Getting ready to send your son or daughter off to college? Worried about how to pay?
Fortunately, more than $100 billion in financial aid is awarded every year. You and your college-bound child will want to explore as many aid options as possible, so you can make an informed choice based on your financial need and economic situation. One size does not fit all.
- Research your aid options.
- Include your son or daughter in the aid process.
- Develop a financial plan to help your child pay for college.
- Have a discussion about money management.
Grants, scholarships, and loans are the primary sources for college funding.
- Grants and scholarships are the best choice because you do not need to pay them back (as long as you meet all of the obligations).
- Pursue loans only if you don't get enough funding through grants and scholarships to pay for college.
Meet with the financial aid staff at the schools under consideration to talk about your options.
Include your high school student in any discussion about paying for college.
Step 1. Have an open conversation about money.
Determine how much you are willing to contribute to your son's or daughter's college costs and share this information. Decide together who is responsible for paying and how much each is able to give (for example, toward tuition, books, room and board).
Step 2. Set some ground rules.
Don't do all of the footwork on your own. Students who participate in the aid process seem to take the responsibility more seriously.
Step 3. Encourage participation.
Give your college-bound child a few financial tasks to promote understanding of the commitment involved in getting a loan. This is particularly important if your child will be the borrower (that is, the person responsible for repaying the loan).
Step 4. Make the final decision together.
It's a good idea to have your child evaluate every award letter. Don't be surprised if you have differing opinions about which aid package provides the most value in terms of educational experience. Have an open dialogue about what's important to each of you and be prepared to compromise.
Step 5. Prepare your son or daughter with knowledge.
Make sure your son or daughter knows his or her student loan responsibilities before either of you sign any promissory note. Your role is to provide support and guidance.
If you want to help your child pay for all or a portion of his or her college costs but don't know where the funds will come from, don't panic. Here are few tips that may help you prepare for upcoming college costs:
- Start saving early. The best way to prepare for the costs of college is to start saving early and be consistent. The earlier you start and the more regularly you make deposits into a college fund, the more money you will have available for your child's education.
- Re-evaluate your budget. College is expensive, and it may take some financial sacrifice on your part. Evaluate how you spend money and create a budget. You may need to give some things up in order to balance the bottom line.
- Look into PLUS loans. As parents, you may choose to borrow a federal PLUS loan to help pay for your child's education expenses. To borrow a PLUS loan, you must pass a credit check or, if you don't pass the credit check, obtain a creditworthy endorser. And you are responsible—not your student—for a PLUS loan debt.
Now is a good time to teach your child some basic money management skills. While at college, your son or daughter may be making financial decisions for the first time. A college student who is uninformed about money is at greater risk of doing long-term damage to his or her bank account and credit history.
Give your son or daughter the skills to face any unexpected money issues that may arise throughout college:
- Budgeting—Sit down together and work out a budget for school. Stress the importance of living within this budget, because once the money is spent, it's gone for good.
- Unexpected fees—Many students get into financial trouble without realizing that debt is actually a very expensive circumstance. Overdraft fees from ATMs and penalties on late payments can add up quickly. These unnecessary expenses are easy to avoid with a little foresight and education.
- Credit cards—Many students get their first credit card during their college years. (Per new federal rules, the minimum age is 21 years to get a credit card without a co-signer.) Credit used wisely is a good thing. But credit cards require discipline and responsibility. Make sure your child understands the commitment involved in good credit card use.
- The financial aid office at the school your child plans to attend is a great resource. The staff is very familiar with the aid programs available and can provide assistance.
- The more you learn about all of your financing options, the more comfortable and prepared you will be when the college bills begin to arrive.