As college freshmen begin packing up everything in the house to head off to college for the very first time, their parents usually breathe a little sigh of relief. They have done what is necessary to guide their child through the college admissions process, figured out how to qualify for the maximum amount of financial aid, helped to pick a college that is within the family’s budget, and given their child a credit card to be used only for “emergency purposes.”
Everything seems to be going well until mom and dad get a disturbing phone call in September from their newly-independent young adult. The child might report that expenses are much more than anticipated and that he/she needs the parents to send more money. The parents might see that the credit card is being used for a variety of purposes that were never agreed-on with their student. They might hear that the child is spending student loan money that was supposed to be saved for educational purposes on everyday living expenses.
Even worse, they might find out that their wayward child has already dropped some classes or is falling behind enough that it could cause him/her to jeopardize the financial aid award for the next semester. All of these scenarios are the culmination of many bad decisions on the student’s part. It can feel really free to be independent, but if your child doesn’t have a solid money foundation, bad decisions can be made. Here is some last minute wisdom you can impart to your child as you’re packing up the family van for the trip to campus:
• A Budget is a Budget: Parents have to be very serious about setting a budget for their student. Unless there is a real emergency, parents should not be too quick to send money. It is already a strain on the family’s budget to keep paying normal home expenses while supporting a student in college, so there is really not much wiggle room left for unanticipated expenses. Ask the student to evaluate options, look for lower cost items, or find ways to generate an additional income. It may be hard to say no to your darling child, but it is a life lesson better learned at an early age.
• Have the Student Loan Talk Now: Too many families wait until the student graduates to talk about the volume of student loans that has accumulated, and to make decisions about repayment responsibilities. The family may have failed to meet financial aid deadlines, maxed out federal student loan borrowing, and started borrowing from private student loan lenders. The student looks at loans as “free money” and spends it on everyday expenses instead of judiciously applying it only to education expenses. At graduation time four years down the road, everyone is shocked by the amount of money that was borrowed, and nobody is prepared to shoulder the responsibility for paying back these loans. Help your student determine how best to spend student loan money, and make sure you agree now on who will be making payments after graduation.
• Keep Looking for Ways to Save Money: The only two ways to stretch a budget are to earn more money or spend less money. If your student is maxed out on academics and other commitments, then look for ways to save money. Shop for used textbooks, or see if classes have online course materials which can save hundreds of dollars in book costs. Analyze data and cell plans and pay only for what is absolutely necessary. Scrutinize living expenses to determine if it would be more cost-effective to have the student live off-campus, commute from home, or cook his/her own meals. Have your student ask around campus about college scholarships in their major or conduct research online to find scholarships for students already in college.
As a family you also want to keep an eye on the calendar so you will be aware that it is time to complete the FAFSA for the 2019-2020 academic year beginning October 1. Give your student the skills necessary to make a lifetime of smart money decisions.