Ever since the Post 9/11 GI Bill started allowing service members to transfer their benefits to their spouse or children, people have been telling me that they are saving their GI Bill for their kids. While I understand the desire, it's not a great idea for two very specific reasons.
Of course, every family is different. The right choice for you is probably not the right choice for your friend. But in making your decision, be sure to consider these two important factors:
The Value Of Mom's or Dad's EducationDon't underestimate the value of using the GI Bill for a parent's education. While the numbers vary dramatically depending on your major and location, the average college graduate earns about $25,000 more per year than a high school graduate.
Let's say you and your spouse are both 26 years old, neither of you have a college education, and you have a three year old. One of you starts college this year, using the GI Bill, and graduates in four years, when your child is seven. In the eleven years between your college graduation and your child's start of college, you could earn an additional $275,000, more than the child will ever get out of the GI Bill. And you'll continue to earn more for the rest of your life! On the extra earnings from your college degree, you can put all your kids through college and still have money left over.
On the other hand, if you "save" your GI Bill benefits for your kids, you'll have a lower lifetime income and you'll only be able to put one child through school on the GI Bill.
Mathematically, it makes sense for Mom or Dad to use the GI Bill now and use their increased earnings to pay for their kid's educational expenses. Now, this math changes if your child is now 13, not three, or if the parents already have bachelors degrees and don't desire additional education. You also have to consider whether that newly graduated parent would be working full-time. Many families choose to have a stay-at-home parent while their children are small. While education always has value, a stay-at-home parent getting a bachelor's degree won't have the same immediate economic impact.
Changes To The GI BillYou also must consider what changes will come to the GI Bill. It's been changed numerous times since it started, and it will continue to evolve over time.
Historically, military education benefits swing back and forth, gaining and losing value as the country requires more and less from their military. We are coming out of a period of high military recognition, and it is likely that military education benefits will be cut again in the future. Other educational benefits, like Tuition Assistance and MyCAA, have already been changed or are expected to change in within the next few years.
Cuts to the GI Bill are proposed regularly. While no major cuts have been made yet, they are coming. They may include cuts to the housing allowance portion, restrictions or the elimination of eligibility, or other cuts we can't even imagine. One this is for sure: the GI Bill isn't going to get any more generous.
Using the GI Bill now, or soon, ensures that you'll receive the maximum benefit possible.
What Should You Do?Again, there is no right answer. You have to consider how much a parent could benefit from the education, the ages of your children, whether you think benefits will be cut, and any other considerations unique to your family. It can be tricky, but there will probably be one or two options that are significantly better than the others.
Be sure to keep all your options open by transferring the GI Bill as soon as you are eligible, and ensuring that each eligible family member is assigned at least one month of benefits. This will put them in the system and start the clock on the four-year service obligation. You can always modify or revoke benefits later, but you've got to start that four-year service obligation clock as soon as possible, and you can't add new beneficiaries after retirement.
I understand why people want to save their GI Bill for their kids, but it's probably not a great choice in most situations. Be sure you are considering all the factors. In many cases, the economic benefit of Mom or Dad's education greatly outweighs the benefit of saving the GI Bill for the kids.