How to Talk with Your Child About Funding their College Education
One of the most difficult parts of a college education is figuring out how to pay. The college experience is not cheap! In fact, the question about who is going to pay for college is one of the hardest questions for many families to answer. There are parents who want to shoulder the burden – to eliminate debt for their child, give them a path of success for life, and who can afford to do so. There are also families where they want to do all of those things but doing so would cause a huge financial burden to the family, too. No matter where you fall on that spectrum, it’s important to sit down with your child(ren) and discuss who is responsible for paying for college.
Having money talks – especially with your children – can be a super difficult thing to do But, the reality is that many students assume their parents will pay for college if that’s the path they choose. However, many of those same parents know that they can only contribute a certain amount of money to their child’s education. That disparity leads to frustration throughout the application process. Instead, it’s important to sit down and have a money talk with your family. Here’s my top three tips for talking about the reality of paying for college:
Let your child know whether you have saved any money
Most children don’t understand the reality of family finances, and might just assume that there is some type of college fund available, if they even know what those are. Let your child know early on whether you have been able to start a 529 Savings Plan, or have put money aside in other ways. This will go a long way towards finding and attending an affordable college. Plus, that’s the first money available to them to pay for school and should be highlighted right away in the calculations.
Think carefully about taking money from your retirement account
It’s so tempting to use your own retirement fund to cover college loans. But, you put money into retirement accounts for your own purposes, and withdrawing anything could adversely affect your financial stability in later years. It’s not just the principal amount you’re putting on the line; it’s the interest that will not accrue, too. You might think you are withdrawing just $5000 from your retirement, but that could end up being $7000 or $8000 less in your account, depending on your investment plan and time until retirement. There could also be tax consequences for an early withdrawal. It seems like an easy solution but is often anything but that!
Know why costs go up for college educations
Many families don’t have an adequate understanding of why college costs increase between schools and even between years. Discuss the cost differences between public and private, two and four-year, or in-state and out-of-state colleges. Learn about financial aid, and roughly calculate how much you will have to pay out of pocket or borrow through student loans. Start budgeting early, and look for scholarships that might be able to draw costs down. Remember, loans HAVE to be paid back. So, while you’re chatting about the options – determine who would be responsible for paying those in the future, too.
Parents should not get disparaged or feel entirely responsible about paying for college. In many households, it’s a joint effort from the student and parents. It’s important to strike a balance between helping and overburdening your student and having clear discussions to set expectations should make it easier for everyone!
More about Jodi and College Financial Aid Advisors
Jodi is a FAFSA financial advisor who helps with the financial aid process to help families of college students maximize their financial aid. From completing the FAFSA and completing the CSS Profile to reviewing the SAR, responding to requests for verification, comparing financial aid offers and understanding student loan options, Jodi is a fantastic resource when it comes to student financial aid. Schedule a 15 Minute Power Chat to learn more about finding ways to pay for college.