Prepping Your Child for the Cost of College
Your Rochester Wealth Care Team’s Recommendations Before Sending Your Child to School
It’s back to school time! Parents have a lot on their plate making sure their children are prepared for the year ahead, especially if their child is college bound. It’s a time of uncertainty, excitement, and lots of expenses. College students face new-found responsibility and will need to learn how to be responsible with their money.
You can be your child’s own financial advisor and give them the tools they need to make responsible choices. We’ve put together a few tips on how to help prepare your child for the financial decisions ahead of them.
Understanding the Cost of College
Understanding the cost of college can help your child understand the value of the education they are about to receive. College costs can be broken down by tuition and fees, room and board, and supplies. All these categories combine to equal a college’s cost of attendance.
Tuition and fees are generally the costs associated with enrolling and taking classes. Tuition and fees will vary greatly between colleges. It is important to understand the difference between in-state versus out-of-state tuition, public versus private institutions and two-year versus four-year programs. One is not necessarily more expensive or better than the other, but tuition rates will vary based off these factors. It’s up to you and your child to know what’s best.
Room & Board
Room and board generally refers to the costs associated with living on campus. This would include dorm costs and any meal plans. With most colleges, you have the option of choosing your housing and meal plan options, but it is important to research what you will need out of your room and board and how much you are willing to pay. Room and board expenses vary if a student is living on campus or commuting. But travel expenses and groceries may be just as expensive as living on campus if you don’t stay within your means. Work with your child to decide what’s best.
Supply costs generally include textbooks and course materials. This cost usually depends on your child’s program or area of study. Make sure you and your child are prepared for the costs associated with buying supplies. There are ways to lower supply costs and still get the materials you need. Renting texts books, buying used, using online versions and using a free copy from the college’s library can often save a few hundred dollars. Although this is a smaller portion of the cost to attend college, it is still important to look into.
Paying for College
Whether or not your child is paying for their education, they should understand how it will be paid for. Paying for college can be broken down into categories as well. The most common ways to help pay for college are through scholarships, financial aid and student loans.
Scholarships are discounts on tuition based on academic merit. There are hundreds of scholarships your student may be eligible to apply for. Scholarships may include national, regional or local. Your child’s college will likely offer scholarship opportunities as well. Finding national scholarships is easy, but competitive. A good practice is to apply for local scholarships. Your child’s high school guidance counselor is an excellent resource to find local scholarships.
Financial aid is a combination of grants, scholarships and loans provided to students by the federal government and state governments. Most people are eligible for financial aid, but you must apply for it. The FAFSA is a yearly form with the federal government that determines the amount of aid your child can receive. It involves reporting income and tax information, so make sure your taxes are up to date and you can easily access them. Your child will then receive a combination of financial aid awards and the option to choose federal loan options. Federal loans will always have lower interest rates compared to private student loans. Parents of students could also be eligible for federal loans. State financial aid will vary based on your state and the state in which your child is attending college. Financial aid resources should always be exhausted before searching out private student loans.
Private Student Loans
Private student loans are very common, especially with the growing costs of college. It’s very unlikely your child will graduate with zero student loan debt, so it is important to understand how they work. You or your child will be responsible for paying back these loans once they graduate. There are multiple loan providers, like Sallie Mae. But your local bank or credit union may have loan options that better fit you and your child’s needs. A good practice for taking out student loans is to never take more than you need and to apply for loans only after all aid options have been explored.
To learn more about college costs and how to pay them, visit The College Board or the US Department of Education Federal Student Aid Office for helpful information and tips.
The Importance of a Budget
Having a budget is the key to any financial decision. Being in college is no exception. Your college student should understand how to budget and stick to that budget. A budget will help prevent over spending.
There are many different ways to create a budget. Excel spreadsheets are very common, but there are even easier ways with today’s technology. Mobile apps are a perfect way for your child to connect their bank accounts and track their spending. Check out Nerd Wallet’s list of budgeting apps for college students to find the best one for your child.
We at Davie Kaplan know how financially stressful sending your child to college can be. We want you and your family to be as prepared as possible. Looking for more advice? We offer advising for educational planning and have financial advising for all walks of life. See how we can help you through your financial journey here.