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The Color of Money | Michelle Singletary

When college graduates move back home, financial ground rules are imperative

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May 18, 2008

They're coming home. Many parents already know this, but it's likely that many college graduates have no choice but to move home to get their financial bearings.

And you know what? Despite assurances they will only stay for a little while, this time next year many of those graduates will still be at home. That's what MonsterTRAK found in its annual nationwide survey of college students, recent graduates, and entry-level employers.

Continuing a three-year trend, 48 percent of prospective graduates, plan to boomerang after graduation, according to the online career resource company. While only 22 percent of last year's survey respondents said they planned to live at home for six months or more, 43 percent have yet to leave, MonsterTRAK found.

Chief among the reasons recent graduates say they can't leave home: college loan debt. Forty-two percent of 2007 graduates said they had loan debt of $25,000 or more, while another 33 percent have a credit card balance of more than $5,000.

Graduates may not earn as much as they had planned, either.

So should you allow your graduate to move home? Lester Lefton, an experimental psychology scholar and president of Kent State University, doesn't think this trend is healthy. "Students went to college to become independent and gain the expertise to make a living for themselves." But he also knows that for many, coming home is inevitable.

If your graduate will be landing on your doorstep, here are some things that need to be discussed:

Rent. Will your graduate be paying for the privilege of living at home?

Other expenses. Will he or she be responsible for utilities and food?

Length of stay.

Personal financial information. Will the graduate share it with you?

The first thing you need to do is establish how long your child will be staying. All parties should sign a rental agreement. You can get one in any office supply store.

The graduate should pay for a share of food, utilities, and other household expenses. If you offer a complete free ride, your boarder may never leave.

Charging rent, however, is debatable. If you feel your adult child needs a little financial breathing room, don't charge.

Without the pressure of paying rent boomerang adults may end up spending irresponsibly on other things, such as a new, expensive car. Or they may live it up hanging out with friends.

If you collect rent, be clear about the amount and when it is due. Impose a late fee if the money doesn't come in on time.

Parents who don't charge rent so that graduates can pay down debt and save should demand proof that they are following a plan. Ask to see bank statements. They should also show you their budget and a debt payoff plan. Pry you must.

If you get resistance, hand that grown person the classified section of your local newspaper folded to the rental listings.

Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com.

SOURCE: Bloomberg News

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