Students are going back to school and parents are again thinking about the future. Between AP classes, sports, extracurricular activities, and community service kids, these days are very busy. Parents are also worried about how to pay for all of those things plus the upcoming college costs. Are you preparing your family correctly? Take this quiz to see!
1. Have you set up a 529 or college savings plan?
2. Have you calculated the future college costs once your children graduate? (Here is a college costs calculator.)
3. Have you considered saving for 5 or 6 years instead of 4 years? (College completion rates)
4. Have you researched other college costs, outside of tuition and room and board? (Examples include travel back and forth, parking, books, health care, monthly living budget, sports passes, etc) (Rising Hidden Costs and an Infographic)
5. Have you or your child looked into scholarships based on his/her interests, sports, or talents?
6. In case you don’t have enough socked away, do you know if you’ll qualify for parent loans (PLUS)?
7. In case you don’t have enough socked away, do you know if your child will qualify for federal loans?
8. Do you know the difference between subsidized and unsubsidized loans?
9. Do you understand the cost-benefit of AP or Dual Credit courses taken in high school? (scroll down for more)
10. Have you (or your children) researched colleges and degrees based on their earning potential in that profession?
Add up how many questions you answered “yes” to:
8-10 “yes” answers: Congratulations! You’ve done the homework and are on the right track!
4-7 “yes” answers: You’re getting there! Be sure to read the tips below to improve your knowledge and preparation.
0-3 “yes” answers: Uh Oh! Hopefully, your child is very young or you have a lot of time on your hands in the next few years to get caught up. Consider contacting a financial advisor to answer questions about setting up 529 plans or a college consultant, like myself, to answer college financial questions specific to your child.
4 Steps to Prepare for College Costs
The process of preparing for college involves deciding what the family can and is willing to contribute to a child’s college education costs. Many factors affect the costs itself, including private vs public colleges, completing the degree in 4 years, scholarships and students working throughout school to help contribute to expenses. Experts agree that parents should take several steps to prepare for the cost of college:
1. Evaluate the educational costs of career goals: Begin by discussing career options with your child. Students will sometimes have a very general career path in mind (science for example) and will need help narrowing it down. Use online tools and research to determine how much professionals in those careers can expect to make. Compare those numbers to the costs of college.
If a student wants to be a doctor, there is a very high earning potential. Combine that will the need for a great undergraduate program to enter med school and the costs of private or out-of-state education might make sense.
If a student wants to major in social work, however, that has a very low earning potential and employment can be obtained with an in-state public education while keeping costs low.
- “Free” money: scholarships, grants, etc
- Family savings
- Student or parent loans
Obtaining more of the “free” money requires preparation before the student’s senior year of high school. Families should also discuss how much the parents and the child is willing to borrow for that education. No one wants to graduate with a heap of debt, but if small federal loans are required to complete the degree, the payoff might be worth it.
Families who want or need additional assistance with career goals or selecting a college major should contact us here at Brand College Consulting for personalized guidance.
2. Encourage your children to develop skills with scholarship potential: You’ve probably heard the line that there is plenty of scholarship money “out there”, students just have to apply. Well, that’s kinda true. Students also have to meet the basic eligibility for those scholarships.
As the new school year starts, children in middle and high schools should be encouraged to get involved in activities that allow them to pursue their passions, which can help boost a student’s scholarship potential. Scholarships are available in athletics, music, community service, student clubs and organizations, and of course with excellent grades.
Clare Levison, author of “Frugal Isn’t Cheap” recommends parents make contributions to a 529 plan, tax-advantaged college investment accounts, based on their achievements as an incentive to do well. For instance, if a child scores high enough on an Advanced Placement test to earn college credit, a parent might contribute $50 to $300 to the child’s account. The exact amount should be based on a family’s individual financial circumstances, experts say.
Another option to encourage students to actually apply to scholarships is to incentivize them financially. If a student finds and applies for a scholarship which they then earn, they should get to keep a percentage of the scholarship total. My own family uses this method to encourage our oldest children to find and apply for scholarships at their own college. If they do so, the scholarship money decreases the amount that the parents pay so we reward the child with 25% of the total in an account to spend on miscellaneous expenses at college. Parents don’t have to nag them about applying and students feel included in the award.[Learn how to evaluate your college savings performance.]
3. Look for programs that cut the cost of college: College savings go further if families find programs scholarships to supplement what they save. The most obvious and widely used programs are AP courses, IB courses, and Dual Credit programs.
AP (Advanced Placement) and IB (International Baccalaureate) programs are offered in most high schools as a way for high school students to take college-bound courses. If they earn a certain score on the final exam (AP exam), they have the potential of earning college credit. There are limitations: for example, scores of 3 which is considered passing, may not be high enough for certain colleges to grant credit. Some universities simply don’t grant AP credit in Math or Science for incoming freshmen to ensure that students all take the same courses and are equally and adequately prepared.
Another option is Dual Credit programs. These allow high school students, usually juniors and seniors, to take courses and earned credit both at the high school and college level. Most students take 1-2 courses a year through the Dual Credit program (such as English and History). Credit is earned as long as the student passes the course, which can add up quickly to an entire semester worth of classes, saving the family thousands.
4. Discuss family contributions: Families who have middle school students are at the perfect time to start discussing the costs of college. This can be done through an honest discussion with their children about what they’ve saved, how much they’ll continue to contribute to a 529 plan and how much they’ll give their children during college.
Following the discussion, parents could encourage the student to work part-time to help save for college or take more AP or Dual Credit courses to reduce the time it would take to get a degree and discuss the possibility of living at home during college. Families who can’t afford to save for all four years at a university should consider sending their teen to a community college for a year or two first. Some community colleges cost a third to a quarter of what universities will charge for the same courses.