Written by: Deborah Cartisser
When it comes to selecting the right college, families should start the discussion with money. With all the choices available, there are different ways to get a degree and the price tags associated with them vary significantly. Too often the funding element is left out of discussion until the end of the process. We believe discussions should start before your child is ready to start looking at schools. Many parents figure that if we love our kids and want to give them the best opportunities available, we will let them decide where they want to go first and figure out how to make it happen after. This approach does a disservice to both parent and child, unless they have the funds available to let their child go anywhere. During my career, I have watched many parents make sacrifices because of paying for college, to the detriment of their own retirement savings. A saying in our office is, “They make loans for college, but not for retirement.” So what should you do to help you and your child make the best choices, with all the information available?
How Much Can You Comfortably Afford?
The first step is to determine how much you can comfortably contribute to your children’s college education. If you aren’t sure, be conservative and take care of your retirement saving first by maxing out your retirement plan contributions. You can always help them pay down loans later. If you don’t know what you can afford, get help from a financial advisor. For an online calculator try: https://mint.intuit.com/blog/calculators/retirement-calculator/ Make it very clear what your child will be responsible for. Helping to pay for college often makes students take college more seriously.
When to talk to your child?
This conversation can start as soon as your child is able to have a responsible conversation about college affordability. Aim to speak with them by the time they are 15. By not waiting until junior or senior year, there’s more time to look for and apply for scholarships. It may encourage some students to get better grades or spend time thinking about what they want to do for their career. You don’t need to reveal your net worth, or salaries, simply focus your message on what you can contribute. Continue the conversation as the process unfolds and have follow up discussions to help guide them through the process.
It can be difficult to qualify for federal financial aid or aid-based money from colleges. It’s best to find this out in advance. The FAFSA form is something you can fill out to see what your student will qualify for. From here, you and your student may want to refine the list of colleges he or she applies to.
Student loans are just that, loans for a student. We strongly caution parents from taking loans out for their children’s education. You can always decide later to help with their loans. If you don’t have the savings set aside for college, we advise against short changing your retirement savings plan by taking on your child’s college debt. As you evaluate tuition, look at the final cost of education, not just the tuition, room and board numbers. You will need to assess the cost of interest and how quickly the loan will be paid back, based on the potential career choices and earning ability of your student. If your student needs to take loans for college, help them to understand the weight of taking on a loan and what it means to pay it back, with interest. Help them to determine how they can graduate with the same degree at a lower cost. Share some of your own experiences with debt and what it took to pay it off. Use online loan calculators to determine how long it will take to pay off.
Merit Aid and Scholarships
As you are evaluating the cost of a degree, look at the difference between public and private universities. Then look at the list of colleges giving the highest percentage of merit aid to incoming freshmen: https://www.usnews.com/best-colleges/rankings/most-merit-aid. Strategically applying to schools can often lead to a lower cost of education for your child. Some factors that can contribute to the likelihood of getting merit money include: grades and test scores in top 25% of applicants, performing arts & talent, personal background, community service, club sports and hobbies, etc. Look for scholarships in your student’s field of interest. Also consider that applying in a geographic region different from where you live may enhance your student’s chances of being admitted with a merit award. Look at private merit scholarships outside of the colleges themselves, such as The Gates Foundation, The Families of Freedom scholarship, Coca-Cola Scholars Program, Dell Scholars Program, among many others. Find scholarships here https://bold.org/scholarships/by-year/undergraduate-scholarships/3/ . As with all applications, start early and stay focused on deadlines.
Start with your child’s school counselor and see how much direction they can provide. Schedule an informational appointment in advance to see what your student can do to get started and what they should be working on, and when. Hiring a professional college advisor who can help your child apply strategically has the potential to more than cover the fee you pay for their services. Ask parents in your vicinity for recommendations.
Evaluate Offers & Ask for More
When the offers from schools come in, evaluate each offer in light of the total cost to you & your student. If your student has their heart set on one school but they got better merit/scholarship offers from another school, let the admissions counselor know and ask if they can improve their offer. You may be surprised at how often they come back with a higher offer.
At the end of the day, college is an enormous expense and being better informed will help our children determine the value as well as the costs of an education. Have money conversations early, so your child can make rational, as well as, emotional decisions about college.
PLEASE SEE IMPORTANT DISCLOSURE INFORMATION at www.twelvepointswealth.com/disclosure