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The cost of a college education has risen significantly over the years, making it increasingly expensive for students and their families. Tuition fees, room and board, textbooks, and other expenses have soared, outpacing inflation and placing a substantial financial burden on individuals seeking higher education.
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It is wise to have a plan when it comes to paying for college. Your plan should be communicated and understood by all members of the family. Below we will cover things parents should consider as they create a game plan to pay for their kids’ college.
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Paying for College Philosophy
A parent’s philosophy on contributing towards their child’s education can be summarized as a commitment to provide as much support as their financial circumstances allow while fostering a sense of personal responsibility and ownership in their child.
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Your family’s philosophy also encourages open communication with the child about the family’s financial limitations and encourages them to actively participate in seeking scholarships, grants, and other forms of financial aid. It aims to strike a balance between providing support and empowering the child to take ownership of their educational journey.
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Strategies for Parents Supporting the Cost of Higher Education
To aid in coming up with your family’s philosophy, below are a few approaches you can use to create your family’s philosophy around paying for college.
Assessing the Return on Investment: Some parents take a pragmatic approach by evaluating the potential return on investment (ROI) of the chosen field of study. They may be more willing to support student loans for fields with higher earning potential, believing that the future income will justify the debt incurred.
Paying in Full: Some parents believe it is their responsibility to pay for their child’s education without involving student loans. They may save in advance or make significant financial sacrifices to cover the costs. This philosophy is rooted in the idea that education is an investment in the child’s future, and it is the parent’s duty to provide that opportunity.
Capped Amount: Emphasizes that any expenses beyond the saved amount become the student’s responsibility. This approach encourages the student to actively seek scholarships, grants, part-time work, and other forms of financial aid to cover additional costs. This philosophy empowers the student to take ownership of their education by instilling a sense of personal accountability.
Split Percentages: Some parents believe that both they and their child should contribute to the cost of education. They may expect their child to take on student loans while also providing financial support to lessen the burden. This philosophy promotes a sense of shared responsibility and teaches the child the value of financial independence.
Student Pays: Sometimes, parents may actively encourage their children to pay for their education. Paying for education can be used as a practical tool to finance education while allowing their child to learn important lessons about managing debt and financial obligations. It instills a sense of personal responsibility and accountability as they take ownership of their education. By actively contributing to their tuition, they develop a stronger commitment and motivation to succeed academically.
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It’s important to note that every family’s situation is unique, and parents may combine elements of these philosophies or have different perspectives altogether.
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Parents Paying for College
Parents can employ various strategies to pay for their child’s college education.
Savings: Parents can start saving early for their child’s education by setting aside money in a dedicated college savings account, such as a 529 plan or an education savings account. These accounts offer tax advantages and can accumulate interest over time, providing a pool of funds specifically earmarked for college expenses.
Transition Current Spending: Transitioning from current spending on kids to paying for their college requires a strategic approach. Start by reassessing your family’s budget and identifying areas where you can reduce expenses or redirect funds towards college savings. Think of payments such as sports fees, and private school payments and convert these into tuition payments.
Payment Plans: Many colleges and universities offer tuition payment plans that allow parents to spread out the cost of tuition over several months. These plans often come with low or no interest and can make it more manageable to pay for education expenses without taking on significant debt.
Parent Student Loans: Parent student loans, also known as Parent PLUS loans, are federal loans taken out by parents to help finance their child’s education, allowing them to borrow up to the cost of attendance minus any other financial aid received by the student.
Co-Signing or Helping with Loans: Other parents may be willing to help their children secure student loans by co-signing or assisting with the application process. They may view this as a way to provide support while still encouraging their child to take on some financial responsibility. The extent of their involvement can vary, from being a guarantor to assisting with repayments.
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Two Rules of Thumb with College Planning
A general rule of thumb for student loan borrowing is to aim for a total loan amount that does not exceed the projected annual starting salary after graduation. This guideline helps ensure that the student can manage their loan payments comfortably without excessive financial strain. However, it’s important to note that this is just a rough guideline, and individual circumstances can vary.
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You have to prioritize your efforts when looking for scholarships and direct your family’s energy to the scholarships that pay the most.
- Colleges – Colleges hold the most money in scholarships. Focus on the schools that give you the most money. They usually last for all four years of college.
- Acceptance Letter Scholarships – When your student receives their acceptance letter, don’t just post the picture on social media. There is usually a scholarship list that your student should take advantage of.
- Local Scholarship – These are a nice have, but a lot of times don’t move the needle
- Private – These should be the lowest priority due to the expected payout.
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If you need help with planning for college. Consult with a financial advisor or college financial aid counselor who can provide personalized guidance based on your specific circumstances. They can help you develop a comprehensive college savings strategy and explore the most effective ways to fund your child’s education.
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[sh_btn link=”https://calendly.com/deasil/15min” target=”_blank” shape=”squareRounded” style=”dimension” size=”extralarge” color=”rgb(27, 54, 156)” bordercolor=”rgb(11, 0, 0)” bordersize=”0″ fontcolor=”rgb(248, 247, 247)” enablehover=”enable” enableicon=”enable” iconbg=”square” iconset=”fontawesome” iconfa=” fa fa-calendar”]Schedule Your 15 min Consultation Now![/sh_btn]Randall Avery, CFP® CFA
Financial Planner │ Author │ Public Speaker
R.S.A. Deasil Advisors, LLC
Office: 531-333-2745
Email: Deasil@rsadeasil.com
Website: www.rsadeasil.com
P.S. If you would like me to speak at your next event, please click HERE
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While working with clients, Randall realized there was a missing process that individuals were not performing when choosing to use their money. Motivated to fill this gap, Randall developed three models to ‘Hack The System’ and allow individuals to Create Your Own System (CYOS). Randall hopes effectively using these models will help individuals identify the best moral and ethical use of their money.
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