SEND YOUR CHILD TO COLLEGE WITHOUT SACRIFICING YOUR RETIREMENT

If you have a college-bound child one of the most important (and frank) discussions you should have together as a family should be about college affordability and financial aid.  Having this discussion as early as possible is also highly suggested. Choosing the right “fit” college tends to be an emotional decision for students and families- the pretty campus, the dorm rooms that “feel” homey, the extra-curricula’s available and of course, the academics.  Many families feel that the most important part of the college search process is just finding that “right fit” campus and then…look to make the financial aspect “work,” because that is just what needs to be done.  But is that the right philosophy when making one of the most important investments in your life?  Choosing a college is not the same as buying a pair of jeans.  It is not even the same as buying a car, however you would give a great deal of deliberation if you were to find yourself in the market for a new automobile, right?  Why not college?  It is not just a matter of looking at your assets and how to bridge the gap of your estimated family contribution (EFC).  It is about looking at the college process holistically and realistically. It is undeniable that more thought should be given to college affordability and the selection process, yet every year at this time it becomes more about parents scrambling to figure out how they are going to afford that huge tuition bill and the word “scholarship$” rolling off their tongue like a yoga mantra. My question to you is, why?  It is not just about how to position your assets, whether you have savings or not, or about some institutions being less expensive than others.  It IS about choosing colleges that meet all the needs of your child including, future job availability of their major (forecasting), the balancing of assets, possible borrowing via loans (we want to accomplish this sparingly), and the great deliberation that should be made as early as possible, to make sound choices regarding this huge investment. Affordability in the college bound equation is essential when thinking about what colleges you should be looking at and why it makes $ense to choose some colleges over others.    

First, let’s dispel a few myths:

 State universities are not always the most affordable option.  In many cases, you may be spending more money.  But how can that be?  Many families don’t realize that the sheer size of state universities can be a detriment.  Many students wind up having to attend for a fifth or sixth year because they were not able to register for the classes they needed to fulfill distribution requirements.  In other cases, if your child works better with guidance versus totally autonomy, the less individualized attention at a larger institution can lead to changes in their career pathway, hence, more schooling or transferring.  

Private colleges are unaffordable and the cost keeps going up year after year.  Yes, they are expensive, BUT  (research with smart cents) and you will find that they also have very large endowments and strategically balance out their classes with students who fulfill the college’s wish list.  So for example, your child is in the top 5% of their high school graduating class and are an accomplished musician, there are many colleges who may be willing to offer generous scholarships to a student of that caliber.  Therefore, it is not always wise for students who have exceptional academic records to pigeon hole their colleges of interest to specific institutions without looking at the financial breadth of the college they are interested in.   If you look at the award letters (side by side) given to a family, you will see that state universities typically will leave a generous gap (which is what parents are obliged to pay) because they do not have large endowments to give scholarships or merit aid.  They also cannot go back and find additional monies should your financial circumstance change and you warrant more financial aid- private colleges can and do respond to this type of leverage.

My child has an interest in engineering and that field is doing very well, so any money spent towards their degree is a sound investment.  Really?  This may or may not be true.  But in four years the field of engineering can change.  What is your child’s plan B, C or D? Have they looked into how their strengths in math and physics can be applicable in other positions? There are many considerations to be discussed when you equate profession and investment.

My child has always loved sports and hopefully, they will get some type of scholarship.  Yet…..academics rule, no matter how great a star you are in anything else. Equating sports scholarships with lessening the burden of financial costs is a risky belief system that needs to be altered; the same goes for…my child is the best artist, musician, equestrian, etc…while it is true that a student can be recruited and be offered some monies at certain colleges, the percentage of students receiving that generous a reward is few and far between.  Since I tend to tell stories from my experience, here goes: I had an exceptional track player years ago who  thought (as did his parents) that his dedication to track was what would get him into any and every college.  It was undeniable, he was amazing and was top in the state BUT….he was not as exceptional as an academic student. He was better than average and his SAT scores were decent, but in the scheme of things, colleges can and do choose to be very selective- even when it comes to recruitment.  They can find the exceptional track star with a stellar academic record; that is what they are striving for.  They are even willing to recruit a “not the best” musician who is top of the class and offer them the seat in the symphony. 

The bottom line, smart planning results in: guidance in choosing the right college for your child, the student benefiting by the most merit aid, grants or scholarships they can obtain, parents carefully positioning their assets and lastly, students supplementing the investment their parents make in their education with affordable borrowing. (See Below)

Next, check out the best options for students, in terms of available loans.

Federal Perkins Loans

The Federal Perkins Loan is geared towards helping needy students who want to go to college, but do not have the funds to do so. This is a loan with a low fixed interest rate, and is available for 1,700 post-secondary education schools. An added bonus is that the student does not need to make any loan payments while they are attending college.

This loan would be the most beneficial to students in the highest financial need category, and who would not want to take out more than $27,500 in student loans.

Federal Perkins Loan: You can check out the Federal Perkins Loan government web site for more information on what the loan is, and who is eligible for application!

Federal Direct Subsidized Loans

A Federal Direct Subsidized Loan is one that offers better benefits for needier students. The U.S. Department of Education will help pay the interest on these types of loans.

The students who would reap the most benefit from this loan would be those who are at least attending college part-time, in financial need.

Federal Direct Subsidized Loans: You can do further, and more extensive, research on what the criteria is to apply for this loan on their website!

Federal Direct Unsubsidized Loans

Geared towards helping all students, this loan does not require proof of financial need for the loan. The school the student is attending ultimately decides how much money a student can take out in loans. The government does not pay any portion of this loan. The interest and loan amount are the responsibility of the student to pay back at all times.

This type of loan would be most beneficial to students who need to borrow money and pay it back in increments in order to be able to attend college.

Federal Direct Unsubsidized Loans: Get more information on what this loan is and how it works on the official website!

Federal Parent PLUS Loans

A Federal Parent PLUS Loan is an unsubsidized loan from the government. Interest is charged throughout all periods of college credit earned, for which the loan is used. The parents must be the biological parents of the student going to college, and the student must be under 24 years of age.

In addition to students using this loan as a resource, his loan is also intended for the parents of dependent students. It would be beneficial to parents who want to send their children to college, but do not have all the finances available.

Federal Parent PLUS Loans: Check out their website for more information about this type of loan, and how families can qualify!

Private (Alternative) and State Loans

These types of loans are given out by banks, universities, private organizations, and state governments. There are no fixed interest rates, which means they are subject to increase over time.

This is a type of loan that is available to students with good credit, but often times this means a parent must cosign for the loan, as most college students have not yet built up a credit report.

Visit a college’s financial aid department for more information on these types of loans!

All of these loans are meant to help students pay their way through college. As long as students keep up on payments and do not let themselves accumulate too much interest or debt, these are very positive programs for students to become part of!

The Collegeologist is an independent college consultation practice which simplifies the college process for students and parents in the Farmington Valley area. Located at 395 West Avon Road in Avon (Across from All-Star Driver). Tel. 860-673-1500 www.thecollegeologist.com. Call for a complimentary consultation. Office visits, email & Skype are available. Like the Collegeologist on FB and follow on twitter @thecollegeologist.

©The Collegeologist 2013.