Congrats-your teen is headed to college! Hopefully, you already have thought about how to pay for the next phase of their education and have been planning and saving for years. But if not, you can use the summer months before your teen packs up and heads for the dorm to jump start planning and make decisions that will help your family’s finances. Luckily, there are still some things you can do to ensure that a hard-won college degree does not come with a lot of debt.
1. If you haven’t already done so, create a budget NOW. Tally the costs of all college-related expenses, both fixed and variable, to figure out what the true cost of college will be. In addition to tuition and fees and room and board, consider travel, activity fees and more. A budgeting app or budgeting software can help. Figure out how much of the cofiling taxessts you have covered and how much more you may need. While many students work part time to help offset those costs, it can be difficult to balance school and job responsibilities.
2. Find ways to stretch your available funds. Perhaps you can ask relatives to contribute to your child’s college fund; consider whether a private college is worth the extra cost or whether an in-state public school – that is usually significantly less expensive – is a better choice. Some students save even more money by attending a community college for their first two years, then transferring to a four-year school to finish their degree. Continue to apply for scholarship and grant opportunities throughout the college years; don’t give up trying after freshman year.
3. Set financial goals during college. With some careful budgeting and self-discipline, it’s possible to meet some financial goals, like saving for a future expense or paying off credit card debt, even while financing an education. It’s important and impactful for your child to learn, implement, and practice these principles as well. Managing finances while in college requires careful planning and organization as a family. Including your child in the steps of the journey will help them build “money smarts” and prepare them for an independent life once they have finished college.
4. Get the most out of financial aid. Ensure that all necessary financial aid forms, like the Free Application for Federal Student Aid (FAFSA), have been submitted and reviewed. Contact the college’s financial aid office to address any outstanding requirements or questions. Review any available tax benefits related to education expenses, such as the American Opportunity Tax Credit or Lifetime Learning Credit. Understand the eligibility criteria and gather the necessary documentation to claim these credits or deductions when filing taxes.
You can also negotiate with the school for increased financial aid by making your case for more help if your situation has changed since completing the form.
5. Earn additional money for college. Encourage your child to explore and apply for work-study programs, as many colleges offer opportunities for students to work on campus and earn money to help cover their expenses. These programs often provide flexible work hours that can be customized to fit around your student’s academic schedule, which is a huge benefit.
If your student didn’t qualify for a work study program, have them try looking for flexible, part-time work during their final high school years and over summer break. Taking on weekend or summer jobs to earn extra money will not only help contribute to their future education costs, but will also instill a strong work ethic in your child. Teaching them responsibility and commitment will benefit them both now and in their future careers. Remind them of the importance of maintaining a balance between their work and education so that their studies do not suffer.
6. If you do need to borrow money, be smart. Familiarize yourself with the type of student loans available, such as federal student loans (subsidized and unsubsidized) and private student loans. Learn about their terms, interest rates, repayment options, and eligibility criteria. If your family needs to borrow, always borrow federal student loans in the student’s name first, as they have low fixed rates and special benefits not available with private loans.
If you’ve exhausted federal loans, private student loans are a viable option. Do your research and find a lender with great interest rates, flexible repayment options, and good customer service.
Borrow only what is necessary. A good rule of thumb is not to borrow in total more than your first year’s salary out of college. If you have questions or need assistance, consult with a financial aid counselor at your student’s college. Keep yourself updated on changes in loan terms, interest rates, and federal student loan policies.
The Bottom Line
Paying for college requires careful planning and financial decision-making. As your teen prepares for this new chapter, it’s essential to create a budget and assess the true cost of college.
Start with a plan and give yourself enough time to explore your various options, including scholarships, work-study opportunities, and more affordable college choices, which can help stretch available funds. If borrowing is necessary, do your homework, find a trusted lender, and be well-informed about the different loan types and their terms. Stay updated on loan policies and changes to ensure you make informed decisions. By taking these steps, you’ll have the tools to make the most of college aid, paying for college, and minimizing the impact of debt on you and your family.