The Wall Street Journal’s MarketWatch site just posted the results of the third annual survey from Discover Student Loans. In May of this year Discover asked independent research firm, Rasmussen Reports, to conduct a survey of 1000 adults with children who are planning to attend college. While these parents strongly agree about the value of a college education, they are also concerned about the question of how to pay for it. Here are some financial aid lessons that other parents can take away from this survey:
• 85% are worried that student loan debt will affect their child’s ability to buy a home, car, or other large purchase after college: The question of how much student loan debt to take on is an important one which parents should clearly discuss with their students. Children who are just graduating from high school may not realize the long-term impact of interest accrual, and are probably not even thinking about what they will do after college. Parents need to explain these financial implications now so their children understand exactly what is involved in the decision to borrow money in any form. Although many students plan to use student loans to cover some of their costs Discover Student Loans president, Danny Ray, encourages students to always use “free money” first when financing a college education and then to determine what lending options work best to meet their needs.
• 77% of parents said they plan to help their child pay for college: While this is a nice thought, the survey revealed that about 75% of the parents are also worried about having enough money themselves to accomplish this goal. Parents of college students can sit down with their children and explain the financial impact on the family. The child should be aware of any sacrifices the family is making, and should be encouraged to limit spending and earn money whenever possible. Investigate the potential for work-study programs at your child’s school and always be on the lookout for any scholarship opportunities.
• Parents are beginning to shift some of the costs to their students: 15% of parents now believe their children should pay for the entire cost of their college education, while another 32% believe that their child should pay for most of it. This is an important discussion for parents to have with their students. Make sure they fully understand how much of the financial responsibility will be on their shoulders, and how much you will be willing to assist in repaying student loans. Don’t wait until your child graduates and is surprised by your expectations.
Making plans for college can be both an exciting and confusing time. According to the survey, parents often turn to college financial aid officers and personal financial aid advisors for advice and information. If you need more information about the college financial aid process, or would like to discuss the option of federal and private student loans, contact College Financial Aid Advisors (CFAA).