Your Child and College Funding – Having the Debt Talk

Helping your child get into a good college is a reason to celebrate, but nowadays it’s only half the battle. The class of 2014 graduated with $33,000 in debt and that number is only on the rise. Choosing the right college, college plan, and college funding plan is more important than ever, which is why every student’s parents need to take the time to sit down and half the debt talk. Planning ahead can make the difference between graduating on time with little to no debt, or being saddled with so much debt that their hard-earned degree won’t even pay for itself in the long run.

Choosing a College

While you may want your son or daughter to go straight to college from high school, there is a considerable advantage to waiting a year or two. They can use this time to get a perspective on what type of career path they may want to choose. During this time your student can find out what jobs are available to someone without a college degree and just what a real world dollar is worth. This understanding of the value of money is paramount for continuing the discussion on debt. If your student is already debt conscious, this may be the perfect time to introduce the idea of credit cards and their proper usage.

However, if you have an 18 year old who isn’t concerned with long term goals, taking time off may not be the best option. Instead, a community college may be just the stepping stone that is needed. If you get some push back, there are some serious advantages to community colleges. Community colleges are significantly cheaper than four year universities, and students with community college credits are often given preferential admission to in-state four year colleges. This particular avenue leads to saving both time and money during the college search process.
One of the biggest misconceptions is that students and parents have is that a more expensive college is going to help land a higher paying job. This is not the always the case.

For particularly focused learners, online college may be a viable option. For more information on the top online colleges check out the rankings from U.S. News.

The Debt Talk

The first thing that you need to explain to your son or daughter is that college is a financial decision that the whole family should be a part of – especially if you’re going to help pay for it. You may have considered a 529 plan to fund your student’s education. But this isn’t always the best choice. Smart parents choose other options like universal life insurance and even enroll their students in financial planning or debt counseling courses before they enter college. However, if federal student loans are available, they may be a better choice. These loans are often given at very low interest rates. You can keep your money in life insurance policies or other investments that have higher return rates and end up pocketing the difference in the long run.

Debt is not a bad word. In fact, a certain amount of debt is necessary to obtain a top credit rating. The key is teaching your child that the amount of debt that is carried should be well within their means to pay off at any given time. Credit cards are actually a very good tool to teach this with.

When looking for the perfect college might mean searching for one that isn’t following the standard 3% increase in tuition that has been the standard for the past 40 years. Some colleges, like Ashland University, are actually cutting their tuition instead of raising it. There are several colleges throughout the country that are using this as a way to compete in the high-competition area of college enrollment. Talk to your student about these colleges and compare the tuition and programs of the higher priced schools with these lower cost options.

Above all else, don’t feel guilty about sharing your opinion, especially if it’s your money. But you should also be aware that the college experience has changed since you were there, and student loan debt has become a real burden for many Americans. Take the time to do your research, plan ahead, and speak with your financial advisor. It could make all the difference to your child’s success, and save you a small fortune.

To learn more about how to plan for your child’s future, visit our college planning page or join us at our next College Funding Seminar.