The College Money Talk
Over the past two decades of helping families pay for college, I have seen the following pattern for families that come to me for help:
Mom, Dad and their high school student visit a college.
The student is thrilled with the school and loves everything about it.
Mom and Dad discover what it will cost (but discover this when it’s too late.)
The parents have to explain to their child the dream school that he/she worked so hard to get into is not an option because both parents and student will incur massive and crushing amounts of student loan debt.
How to avoid the emotional letdown
Have the college money talk with your student before you even start your college search.
When you go shopping for your child’s first car, you don’t go shopping without a budget in mind. You don’t test drive a Porsche only to discover what it will cost afterward. You already know a Porsche will set you back $90,000 or more and that is out of your price range. You don’t even test drive one because you know you will both love it – that makes saying “no” that much harder.
In the same way, having these conversations with your student before you start going for college “test drives” keeps everyone on the same page.
This is an emotional buying decision.
College admissions folks are good at what they do, and they have a great product to sell.
Having the money conversation as a family will keep hearts from being broken, and ensure students graduate with manageable student loan debt without robbing mom and dad’s chances of a successful retirement.
I know this isn’t easy. When it comes to financing college, many parents feel embarrassed because they haven’t saved enough money for the cost of today’s college education.
The reality is that every parent wishes they had more saved and started saving earlier.
What are the Things to Discuss?
Sit down with your student to seriously look at the facts and answer these questions:
First things first. Does the student have a major in mind, and how closely does this major match with his/her personalities and ultimate career goals? Uncertain goals will have a real negative effect on your bottom line. Changing a major or transferring colleges is the biggest reason for extra years and extra costs.
Once the academic profile is developed, it’s time for the college money talk:
How much will college cost?
What is the projected income for the student’s future career options?
Does the return (future salary) justify the investment (cost of the college)?
How much have you saved for college?
How much can you budget each month out of your current income for college?
How much will the student be responsible for?
How much aid and merit scholarships do you qualify for?
What is your 4-year plan?
What is your plan for the student’s siblings?
Why I need to go through all of this?
If you somehow have all the money saved for your child to go to whatever school he/she chooses ($300,000+), please disregard this.
If this is not your situation and you need to get creative on how you will pay for college, it is imperative that you have the “college money talk” to reduce the stress and anxiety of the college shopping process.