Every year I present college planning workshops at some of the high schools in my area. My presentation, "Pay Less for College" helps parents of college bound, high school students manage their college expenses more effectively, increase their eligibility to receive financial aid, and find ways to -- you guessed it -- pay less for college.
The top 5 takeaways from Pay Less for College.
Have a Plan. Here is how the process goes for many families: student does really well in high school, comes home and says they want to go to an expensive private school or a public university in a warm climate, mom and dad see the price tag and freak out.
Don't do that.
Instead, start a conversation with your student as soon in the process as possible. Whatever age your kids are, tomorrow is not too soon.
During that conversation be honest with them about your expectations and how much you can afford to spend on college. By the end of this conversation - hopefully, by the end of their junior year of high school -- you should know the answer to the following three questions: 1) How much college will cost, 2) Who will pay for what, and 3) Where the money will come from. Until you get those three questions answered, you don't have much of a plan.
For a more detailed explanation of these questions, check out the post "To Pay Less for College Answer 3 Critical Questions."
Choose your college wisely. How much you pay for college may come down to just one thing: the school your student chooses to attend.
I believe the single biggest factor determining how much you will spend on college is the school your student chooses to attend. Saint Cloud State University probably costs less than Carleton College -- or does it?
The real answer is -- it depends. For some students, a highly selective private college like Carleton College may actually be your least expensive option. To know for sure, you need to do your research. How much you pay for college will vary literally from school to school, family to family, and even student to student within the same family.
Understand how financial aid works. Financial aid can be need-based or merit-based. Need-based aid takes into consideration your income and assets. Merit-based financial aid is based on your student's academic merit -- grades, ACT scores, class rank, etc. Knowing where your opportunities are and how to leverage your unique situation can help increase your eligibility to receive financial aid significantly.
For example, let's say your student has a 30 on the ACT, a 3.9 GPA and is in the top 20 percent of her class. Maybe your income is $150,000 (or $50,000) and you have $100,000 in non-retirement assets some of which is in your daughter's name. Where are your financial aid opportunities? Understanding how the financial aid system works, and how to make the most of your situation will help you answer that question.
Avoid debt. Obviously no one wants to borrow any more for college than they have to, but these days student loans are a necessary part of paying for college for most students and their families.
According to the Project on Student Debt the average Minnesota student has over $31,000 in loans by the time they graduate. If they go on to graduate or professional school, the numbers go even higher.
The Minneapolis StarTribune recently reported that at the College of Veterinary Medicine the median student loan debt is over $188,000 -- and that doesn't count undergraduate loans. The article featured a student with loans that exceeded $300,000!
While that is an extreme case, it's not unheard of. Knowing how the financial aid system works, doing some wise college planning, and making your self a smart consumer of a college education can help avoid that situation for your student.
Don't forget about retirement. One of the biggest obstacles to get over in your retirement planning may be the college tuition bills you need to pay between now and then.
How old will you be when your youngest child graduates from college? Odds are you will be less than 10 years from retirement. That's not enough time to make up for ground you lost while you were paying your kids' college bills.
Before you make promises to help pay for college, know how you are positioned for retirement. If you are well-positioned for retirement now, maybe you can afford to shift more resources towards college tuition. If not, spending money today or even borrowing to pay for your student's college expenses may threaten your financial security in the future.
As a reader of this blog you are welcome to attend any of these public presentations. For a list of when and where you can attend this presentation, see the Speaking and Events tab on my website.