“You cannot send a kid to a 60K school by taking out a second mortgage”
I guess you don’t live in Silicon Valley then? That’s what a lot of people do, and assume they will either hit a homerun with stock options or retire to somewhere cheaper if they don’t. In fact S18’s friend’s parents have just done that to pay for Georgetown, which S18 decide not to apply to because it was too expensive. His friend never considered cost at all, just where he could get into.
On the question of whether merit aid goes back into the “family pot” and when the kid has “skin in the game”, I see these as linked because they are both related to when your kids take on more responsibility for their own finances. I don’t think that requires them to be self sufficient by earning all the money first, just that they are deciding how to budget and spend it (as they would do if they were taking out a loan for grad school for example). I’d prefer that to be earlier (i.e. when they go to college) rather than later (i.e. when they graduate) not least because I certainly don’t want them moving back home after college. But I would only hand over the responsibility at a pace both we and they think they can cope with.