What to Do When Your Finances Aren’t Ready
College can be quite costly. According to the College Board, during the 2015-2016 academic year, the average tuition and fees were $32,405 at private institutions, $9,410 for in-state students at public colleges, and $23,893 for out-of-state attendees at public universities. You may have started saving a bit each month when your children were just infants, hoping to cover tuition, books, dorm fees, and meal plans as each semester comes.
But what happens if you’re not financially prepared?
by Alicia Wanek
Let’s be honest—there could be a variety of reasons for this. Do any of these resonate with you?
“I just didn’t save enough.”
“Our finances took a considerable hit when I lost my job.”
“I paid for my own college; my kids can do the same.”
“The divorce changed our financial situation.”
“I simply didn’t have enough time.”
“We have more kids than we can afford to send to college.”
The silver lining? Bryan Camper, a certified financial planner at Camper Rogers, assures us, “It’s never too late.” The key rule is to ensure that you do not jeopardize your own financial health. “Don’t prioritize college over retirement.” After all, there are funding options available for education and time to manage loan repayments. However, retirement is approaching sooner, and you are the only contributor. If you are confident that your retirement funds are in good shape, you could consider temporarily lowering your contributions to divert extra funds toward college costs. Conversely, since financial aid agencies do not count retirement accounts as assets, you may wish to increase your retirement contributions quickly to protect those assets, which may help increase your child’s eligibility for aid.
For students seeking additional funds, the first step is to apply for financial aid, Bryan suggests. The Free Application for Federal Student Aid (FAFSA) is accessible online. Any student who meets the basic criteria of citizenship and enrollment can complete this application each year. The most common funding sources are Pell Grants, which don’t require repayment, and Stafford Loans, offering low-interest funds (currently 4.29%) that the government subsidizes as long as the student is enrolled at least half-time. Once graduates land a great job, they can begin repaying their loans.
When filling out the FAFSA, students will need to provide the “expected family contribution.” This figure takes into account parents’ income, the number of children attending college, and student assets. According to Bryan, “If a student possesses assets in their name, they are expected to contribute 20% of that toward their college expenses.”
After determining their federal funding options, students should explore how to cover the remaining costs. Bryan suggests considering the following:
Parents don’t need to cover the entire cost
Research indicates that students who are accountable for a portion of their educational expenses tend to achieve higher GPAs and graduation rates. It’s reasonable to expect your child to work part-time to help with their college expenses.
Community college is an excellent starting point
The fundamental courses taken during the first two years are often similar, whether at a community college or a larger university. Community colleges offer significantly lower tuition rates and smaller class sizes, enabling parents to be more involved in guiding their child’s transition to independence.
Don’t pay extra for an Ivy League education if it’s not necessary for your child’s career path
Since the financial crisis, there have been numerous reports of graduates carrying significant debt without securing jobs. If your child is interested in a field like education or public service, attending an expensive private university may not be essential. However, if they aspire to attend law school, incurring debt at a more renowned institution may be justifiable.
Apply for all available scholarships
The application process may be lengthy, but a considerable amount of scholarship money goes unclaimed every year. Numerous services and apps can assist students in identifying scholarships for which they qualify, and it’s worth the effort.
Consider retaking the ACT or SAT
If your child has a solid GPA but didn’t perform as well as they hoped on standardized tests, boosting their scores could enhance their chances of qualifying for merit-based aid, particularly through the university.
Review your Roth IRAs
Contributions can be withdrawn at any time without tax implications to help cover your share of the tuition expenses.
“Ideally, yes, you would have started saving for a 529 plan for your child at birth and contributed regularly, increasing the amount over the years, resulting in a substantial sum by the time your child reached eighteen,” Bryan adds. Ultimately, however, don’t let your children feel that college isn’t a possibility due to a lack of funds. Together, you can ensure their future is as bright as they envision it.
