20 Jun Assess Your Family Budget As Part of the College Process
Summertime and the living might not be quite so easy for families with rising high school seniors who are in the middle of the college search. Although it certainly is exciting and fun for the student to have big dreams about which college to attend, the parents are far more likely to be thinking about the impact on their family budget.
Before getting too far into the process, where the student absolutely falls in love with one particular college, it is best to have a frank discussion about what you family can realistically afford. Here are some tips to help assess your family budget as part of your college search:
- Think about where your family stands financially: This is really a challenging time to be thinking about spending big money on college. We have just come through a pandemic that altered many families’ financial situations through job loss, death, or medical bills. Now, we may be looking at a period of inflation, with rising interest rates taking a toll on already-stressed budgets. Families have to take all these factors into consideration when trying to determine how big their college budget is.
- Talk about how to pay for college: Families have a variety of financial resources they can access to pay for college. Some parents, grandparents, and students themselves have already saved a substantial amount of money in education savings plans. Others plan to use the next year to earn money they can contribute to the cause. Still others might think about tapping into home equity or retirement accounts, although these decisions are harder now in today’s more uncertain economy. Also, take a look at potential future expenses in terms of siblings attending college, or grandparents who might need extra help. The parents’ income at the time of college enrollment plays a big role in your family’s ability to pay future college expenses.
- Look at 2021 income and 2022 year-to-date income: After October 1, families will have the opportunity to file the Free Application for Federal Student Aid, which will determine their eligibility for financial aid for the 2023-2024 academic year. The official FAFSA will use information from your 2021 federal income tax returns as the primary source of determining your eligibility. If your financial situation changed in 2022, be prepared to make a case for additional aid. You can use the Federal Student Aid Estimator to get a rough idea of eligibility now, and compare the results to the actual costs at the colleges to which you will apply.
- Be wary of student loan borrowing: Many families do use student loans to cover some of the costs of college, but be aware that this could become more expensive in the current interest rate environment. Look at the students who are already struggling with student loan debt now, because they simply borrowed more than they could realistically afford to repay. Only borrow what is absolutely necessary, and use available student loan funds wisely. Compare future repayment amounts against future earning potential to determine how heavy your debt burden will be. Parents should also make students aware of how much of the future payment responsibility they will be expected to shoulder.
- Always look for scholarships: Scholarships are one of the best ways of finding additional money to help pay for college. Start searching now, and continue through the college years.
Help your student make wise financial and emotional choices when it comes to college. Learning about money and family budgets may be the first of many great college lessons to come. Good luck!
Remember that CFAA helps with every step of the financial aid process, from completing the FAFSA and completing the CSS Profile to comparing financial aid offers and understanding student loan options. Rising seniors can set a CFAA new client free strategy session or a 15 Minute Power Chat to learn about finding ways to pay for college. To get the latest financial aid information and college application to-do lists, look for my bi-weekly JustAskJodi emails and check out my monthly CFAA e-newsletter.
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