Well, 2020 and 2021 have certainly been some pretty remarkable years. Between COVID, natural disasters, unemployment, and economic swings, family budgets have taken a major hit. It can be hard enough to recover and get back on solid financial footing, but for families with a rising high school senior the challenge can seem even more unsurmountable.
There are several ways that giving your children the gift of a college education can impact your family. First, there are the costs of just applying to college. Some families are surprised at how quickly these “small” expenses can add up – application costs, testing fees, and travel expenses to visit preferred colleges. With financial aid applications the FAFSA is free, but there are fees involved for the CSS Profile. Before you know it, you could be down a good chunk of money without your student even setting foot in a campus classroom!
The second hit to the family budget comes when the student actually starts attending college. There are the ordinary expenses of tuition, room and board, and various fees, but you also have to take into account any living expenses needed for your student. While financial aid might cover a good deal of the education expenses, the extra cost of supporting a college student while still running your own household can be a burden. Be prepared to set a budget for your student, and make sure he/she lives by it.
Finally, many families don’t take the cost of student loan payments into consideration when budgeting for college. Repayment seems far away, but it could be a drain on your student and your family for years after graduation. Have a decisive discussion now about the amount of money you are willing to borrow, and set repayment responsibilities, so there will be no surprises down the road. Other steps you can take to minimize the impact of college on family finances:
- Apply for financial aid: Never assume that your family does not qualify for financial aid. Always complete the financial aid applications required, and wait for each college to make its offer to you. You might be pleasantly surprised. Do it early, so you qualify for the maximum amount available, as some programs have limited funding. At the very least, you will need to have a FAFSA on file if you need to access federal student loans to close any money gaps.
- Look for scholarships: These forms of “free” money can be a lifeline for many families. Most are modest, but some can be quite generous. You never know what your student will qualify for if you don’t put the work into the scholarship search process.
- Save, save, save! Fully review your family budget and look for areas where you might be able to save money. Every penny saved is a penny you won’t have to borrow. Even cutting back on data plans, coffees or take-out dinners can have a big impact. You might find yourself with an “extra” thousand dollars that can go to cover some of those additional expenses.
Check with your financial advisor about the impact of college expenses and student loans on your tax situation as well. Your family life should not be unreasonably disrupted by sending a child to college. You should still be able to provide for basic expenses, save for retirement, and maintain an emergency fund. A complicating factor also arises when there is another child with college dreams coming down the line. If paying for one child in college is a stretch, two might break the family bank completely.
Build a partnership with students when deciding how much college your family can afford. If they want to attend an institution that is out of your price range, get them involved in serious discussions about how you can accomplish that feat as a family.
Set up a CFAA new client free strategy session to learn more about financial aid and finding ways to pay for college. To get the latest financial aid information and college application to-do lists, look for my weekly JustAskJodi emails and check out my monthly CFAA e-newsletter.