The Six Figure Cost of College: In Dollars & Sense
The words, “financial aid,” can send chills down any parent’s spine, as they wonder, “How in the (insert expletive) are they going to pay for college, without going bankrupt?” Many American families approach college, like other purchases in their lives–dream big and figure out how to pay later. Parents often believe, “If my kid does his/her job–getting the right grades and ‘higher’ test scores, plays all kinds of sports and is a leader–then, I’ll do my part and pay for the whole university thing.” Then, as the kid’s high school graduation year looms closer; the news continues reporting “record tuition” hikes; colleagues at work start grumbling about tuition payments and sisters and brothers-in-law worry out loud about the expense of college for nieces and nephews; stock market volatility is not creating any confidence in retirement investments, plus meetings at work about pension values being reduced; the equity in the family home is decreasing, at the same time parents look at their multiple children, who will go to college in overlapping years, as they open the cupboard to peek at the rainy day fund and only moths fly out. GASP.
So, about this time of year, we start getting more phone calls about scholarships and other sources of “free” money. However, scholarships require effort–which parents (especially those living through the college application process for the first time) can simplify or overlook in their emotionally charged efforts to bridge the gap between what they expect college is going to cost and the reality of what college costs, in comparison with their ability to pay. While, for Seniors, in the middle of still applying to college, having endured the first round of application deadlines, with a few moments to complete research papers and study for finals before the holiday break in 2 weeks, while continuing their “normal” pace of activities after school and on the weekends, PLUS preparing for the holidays around the corner, ANOTHER essay for the scholarship application is probably going to be after the last, last, last item on their to-do list–right behind clean every toilet in the neighborhood. (And, for many, the mere mention of scholarships by parents can be the “spark” that unleashes a tirade, from pent up pressures and angst about getting in or not to the “right” college, high school coming to an end and facing the specter of leaving home in the next 12 months–that has nothing to do with paying for college.) For some families, who’ve been upfront–for awhile (like years)–about financing college and the limits of the family’s resources to assist, and helping each kid determine the value of a college education, then the scholarship conversation is only the next step in a series of on-going conversations, that allows parent and student and siblings to work together.
To avoid these Senior year panicked scenarios, for families with Seniors, open the family finances to be reviewed by the entire family, as soon as possible. Working together parents and teenagers can determine an amount both the family and the student are expected to contribute toward college expenses. Then, both student and parents can create coordinated plans outlining how to meet those targets, including: applying for scholarships, getting part-time work, using savings, reducing expenses, and/or taking reasonable loans. Additionally, for families with children younger than a Senior in high school, work to understand the family finances–i.e. monthly budget, asset values, net worth. Then, open candid, on-going conversations, to discuss how the family will contribute toward college expenses and help each child understand more about their purpose for seeking a college degree. Parents, who openly discuss the family’s finances not only avoid last minute planning, but also possibly the greater risks of high student loan debt for their children and/or other painful financial sacrifices for the rest of the family. For any aged family, approach college as a 4 year endeavor to help plan realistically and minimize the overall stress of paying for college. No matter the age of the student heading toward college, having a consensus building series (and series is the key word to remember) of conversations, where both parent and student can give input and reason out a consensus, will help everyone in the family make a confident decisions about college and plan for its expense, for each child in the family.
Note: Our 6-part Prudent Planning series can help families learn more about how to assess their financial situation.
Photo Credit: Art Baird, Creative Marbles Consultancy 2012