Talking to Your Child About Paying for College
Talking to Your Child about Funding College
We encourage financial literacy in young adults and there’s no better time to talk about money than at the beginning of the college application process. It will be one of the biggest investments you and they will make, and will have a significant impact on their future income and happiness. Too many times we see 20-somethings struggling to manage budgets, make informed decisions about careers, manage credit and obtain comfortable living situations because they don’t have a clue about money.
Because you’re a parent, you’ve probably been thinking about it and preparing for it for a long time. Maybe you have a special college fund or 529 plan that you’ve been contributing to for years. This doesn’t mean, however, that you shouldn’t talk to your children about college costs or expect them to contribute. In fact, it’s to their advantage to have some skin in the game. They will appreciate their education much more and will take it more seriously if they know they’re paying for it, too. And most importantly, they will feel more motivated to search for a career and job because they will have some loans to start paying back. You may want them to move home after graduation, but the sooner they spread their wings and jump out of the nest, the sooner they will feel empowered and in control of their own lives.
When to start “the talk”
Start talking about college costs when your students are starting to think about college – for most, that might be at the beginning of high school. Before they start thinking about their “dream school,” they need to know that college is very expensive. Grants, scholarships, and loans can bring some colleges within reach, but only if you plan early.
Preparing to manage the cost of college
It’s important to strike the balance between encouraging your children to follow their dreams and being realistic about costs. There are many ways to make schools more affordable, if the student starts early enough.
Explain the best ways to get scholarships and grants. Athletic students may think they’ll ride into college on a sports scholarship, but in reality, those scholarships are few and far between, and come with lots of strings attached.
The better approach is to get good grades and have a variety of interesting extracurricular experiences. Colleges want well-rounded students who show they can balance an active life with good academics. Leadership and volunteerism are especially important. We have worked with students who have been hired as Resident Assistants in college, a decision that has resulted in a reduction in college costs of $40K. This experience has given them leadership experience as well as many professional and personal connections and a great resume.
What your options are
Now is the time to talk numbers. Once you have a good idea of what you and your student can afford, then you can start talking about specific colleges. Here are some important questions to consider:
- How much can you, as parents, pitch in to help?
- How much has your student saved or how much can he or she realistically expect to make at a job?
- Are there any other family members who can help pay?
- What is the expected yearly income of the occupation your student intends to enter? The higher the expected pay, the more the student can afford to take out on loan.
Once you know how much money can be allocated, you can start looking at other options to extend your dollars:
- What scholarships or grants can your student apply for?
- How much do you think you will receive from FAFSA? (Always apply for FAFSA, even if you think you make too much money. “Too much” is a relative term.)
- Will you, the parents, be willing to take out loans to help your student?
This is an opportunity for you and your student to work together toward an exciting and life-changing goal. Enjoy it!