Parents frequently seek advice on the appropriate timing for starting conversations about college finances. It is my conviction that this vital discussion should commence early, possibly as soon as the freshman year, and should be an ongoing topic throughout high school. It’s important to approach this practically, presenting information in small, manageable segments.
Financing college education is straightforward but costly. Scholarships offer “free money” and are available at national, local, and college-specific levels. The Free Application for Federal Student Aid (FAFSA) provides financial aid based on a family’s financial status, including grants, federal work-study, and loans for students and their families. Additionally, 529 plans offer tax-advantaged savings for educational expenses. Beyond FAFSA, there are also private student and family loans.
I have had a few different examples from my experiences that I would like to share.
Example 1:
This story starts off with a student who figures that parents will assist in paying for college. Facts are the parents never really committed to paying for college but would assist the child in getting loans so he could go to college.
The student had an outstanding GPA, extracurricular activities, and did plenty of volunteering. He had a dream to attend a prestigious university. Applied and was accepted. The dream was fulfilled! The family was extremely excited. Everyone’s mind was made up but no discussion on finances happened. Until it was time for deposits. That is when the student found out that the parents were only planning to assist him in getting loans.
The student came to me looking for a cheaper option, without sacrificing the dream job in the future. We worked to find a college that was about 70% cheaper in the cost of attendance. The problem was this was late in scholarship season, so getting assistance from “free money” was going to be almost impossible (there is always every other year at college to get scholarship dollars). Saving 70% off meant a much lower loan amount.
Example 2:
The story begins with a student who had no plans for college, but during their senior year, decided to pursue higher education. Discovering a passion that required a college degree to achieve their dream. The family reached out to me for assistance. As a team we developed a strategy for applying to affordable college and scholarships. The parents planned to seek advice from their financial planner. Ultimately, scholarships were granted, resulting in the student taking out only a small loan for the first year.
In Summary:
Dear parents, take note of these cautionary tales. Never undervalue the significance of initiating discussions about college finances early. The repercussions can be both emotional and financial. Enable your student to make knowledgeable choices and explore all possibilities, as it is through these dialogues that aspirations can thrive, unburdened by the oppressive load of debt.
When it comes to discussions during senior year, particularly when applications are being sent, it’s crucial to sit down with your senior and talk about paying for college. In my meetings with students regarding applications, I emphasize the importance of understanding the total cost of attendance. I stress to students that their primary job this year is to secure funding during scholarship season. The more scholarships they obtain, the less they—or perhaps their family—will have to pay.
Loans may have to happen. Making sure that the loan amount is a low as possible – is key!
Some Key Findings on Student Loans
According to Finmasters:
- Approximately 1 in 7 Americans (13.5%) has student loans.
- The average federal student loan debt per borrower in 2022 is $37,667.
- The highest number of borrowers are aged 25-34.
- 2.5 million Americans in their 60s and older are still paying off student loans.
- Most borrowers need up to 20 years to pay off their student loans.
[…] and parents are often concerned about finances. Conversations I’ve heard include concerns such as, “I’m anxious about my mom […]