Planning For College – Choices and Payment

Part 1 of this series addressed how parents and family members can sometimes influence a child’s choice of schools through words and actions. Part 2 focused on the myriad of choices and how to assist a child in narrowing the selection to those best suited to help achieve vocation goals. The final segment of this 3 part series will attempt to outline options to think about when paying for a college education. While it may be possible to cover the entire cost of a child and their siblings’ education, it might be worth considering other options that involve the child. If possible, shifting the responsibility of paying for college to a child and the accompanying debt burden should be avoided. However, requiring the child to share in paying for some of the cost by working or securing grants and loans may increase the student’s motivation to do well and finish on time or early. It might also improve their awareness of what an education costs and reinforce positive views on the responsibility that comes with participating in and repaying some of those costs.

Determining a Path

The earlier parents and family members begin to think and talk about how to pay for college the better. Saving for a child’s college education early can go a long way in relieving the pressure. Consider yourself fortunate if financial constraints do not enter the picture. This scenario would seem the best of all because it allows for maximum flexibility and options when deciding whether to involve a child in participating financially. More likely, with college tuition rising at an average rate of 6% per year, households may find saving enough to cover all the costs difficult.

If fully funding the education is not an option for your family, decide how much can be set aside and prepare to discuss this with your child. Initiating these discussions early is preferable but it may be helpful to wait until the child narrows their choice(s). Doing so may result in more resources being available than expected. Regardless, the more that is known about the schools of choice, the more parents can be prepared to discuss finances.

Shared Responsibility

If sufficient savings are available to cover the entire cost of your child or children’s education, consider having them participate in ways that further their financial acumen. This may come in the form of requiring they work during the summer and set aside enough of their earnings to cover extra-curricular activities like social organizations, academic societies, study abroad or spring break trips. If the child exhibits good time management skills, encourage them to find opportunities at school that expand their vocational experience. If these happen to come with compensation, require they use it in ways that reinforce the shared responsibility of paying their expenses.

If there is a gap in funding, work on the part of the child seems inevitable along with some combination of grants and loans to supplement what has been set aside. Other options, often overlooked are completing basic coursework typically required during the first two years at a local community college and/or extending the timeframe to graduate. Community college is considerably less expensive (lower tuition and no room/board since the child typically stays at home) and gives parents more time to save for the final two years. Extending the time to achieve a degree to five or six years may also be a good option. Under the right circumstances, it can help spread the costs and likely reduce the need to borrow.

These options might also result in shortcomings and should be considered carefully to better understand any longer term implications. Because the primary goal of attending college is to make good grades and secure a better, higher paying job upon graduation, reflect carefully when considering work. Having a child work during the summer would seem logical, but requiring work during the school year might lead to lower academic performance. Loans are clearly helpful in the short term but come with the responsibility of repayment. Some schools are taking steps to limit student debt upon graduation but these seem to be those with large financial endowments.   Larger, more easily accessible state institutions are not in a position to offer similar commitments to graduates. Debt, while useful under the right circumstances, can sometimes be a heavy burden. This is particularly true of a young graduate just starting out with an entry level wage or worse yet, to the parents of a graduate unable to secure employment.

Resources

There are a number of helpful resources available at www.collegeboard.org and www.studentloans.gov. Utilize these resources and consider having your student do the same. Search these websites for helpful facts, tools and tips. Beyond the tools offered here, try and be realistic about the available resources and how best to cover costs. Start discussions early and engage the child in a meaningful way that conveys both the commitment to their future and any shared financial responsibility that may be required. Honest and pragmatic dialogue can help parents and children alike, effectively cope with one of life’s larger financial hurdles in a positive way.