Sorry Kids, Parents May Have More of A Say In Your College Choice

Think there shouldn't be any parental input on where their child should go to college? Think again.
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Think there shouldn't be any parental input on where their child should go to college? Think again.

A 2015 Sallie Mae study found that 32% of college tuition were contributed by parents, and only 30% came from scholarships and grants, the first time since 2010. And while parent borrowing decreased, the amount paid from federal Plus program for the year doubled. I know, crazy, right?

Families wanting to fill the gap between savings and smaller financial aid packages turn to student loans and in some cases private student loans or Plus loans. Unfortunately, those who need loans will find that federal student loans are capped and many private loans need a cosigner. If the cosigner is a parent, well, they should have a say, using tools like the Parent Student Debt Indicator (PSDI) to figure out the most affordable school.

Usually, people tend to compare the academic reputation, cost of attending college, and financial aid received when making a decision about what school to attend. However, if a parent is going to be a co-signer or take out a loan in their names to finance their child's education they should consider the future impact of their decisions.

The parent is responsible for those loans if the child defaults on payment, or, worst-case scenario, passes away. Sure, a parent might feel they're obligated to pay for their child's education, but they shouldn't. It's not unusual for student loan debt to delay parent's retirement, so think twice before borrowing on a child's behalf.

Parents should figure out how to incorporate the PSDI in their decision making to ensure that they aren't borrowing more than necessary for their child's education. Let's discuss how the results of the Parent Student Debt Indicator Study can help you.

The PSDI calculates the average amount of PLUS loans borrowed by parents per student every year at over 1,200 different colleges and universities.

Let's take a look at two different schools to show how the PSDI works. Say your child is torn between going to Otis College of Art & Design and Ringling College of Art & Design. Otis college has about 1077 students whereas Ringling College has 1170. The total amount of PLUS loans Otis College gave out was $4,881,187 while Ringling College gave out $107,708,860.

Let's use these numbers to calculate both school's PSDI:

Otis College - $4,881,187 / 1077 = $4,532

Ringling College - $107,708,860 / 1170 = $9,153

If both colleges had similar programs and features, then Otis College would look like the more obvious choice here.

Schools with a higher PSDI should be considered carefully along with the average amount of student loan debt per student.

With the data provided and the methodology included, parents and students can easily figure out whether the college of their choosing is a good financial decision. Schools with a higher average (amount of PLUS debt divided by the number of students enrolled) means that parents are borrowing at a higher rate than schools with a lower average.

Also, goes without saying, but the higher the average is, the more likely you might be forking more for your child's education.

One way to determine if you can even afford to take on the loans is to figure out what the monthly payment might be. Let's say you take out a 10-year plan to pay back those loans, and you borrow $80,000 over the course of your child's school career. That amounts to about $900 in payments. If you have more than one child, well good luck with that.

If your school is not on this list, don't let this deter you from factoring the Parent Student Debt Indicator in your decision.

Listen, this list is certainly useful to help you make a decision on which college to attend, but it's not the end of the world if you can't find the school you really want to attend on the list.

Instead, there are a few factors to look at to determine PSDI. First, figure out how many students go to the school of your choosing. A simple Google search will probably do, or the US Department of Education's website College Scorecard will show you the exact number of undergraduate students currently enrolled. They also have averages for loans taken out, but unfortunately for you, the PLUS loans aren't included in there. Even still, you might want to take those numbers into consideration.

Ok, back to figuring out PDSI. I tried searching online for total PLUS debt for different colleges and universities and had a heck of a time. Maybe you're smarter than I am and just called up the financial aid office at your chosen school for averages from last year. Either way, hopefully, you'll dig up some numbers and be able to factor in PSDI.

Conclusion

If you're taking out a loan to help pay for your child's education, you are certainly allowed to have a say in where they should go to college. After all, you are potentially getting out a loan in your name, which means you are responsible for paying back that money.

And yes, money shouldn't necessarily be the only indicator for whether your child should go to a certain school but that factor shouldn't be ignored either. I'm sure you'd agree that your future is just as important as theirs, and if you might have to delay retirement because you have a bunch of loans to pay off, you'd think twice before taking out a huge loan.

So go ahead, use a tool like the Parent Student Debt Indicator, to determine whether the PSDI for that particular school is a yay or a nay. Going to college isn't cheap, but it doesn't have to break the bank either. I'm confident that you and your child can make an informed decision together.

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