figures. However, if a parent hadn’t been helping me out, I would still have… Read more »
@Anonymous: As I mention in the article, taking money out of a 529 might have tax and penalty consequences. However, it’s only on the earnings, so if you haven’t made much money (possible, given the past few years), then perhaps the consequences wouldn’t be severe. Here’s what the accountant is thinking: You can always and anytime withdraw the CONTRIBUTIONS to a Roth IRA, tax- and penalty-free. As for the earnings, you’ll pay taxes and a 10% penalty if withdrawn before age 59 1/2. However, the penalty is waived if the money is used for qualified expenses (though you’ll still pay… Read more »
WOW do I disagree… My BS in Mechanical Engineering was reasonably priced at a well-regarded state school and has served me really well for the last 9 years! I made great friends (whom I still see often), enjoyed almost every minute of it, graduated with no debt (working and internships), and have a job that is challenging, rewarding, and even sometimes fun! I could not be doing any of this without my college experience. My school’s Engineering Career Services department even put me in touch with my first employer and launched a career path I had not previously considered! For… Read more »
@Annoymous in comment 12 The child can only open a Roth IRA if the child is earning income. How much is their infant or little kid making? Except in special cases (e.g. child actor) this makes no sense for early on, and in the teenage years where they may be earning some money and that earned income equivalent could be put in, but as already mentioned there may be penalties associated with this and it doesn’t make sense for the child to have the Roth IRA and you can’t transfer money from a parents account to a childs Roth IRA… Read more »
Like “Young Professional” up above, I too recently graduated with $100k+ in debt. It was worth it to me, because my engineering degree from an Ivy league university impressed my boss enough for him to hire me a month after the economy started tanking in Fall 2008. Also, I met my husband at college and would not have met him otherwise, so I wouldn’t trade my time there for anything. That said, I’ve been smart/lucky with the way my payments have worked out, and despite making payments of $1200/month, I only paid about $1800 total in interest last year. My… Read more »
I go back and forth on this. My college experience was great – I went to a state school and graduated in three years, so I didn’t take on a ton of debt to do it (and my parents didn’t take on any). I enjoyed my classes and definitely found that it opened up my worldview and exposed me to new ideas. But I don’t work in a field close to my major and I don’t plan to any time in the future. In fact, my BA was only enough to land me a secretarial position upon graduation, so in… Read more »
Robert, Don’t forget that in Virginia, even though there is a $4,000 maximum to the annual deduction you can take on your state income taxes, excess contributions that could not be deducted can carry forward to be deducted in subsequent years for as long as necessary. I became a 529 expert a few years ago as a young father, and I was talking about this to an older co-worker whose kids were entering college. He didn’t think the 529 was worth it, since he was spending the money now. I explained that he should pass EVERY single tuition payment through… Read more »
We’re going with the Roths, which for us are for college tuition as our retirement is well funded through other means. I’m not certain we’ll qualify for financial aid, almost certainly not at the state schools. So, we’ll have some savings and the rest we plan to cashflow. The one thing we’re making clear to our children is that we will not pay more than state school tuition. If they want to go to a private college, they’ll need a scholarship. That rules out the Harvards of the world as they don’t give academic scholarships. We just don’t see the… Read more »
We just had our first (and only) child and I was able to contribute to the 529 for 2010. I think it’s great to have another tax write off. Although 4k x 20 = $80,000 doesn’t sound like it will be enough for college in 20 years.
Hopefully the stock market will perform well in this coming 20 years. I know the last 10 years was pretty horrible.
Hilarious article, and yes, college (in America anyway) has become a kind of extended summer camp or day care for overgrown children. Do some kids (that’s a funny world to call a 19 year old) profit from it? Sure. Some even learn useful skills. But by and large it’s a big scam. I know first hand. I like the Israeli system: turn 18, go to the army, endure some tough discipline AND get all your partying done for 3 years (they do party hard); then go to college at 21 when you know what you want out of life and… Read more »
#12 anonymous, I can’t remember where I read this, but the bad thing about using Roth IRA to fund college is the year that you take out that money, it will count towards your “income” which then is used in the following year’s financial aid calculations. It may make the child less eligible for financial aid. From what I hear, in general using 529’s for funding college is less punitive than using Roth IRA money for how financial aid is calculated. However I’m 10 years away from using it so I don’t know from personal experience. The rub I have,… Read more »
I absolutely agree with this article. College is a huge rip off. The costs are overinflated, but students think they “have” to go and employers think their employees must have college degrees. Now that college degrees are a dime a dozen they really don’t even guarantee anything eithe
If this post were titled: “Your Car is a Big, Fat Hairy Rip-Off…”, or “Your Hobby…”, “Your Eating Out…”, etc. – then it would be a good bet the post would be a point-by-point analysis of everything wrong with cars, hobbies, or dining out. Then we would get details on why these things probably should be eliminated completely. But because the subject is “college”, our culture demands that we somehow defend this “big, fat, hairy rip-off”. A quick glance (I could be wrong) over the previous posts seems to indicate that slightly more posters regret what they’ve “not learned” in… Read more »
I graduated from a state school with my BS 10 years ago. I spent $20K on my entire education – that was for tuition, books, fees, parking and the like. I did not take out loans. I worked my way through – I started at the community college and then transferred to the university state school for the final 4 semesters. Bottom line: Before I got my degree, I was making $11 an hour – no chance to do anything else or make any more. After I got my degree, I now make over $50 an hour. It wasn’t just… Read more »
I’m Canadian, and while I DO have a boatload of debt from my master’s degree, I don’t think it’s near what American students I know have. However, I’m wondering if it’s just going without saying that education is a good in itself, even if it doesn’t necessarily translate into a better paying job, or if no one posting here believes that education is valuable because it helps us to become more articulate writers, critical thinkers, and informed consumers of information. Yes, you probably will make more money over time without a degree, and it’s true that no student has ever… Read more »
Excellent article! It is wonnderful to read about serious and relevant PF topics as seen through the clever and incisive humor that Robert exposes them through. College is too expensive in the US. I came to Costa Rica and am getting world class medical education for about an eighth of the price it would have cost up north. and that is even considering that foreign students are charged higher tuition fees and that cost of living expenses is much lower over here. If one is willing to save for a top education, why not consider investing the money where you… Read more »
As a college professor at a large state school, I see a lot of students who shouldn’t be in college, and many more who shouldn’t be in college yet. I am teaching remedial skills at the college level, which is maddening. Stuff they should have gotten in junior high. But heaven forfend anyone tell these precious snowflakes that, or their parents. But there are not many good opportunities left for those who don’t have a solid trade or other skills. There are some flaws with the premise and argument in “Academically Adrift”, but it does point to a bigger problem… Read more »
We did a study on 529 plans and they are not all created equal in terms of the returns you can expect. With the worst ones, you are better off saving in a good taxable account and paying the tax. You also have more flexibility if the kid decides College is not for them and wants to start a business or….
http://portfolioist.com/2010/12/21/ranking-the-investment-options-in-529-education-savings-plans/
I don’t know that I would take the leap and declare college a big fat hairy rip-off. I think it depends on how it’s done. Most of my education was funded with scholarships and I ended with about $12k in student loans. I did not do the completely money-draining stupid thing of moving out of my parents’ home and rooming on-site. I did not go to a pricey, expensive college. I went to the local state univeristy, took a break in between, went back and finished (through two pregnancies). Personally, I didn’t feel there was much of a choice. Basically,… Read more »
My standing question is whether a 529 actually works out better than a taxable account. Yes, your money grows “tax-free,” but then you don’t get to deduct the college expenses when you pay them. So it’s really tax-deferred, where you’re effectively delaying the income into the year where you can deduct it. In exchange, you’re taking that phantom deduction against money that would have been capital gains, rather than being able to claim it against taxable income. Once you factor in tax benefits lost, I’m questioning whether a 529 actually wins out…. It may just be a hedge against the… Read more »
College (and grad school) is such an individual thing. I’m wary of anyone who says “Everyone should get a college degree!” just as I’m wary of anyone trying to convince me that it’s a total waste. 1 – You don’t have to pay the “average” price for your degree: For undergrad, I managed to get through without debt by having scholarships, working 30 hours/week to pay my rent and expenses, and having parents that were willing and able to pay the remaining tuition (about $4000/year for 3 years). The total cost was $12,000, less than even a cheap new car.… Read more »
i graduated from a 4 yr private university in ’05, thanks to very generous fund (not sure what type) started by my grandparents when i was born. i knew from day one i was able to go to a nice school without having to work or graduate with debt, and every time i count my blessings that is in the top three. i should add my parents aren’t rich, grams just hooked it up. college itself was great. my industry doesn’t require a degree but it’s highly recommended, and the stuff i learned and contacts i made are still serving… Read more »
From above: That rules out the Harvards of the world as they don’t give academic scholarships. Actually, they do give out a lot of aid — and honestly, when everyone you’re accepting is at the top of the scale academically, it would be hard to choose out the scholarship students based on academic merit. Since 2006, students from families with incomes less than $60,000 who are accepted to Harvard under our regular admissions policies have no expected parent contribution for their education. Additionally, families with incomes between $60,000 and $80,000 have seen their expected parent contributions significantly reduced. Financial aid… Read more »
@Jasmine –
The moral you found from that story is to have only one child? How about “when paying for a child’s tuition, outline expectations and enforce boudaries.”
Well, I went to two years of Community College and two years at a small state tech university, and got a rare degree that I loved getting that put me into a fantastic job (land surveying), and all with no debt. It’s definitely possible, because lots of my friends are doing the same. Just combine scholarships, have a definite purpose and aim before you go, and it all kind of falls together.
With college you get what you put in. If you know exactly what you want to do, and make use of the opportunities available (like getting to know the leaders in your field, getting research experience, etc.) you can get a lot of bang for you buck. The problem is that most students don’t do it. Many don’t know what they want to do, and for those who do know there’s pressure from the drifters to party on the weekends instead of putting in a few extra hours in the lab or writing another chapter of their novel. I think… Read more »
We let our three kids know that they had to go to the college where we teach for the first two years (free tuition) and that after that we would help them as we could if they chose to transfer. 1st child: two years here, transferred to art school, responsible for $ 18,000 debt herself, we are paying the rest. 2nd child: SO NOT READY FOR COLLEGE at 18, joined the army, started college at 26 on the GI bill, won’t let us help at all aside from babysitting the granddaughter. 3rd child: 1 1/2 years here, semester off, transfered… Read more »
@Jasmine:
That’s an obvious moral to that story. Only have a second child. Skip the first one. Great idea.
I disagree. College was the best thing that happened to me. I think it just takes a bit more these days. I have a master’s degree, in engineering, and I have a great job.
@Pat (#3): You are worth more to any prospective employer, so your boss should pay you more. You should not wait until your performance review. Tell them now.
Not that this disproves the OP: but I somehow made it through 10 years of education with 0 dollars in debt.
Public Universities can be quite a good bargain.