Q: "My college-bound high school junior is starting to look at schools and we aren’t sure how we are going to pay for it.”
A: While this challenge is a little stressful, it isn’t insurmountable; with hard work and guidance, you and your child can make this happen.
Before you begin planning your course of action, make sure you have a realistic estimate of costs. The College Board maintains a utility called the Estimated Family Contribution (EFC) calculator. Using this tool, enter your income, savings, and the number of people in your household. At the end of this, you’ll get a dollar amount showing how much the federal government expects you to pay. You can use this number as a target for how much you’ll have to come up with each year.
Once you have a good understanding of realistic costs, you and your child can start planning. If your child is reluctant to consider schools that don’t have an elite price tag, you might want to frame your concern as one about future debt. Use current examples of people who just graduated and can’t find work in their fields. Encourage your child to think about the next five or six years of their life, rather than just the next four.
Take a look at loans
If you have nothing saved for college, you’ll likely have to borrow at least something. The federal government sets a cap on how much they will lend to students, based on EFC, or estimated family contribution. These loans have quite favorable rates and good repayment terms that will help young people stay out of trouble.
Just keep in mind that you and your child will need to repay the loans – whether there is a degree at the end of the adventure or not. This can be a serious burden for a new graduate, even with income-based repayment programs. Don’t give in to ‘debt creep,’ or the feeling that, since you’re borrowing, there’s no reason to borrow less than the most you can; $19,000 in debt is better than $20,000 in debt. Every dollar not borrowed is compounded by the absence of interest on the other end.
Consider non-traditional options
There’s no rule that says every 18-year-old has to graduate high school and then immediately enroll in college. In fact, in most other countries, this kind of “gap year” is quite common. Students use the time to work part-time jobs, volunteer and build their resumes. A student working and saving for a whole year could save $10,000 for college. That’s enough to defer the cost of tuition. Plus, building a resume will make it much easier to find work on the other side.
Community college may also be an option and most offer discounted tuition for exceptional students. These institutions offer the same general education courses for a fraction of the price. Your child’s four-year degree, whether two years were spent at community college or not, will look exactly the same.
Have a frank, honest conversation with your student, and then do what’s best for you and your family. Don’t forget to celebrate the positive – you raised one smart kid! CAP COM’s College Bound Program has several free workshops to help families who are planning for college. It’s also never too early to schedule an appointment with one of our College Bound Specialists for guidance through the entire process.
Did you know? CAP COM's Certified College Planning Specialists are dedicated to helping parents and students find the right college, and the best financing options available. Click here to set up an appointment!