11 Oct Parents Should Take Quick Action If Your College Freshman Has Money Problems Already
As a parent, you have a lot of reasons to be proud of your children – they worked hard, earned good grades and were accepted into a great college. So you might begin to relax a bit and think they are all set with self-management skills for a few years. But, now you are beginning to notice some signs that there could be some financial problems creeping into their young life.
Perhaps they are asking you to send them more money than anticipated. Or you might notice unusual charges on the debit or credit card you provided, often for small amounts they should have been able to cover in cash. There might be late fees or interest charges accumulating on the credit card. The student loan balance that was supposed to be used for education expenses is being used for everyday living items. On phone calls or chats, you might notice that your child is talking about skipping meals, not doing laundry, or missing out on activities with friends.
Don’t overlook or ignore these signs. They could indicate that your child is not as money smart as you thought. It could turn into a big problem later if you don’t teach your child now how to successfully manage these life challenges. It is not always easy to talk about money, but it is necessary. Perhaps your child is coming home for a weekend, or you are going to the college for homecoming or Parents’ Day, and you can schedule some time to talk in person. If that is not going to happen, then you have to start the conversation on the phone and finish it during the next holiday break. Here are some points to help move the conversation along on a productive note
• Be Blunt: Don’t sugar-coat the dangers of being in debt. Educate your child about how quickly interest charges and late fees can add up, so that monthly payments on credit cards become too high to manage. Your child might be astonished to learn that it will take years and years to pay off a balance when making minimum monthly payments, given the high interest rates on most credit cards. Reinforce the fact that life after college costs money, too, and your child may need to move, furnish an apartment, or get a car, all of which will be much more difficult with a heavy credit burden hanging over their head.
• Be Realistic: Perhaps you have not set a good example of necessary and optional expenses. Ask your child to write down what money is being spent for, as it is being used. This is not just the cash expenses, but the charges and debit card purchases as well. It is often shocking to see in writing how just one coffee a day, or two nights out a week can add up to a big financial outflow.
• Be Helpful: Once your child is aware of the situation, be helpful in coming up with possible solutions. Perhaps the two of you can work on a realistic budget together that compares income with expenses. Ask your child to suggest ways to increase income or cut expenses so the budget is more in balance. There might be ways to find more affordable meals, earn extra income, or participate in more free activities on campus.
• Be Resourceful: Don’t think of Federal Student Loans as the only way to pay for college. Repayment can take more than ten years after graduation, putting a dent into post-college life. It is better to scrimp during the college years than have to make ends meet while repaying student loans. Have your student look for scholarships, consider selling childhood items online, or tutor other students. A few dollars here and there can cover a lot of miscellaneous out-of-pocket expenses.
If your family did not apply for financial aid for this academic year, sit down together and file the FAFSA for 2020-21 as soon as possible, to make sure your child qualifies for the maximum amount of available financial aid next year.