30 Sep College Action Plan – Part 3: Paying for life after high school
Hi, it’s your Money Mavens, and we’re wrapping up our three-part College Action Plan series by talking about the big elephant in the room…
Paying for life after high school.
This is the several-thousands-of-dollars question, right?
When your child starts thinking about colleges, trade schools, or even starting a business, you as their parent may start thinking (maybe worrying?) about how to pay for it!
If you’re the parent of a high school freshman, you may not realize how much it will actually cost.
FYI: plan for it costing around $25k per year for public college and around $50k per year for attending a private college. Don’t panic!
A good place to start with planning for your child’s college is to have the college money conversation with them.
It’s so important (and will avoid much heartache) if you and your child are on the same page about how much college they can afford!
We have seen too many parents struggle with telling their children “Sorry, no” when their dream college is too expensive.
Get the facts about what colleges cost and gain the knowledge you need about financial aid, scholarships, loans, work-study, etc.
You need to understand how all the puzzle pieces fit together. Freshman year is NOT too early to start this learning. What financial aid is available and how do you qualify for it?
Also, consider asking Grandma and Grandpa about their plans. They may want to help, and you want to ensure their help doesn’t hurt potential financial aid while still fitting with their estate planning.
Even giving gifts in the form of deposits to your child’s 529 plan are good ideas to help save.
While most merit aid or scholarships are awarded by the colleges themselves, searching for private scholarships can be something ongoing that you and your student can start considering. Remember to use their guidance counselor as a resource.
Understanding the Financial Costs of Life After High School
Part of creating your child’s college list with them includes helping them understand how much each college will cost.
First, estimate your family’s Expected Family Contribution. Here’s a link to a calculator you can use to generate the estimate. Next, use the Net Cost Calculator on each college’s website to determine potential financial aid and net price at each school.
We highly recommend spending time on each college’s website to read about potential merit aid.
The Free Application for Federal Student Aid or FAFSA goes live on October 1st. Your child and either you or their other parent (if they’re in the picture) will need a FSA ID prior to getting started.
We recommend gathering your most recent tax returns and get that task done sooner rather than later. Even if you aren’t going to qualify for financial aid, you should still file the FAFSA. Some schools require it to give merit scholarships and Federal student loans will require filing of the FAFSA.
If your family is a potential needs-based aid candidate, be sure to filter for that in the college search. Identify those colleges to which your child could be admitted and which school may provide the most free money.
Some colleges use a different financial aid application called the CSS ProfileTM. This application requires more detailed information than the FAFSA.
Make sure to apply for aid prior to each college’s respective deadline. College funds are first come, first served so the earlier you apply, the better. Colleges will not make exceptions for filings past their deadline date.
Applying for Scholarships in High School
The number one source of money for college is the actual college. Seek out those schools that provide merit aid for which your child might qualify.
Your child can also find and apply for outside scholarships. Check with your guidance counselor for local opportunities.
If you decide to find outside scholarships, be sure to have a game plan and stay on top of the deadlines and requirements for each scholarship opportunity.
After you’ve gathered information of how much each school may cost, it’s important to discuss with your child how much college can be afforded and who will be responsible for paying the costs.
Do you plan to pay for all of the costs? Or do you expect your child to contribute?
Will it be paid from 529s, gifts from grandparents, your cash flow, student loans or a combination? Do you expect your child to work during the school year and/or summers to contribute to the cost? How much do you expect your child to contribute?
Document how much you expect can be paid from each source each year so that you know how much you can afford to pay each year.
From a financial perspective, the purpose of going to college is to get a degree to do a job that you can’t do without one (or to get ahead in that profession at a more rapid pace). If you’re considering taking out student loans and expect your child to be the one to pay them back, look into the starting salaries for the career your child is interested in pursuing.
Compare the amount of the starting salary to the amount of the estimated loan payment. Show your child how much of their salary could be going to pay back student loans each month. With this information, they may reconsider which school they want to attend or the career that they want to pursue.
Deciding on Your Child’s School
May 1st is Decision Day for most colleges and universities. Prior to that, your child will have received acceptance letters and financial aid award notices. These two documents often come separately. You find out they’re accepted well before you find out how much it will cost!
Financial aid award notices are not always straightforward and easy to understand- a pet peeve of ours! Take some time understanding how much is free money that you don’t have to pay back and how much of the offer is loans and work study.
Also, you may want to consider whether or not to appeal an aid award offer. Successfully appealing an aid award requires some additional thought and planning.
Before committing to any school, be sure both you and your child understand how much college will cost for all four years. Your student needs to understand what a student loan monthly payment will look like after graduating. What are the terms of a loan? How does that work?
Once the final decision is made, it’s time to write the first check. Your child accepts the college’s offer, and a deposit is made. Let the celebration begin! Time to break out the new college t-shirt and bumper sticker!
Preparing for Next Summer
Over the summer after graduation, your child’s new college will host orientation events. Students will choose their first college courses and select housing.
Shopping will commence for the student’s new digs. Final transcripts will be sent to the college in May or June.
Make sure your child is familiar with tackling daily tasks they will need to conquer on their own at college, like doing the laundry, cooking, cleaning, what to do if they get sick, etc.
This is also a good time to talk about budgeting. What are the benefits of having a written budget – and sticking with it – especially when new friends want to go on a spending spree their first week of college. This is the first time for many students to feel freedom financially and they’re old enough to apply for (and rack up debt upon) credit cards.
Having a job over the summer helps students understand the work environment with management and customers. Talk with your soon-to-be college student about who pays for what at college. Having a job can help defray some of those costs.
Summer is a great time to explore interests and learn new skills at meaningful summer camps. It’s also the obvious time for students to make money to put toward college costs or savings for the school year.
Have conversations about paying for college as a family. If your child is going into their junior year next year, visit a college campus to help stir up a little excitement.
Encourage them to get a summer job. Working is the only real way to see what the post-graduation world is like and will help them understand what kinds of work environments they prefer.
With all the planning and growing pressure though, it’s also good to sometimes just focus on spending time together.
The journey of college and jumping into adulthood will come soon enough.
For now though, follow these steps and savor these last few years together.
Your ‘baby’ has come a long way, and you are starting on a new adventure as they begin their college journey. Congratulations!
To your prosperity,
Your HWM Money Mavens