3 Tips to Avoid Heartbreak When Shopping for College
Taking college visits with your student is one of the most memorable and exciting parts of the college planning process. However, every year many families turn what should be a great memory into a nightmare, when their student falls in love with a school that mom and dad find out too late is not a good financial fit.
The result? Either the student is devastated to learn he can’t go to his dream school that he worked so hard to get into, or the family sets themselves and their student up to take on massive student loans to make it happen.
Avoid the heartbreak!
Have the college money talk with your student before you start your college search. Think about buying a new car for your student. When you begin to shop, you have an idea of what your budget is. You wouldn't test drive a Ferrari only to learn afterward that you can't afford it. You would already know a Ferrari is out of your price range, so you wouldn't even drive one because you know you would love it and it would be extremely difficult to say no. In the same way, having these conversations with your student before you start going for college visits keeps everyone on the same page and helps avoid this scenario.
Picking a college is an emotional buying decision.
College admissions folks are good at what they do, and they have a great product to sell. Being proactive and having a realistic conversation as a family about what you can afford will help to manage those emotions, prevent heartache and make sure your student can graduate with manageable student loan debt without robbing your retirement. Having this conversation is certainly easier said than done, so use these tips to have a great “money conversation” with your college-bound student.
Tip #1 - Determine what your student wants from a school?
Does your student have a specific program or major in mind, and if so, is that a good fit for their future goals? Some uncertainty at this point in life is to be expected, but too much uncertainty can have a real negative effect on your overall costs. Changing a major or transferring colleges can lead to extra years and extra costs.
Is your student a good candidate to start at a community college? Community college can be a valuable way to cut costs and still graduate from that dream college. Also, make sure to cast a wide net when looking for schools. There are many colleges and universities in the US that could be a great fit for your student, but oftentimes students get fixated on the name brands everyone thinks of or that their friends have applied to. Don't let your student be the only one driving this part of the conversation.
Tip #2 - Understand How Much College Will Cost
This is where "the rubber really starts to meet the road". If you ultimately don't know how much the schools your student is interested in are going to cost, you can't have an effective college money conversation.
In order to determine how much schools are really going to cost, you need to understand your expected net cost at each school. Most families get distracted by the "retail costs" of a school, which are the basic costs you can find on a school's website. However, this information is not particularly helpful as the retail cost of school is often irrelevant because it doesn't factor in any of the financial aid your student may be eligible for.
In order to determine how much aid your student may be eligible for and your net cost at each school, you need to know:
Your family's Expected Family Contribution (EFC), which is the amount the federal government expects you to be able to afford to pay from your own pocket.
The cost of attendance (COA) at each school
Merit aid possibilities at each school
How each school approaches financial aid - does the school prioritize merit aid packages? Does the school focus on meeting a family's financial need? etc.
This piece is often the most difficult to understand, because schools usually don't publicize their approach. This is where working with college funding professional can provide a ton of value and help you lower your costs. Set up a free call with our team!
Once you've determined your family's anticipated net cost at each school, you're now ready to have the college money talk with your student.
Tip #3 - Schedule a time to have the “College Money Talk”
Scheduling your highest priorities has been proven to help get them completed more consistently. Make time to sit down with your student to look at the facts and honestly answer these questions:
How much have you saved?
How much can you budget each month out of your paycheck?
How much will the student be responsible for?
How much aid do you qualify for?
How much will it cost?
What is the 4-year plan, and the future effect on loans, income, etc.?
Choosing how much a student will be responsible for when paying for college is determined on a family-by-family basis, and students need to be aware of what is expected of them before they start visiting colleges.
Will they be expected to work during school and over the summers?
Will they need to take out student loans?
How does a loan work? (They have no idea.)
What does that mean to their financial future upon graduation?
Hashing out these questions before you start your college search will save unhappiness later.
Do I really need to do this?
Unless you already have all the money you will need saved up, you need to get creative on how you will pay for college, and it is imperative that you have the “money conversation” as a family to reduce the stress and anxiety of shopping for colleges.
A college funding professional can help you with this conversation by developing a plan to understand exactly what your costs will be, and how to lower those costs so you know exactly how much you'll need to save, and to ensure you don't saddle your student and family with loans they won't be able to handle. If you would like to speak with an advisor from our team, schedule a free call with our team today!
Mike Bink, AAMS®, CCFS®
Mike works with families to simplify the college funding process and is widely recognized as an expert in college planning. He is passionate about empowering families to become informed consumers of higher education so that they don't pay a penny more for college than they absolutely have to.