In this episode, we continue our series on getting ready to apply to college by sharing some approaches to having the money talk about college with your child.
We said in an earlier episode that it was important to talk with your child about how much you have to spend on college and about what that might mean for the colleges your child should consider applying to. We are going to make the assumption that most families cannot pay outright for four years at a private college where your child would live in the dorms; for that scenario, you might be looking at a total bill of $160,000 to $240,000 in round numbers—and that figure might get higher every year. But public colleges cost money, too. Just two years at a public community college, where your child would most likely live at home, might come to a total bill of $4,000 to $10,000, depending on where you live—and that figure will likely get higher every few years. So, let’s look at some options for parents.
1. Do Not Borrow Any Money
Some parents simply do not feel comfortable borrowing money. Some object to buying anything “on time” and paying interest on that money until they can pay it all back. Some feel that their past credit history or job history won’t support whatever background checks are made before money can be lent to them by banks or government programs. If you feel this way, that is your business, and no one is really in a position to tell you that it isn’t right.
But if you feel this way and do not have enough money saved or a high enough salary to pay for your child’s college education, then you need to have that discussion as a family—and you need to start looking hard for scholarships that might make up the difference. As we have said in earlier episodes, scholarships are hard to get.
Many times, we have found that parents and students do not accept the fact that scholarships are hard to get. If you have a child who is great in your eyes, but just average in terms of his or her high school GPA and college admissions test scores, then a substantial enough scholarship (or maybe any scholarship at all) is going to be hard to come by—at least at top colleges. You might have some luck with less selective colleges—perhaps especially very small ones—because they might not be as well known and might not get as many applicants. You might also have some luck with less selective, smaller colleges in a state that is far from your home state, because such a college might be interested in diversifying its student body by attracting out-of-state applicants; however, that scenario poses its own problem of running up expenses because your child would have to live on campus rather than at home. Of course, maybe a great scholarship would cover housing expenses, too.
People say that many interesting scholarships exist and go unused for lack of applicants. Such scholarships might, however, have a variety of specific restrictions on their applicants—for example, ethnicity, geography, family background, subject field of future study, extracurricular achievements, and more. These scholarships do undoubtedly exist and may indeed go unused, but you cannot base your decision about where to have your child apply to college on the outside chance of getting one or more of them.
If your child has a great GPA or very high college admissions test scores—or preferably both—then he or she might get a scholarship based solely on the merit of those academic achievements (especially if you cannot afford to send your child to that school without it and you have indicated that on the completed college application). I was counseling a student recently who had very good SAT scores (over 700 on two of three subtests), an outstanding ACT combined score (34), and grades that were good, but not great (he is the kind of kid who has an 88 GPA, but who could have gotten well above 90 if he had cared more, sooner). He applied to a big, well-known, good private university in a state far from home—the kind of place that I thought might look favorably on his application. He was accepted and received a great scholarship of $68,000 over four years. Wow, I thought. The only problem was that the scholarship was just about half of what he needed to go there. How could his parents come up with the rest—without borrowing all of it? So, even a great scholarship that sounds like a lot of money cannot necessarily make it possible for a kid to go to a college that has accepted him.
There is one other way to get money for college if the parents do not want to borrow any: Have the student take out the loans. There are both private sources of loans (like banks) and public sources. We hesitate to say too much about the world of public student loans because it is always the subject of political discussion and could change between when you hear this episode and when you need to use the information. Suffice it to say that the federal government will lend your child some money for each year of college, at a reasonably low rate, through the Federal Direct Loan Program; one type of loan is based on financial need, and one type is not. However, what your child is going to get will be between, say, $5,500 and $7,500 a year. While that would go a long way at many public colleges, it would not go very far at all at any private college. Additional loans from private sources (like banks) would be needed to pay private college tuition, and those might require some sort of co-signing by you.
Somewhat like the federal government, your state government can also be a source of financial help. For example, the New York State Tuition Assistance Program (commonly referred to as TAP) will cover most of the tuition expenses at the tuition rate of a New York public college, if your family meets the income eligibility requirements. However, if your family income is too high, your child will not be eligible for TAP funds.
The bottom line here is this: If you as the parent do not feel comfortable borrowing any money for college costs for your child, then the chances are good that your child should look only at or, at least, primarily at public colleges—unless you already have all the money you need to pay for the college of your child’s choice, unless you would feel comfortable having the child take out all of the loans himself or herself (including from private sources, like banks), unless your child has posted an outstanding high school GPA and outstanding college admissions test scores, or unless your child is a recognized outstanding high school athlete who is being recruited by college coaches.
2. Borrow Whatever You Need
This is the opposite of the previous option. Some parents feel that borrowing money—in whatever amount is necessary—to send a child to the best college that accepted him or her is worth it. You might wonder how incurring a huge debt—maybe as much as, say, $200,000—could ever be worth it. But those parents would say that putting a child into the best possible college setting could set that child up for life—whether it is the best academic education the child could have gotten, or the best sports training the child could have gotten, or the best theater group or college newspaper the child could have been part of, or the best circle of friends the child could have landed in (friends who would turn out to be friends for life, have their own successful careers, and be major influences on and supporters of each other for decades to come).
In the interest of full disclosure, this is exactly my own personal feeling, and it is exactly what my husband and I did for each of our three children. We borrowed every penny that we needed and did not already have—for three private undergraduate colleges and three private graduate colleges. I would do it all again tomorrow if I had to.
In our case, the federal government made it easy. Our loans were all Direct Parent PLUS Loans, which do require a credit check, which could prove problematic for some borrowers (by the way, if you are not eligible for a parent loan after your credit check, the federal government will actually raise the limit somewhat on what it will lend your child by four or five thousand dollars per year).
To be eligible for all of these federal loans—both student and parent loans—you must fill out the FAFSA (Free Application for Federal Student Aid). The filling out of the FAFSA is much discussed. Free assistance in how to fill it out is available online, and often high schools and colleges run free workshops for parents about how to fill out the application, which will have to be updated and resubmitted each year your child is in college.
I want to make it very clear that I am not a FAFSA expert. I am so much not a FAFSA expert that I got help from a private company, whose services I paid for each year for each child. The company literally filled out the FAFSA application on the telephone with me every time and made sure that I got it submitted properly. I consider the approximately $100 a year per child that I paid to that company as money well spent. If you look at the FAFSA application and are confident that you understand it, then that’s great. If you look at the FAFSA application and are not confident that you understand it, then get help—free if you can conveniently find it, but paid if you can’t. You don’t want to fool around with completing the FAFSA application. It is the easiest way to borrow money for college at a reasonably low interest rate.
FAFSA applications should be completed ideally in January for the following school year, or as soon thereafter as possible. You will need your tax information from the previous year in order to complete the application, so you might not be able to do it as early as January. My understanding is that at least some money is given out on a first come, first served basis. So be first.
One more note: The CSS/Financial Aid PROFILE (where CSS stands for College Scholarship Service) is administered by The College Board and is the way to access nonfederal financial aid from almost 400 colleges and scholarship programs. The form can be filled out online and needs to be done only if one of the colleges or scholarship programs your child is applying to requests it. It is easier to do this one after your FAFSA is already completed because you can use the FAFSA to help with this one.
3. Split the Difference: Borrow Some Money, But Not Too Much
Well, there’s always a compromise position, and it is often the wisest. This compromise is that, as parents, you find a way to borrow some money to pay for your child’s college education and, in so doing, you and your child agree to keep those costs under some control so that you don’t have to borrow any more than is absolutely necessary. So what would be some compromise college choices for your child, in likely order of expense to you, from least to most:
- Apply only to public colleges, but not limited just to two-year public colleges. In other words, your child would be permitted to apply to four-year public colleges, which are more expensive than two-year colleges and which would always include the flagship state university, which is usually a reasonably good choice.
- Apply only to public colleges, but include out-of-state public colleges in that list. While those colleges will be more expensive—really, considerably more expensive —they will still not be as expensive as private colleges. However, opening your child’s search up to out-of-state public colleges will put a lot of great state universities within reach, which might be more highly respected than the flagship state university or other public colleges in your home state.
- Add some private colleges to the list, but only if they are at the lower end of the private college price range and only if your child agrees to live at home and commute to the private college. How good this option might be depends entirely on where you live and on how many reasonably priced, good private colleges are nearby. If you live near in or near a great college town like Boston, which is populated with many private colleges, this option could be appealing to your child.
Of course, there are other compromises that we could invent, but you get the idea: Consider borrowing enough to give your child some choice among the best colleges you can afford—whether those are only public two-year colleges, where your child might be able go full time and live on a campus not near your home if you borrowed the money, or indeed private four-year colleges, which would open up the whole world of college to your child if you borrowed the money.
Whatever you decide—to borrow a lot, a little, or nothing at all—make sure your child understands where you stand before he or she gets too far down the track on a college search that you are not comfortable supporting.
Listen to the podcast to find out about…
- Federal Pell grants that don’t have to be paid back
- The unique perspective of the seven Work Colleges
- The complications of divorce when filing financial aid applications
Check out these resources and programs we mention…
- 529 Plans including New York’s 529 College Savings Program
- CSS/Financial Aid PROFILE
- FastWeb scholarship search
- Federal Direct Loan Program and Direct Parent PLUS Loans
- Federal Pell Grant Program
- Free Application for Federal Student Aid
- New York State Tuition Assistance Program
- Work Colleges Consortium
Connect with us through…
- Subscribing to NYCollegeChat on iTunes, Stitcher, or TuneIn!
- Following us on Twitter @NYCollegeChat
- Reviewing parent materials we have available at Policy Studies in Education
- Inquiring about our consulting services if you need individualized help
- Following us on Facebook
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