You’ve probably heard the story before: A kid works hard throughout high school to earn a spot at a top university (a.k.a., their dream school.) Although the parents have saved and the school is providing merit aid, the cost to attend still is out of reach, so the family has a tough decision to make:
Do you take out student loans to cover the additional cost, or do you consider other, more affordable colleges?
No parent wants to crush their child’s dreams – yet starting out as a young person with tens or even hundreds of thousands of dollars debt seems unreasonable as well.
Parents need to discuss affordability with their college-bound students early in the process.
If your high school student has college aspirations, but you’re questioning how you’ll afford it, know you’re not alone.
The average Bachelor’s degree holder has an average federal student loan debt of $32,300.
As college costs continue to climb, discussing college affordability with your child has never been more important—and the sooner, the better.
Many high school students get caught up in this idea of a “dream” school without realizing that the costs and the potential debt required to attend it will ultimately become a struggle.
Parents need to address this early on with their children to ensure they are all on the same page regarding what they can contribute and what is an acceptable amount to take on for debt.
They may not thank you now, but they’ll definitely appreciate it when they have monthly student loan payments they can afford after graduation.
No one enjoys the money conversation.
This feels daunting for many parents, as discussing money and budgetary constraints can be awkward and uncomfortable.
Instead, look at it as an educational opportunity to inform your child about debt, and smart debt in particular.
Smart debt provides some future economic benefits. It will make the debt holder more financially secure later on. Borrowing to pay for college can be smart debt, as college degrees often lead to improved earnings once borrowers graduate and enter the workforce.
A critical component of college affordability is for students to know whether they can repay their student loans without financial hardship once they start working and whether the degree they receive will actually enhance their incomes.
Knowing what is affordable will help prospective college students navigate those choices. For most young people, borrowing to pay for college will be their first significant interaction with debt.
As a parent, you want your child to understand the decisions they make today will impact them tomorrow. Understanding what your student debt will look like five, ten, or even twenty years out can help protect their financial freedom.
Just because it is simple to borrow to pay for college doesn’t mean it’s the right decision for your family.
There are a lot of different components that go into understanding college affordability.
Knowing what is affordable for your student is as tricky a subject as how much college actually costs (not just tuition, but the full cost of attendance).
Here are five steps to help you and your student understand what an affordable amount of debt could be for them to take on and repay after graduation.
1, Talk to your student about majors and career paths
Knowing what type of college they want to attend is important, but understanding what their career aspirations are can help them select a path that will better prepare them for that career. Majors and career paths impact earnings potential, so it’s important to get a better understanding of what type of job may make sense and the educational level your student may need to achieve, knowing that certain professions require additional degrees or certifications.
2. Get a realistic picture of the total cost of college, not just tuition.
Understanding the total cost of attending (COA) of each college your student is seriously considering – not just the sticker price – is an important step to making smart financial choices. Each school should include a net price calculator on its website to give you the full picture.
3. Discuss budgets and your desire to help lock in their future financial freedom.
Parents need to be upfront about how much they can contribute to their education and what will be their child’s responsibility. This discussion will help put the college costs in perspective for them and get them in the mindset to be your partner in keeping college affordable Starting these discussions as early as freshman year is not unreasonable so your child does not get their heart set on a school that is out of reach financially.
4. Use the Student Debt Smarter Affordability Calculator to see what an affordable amount of student debt is for your student to repay after graduation.
The Student Debt Smarter Affordability Calculator uses the salary and cost of living data to determine the maximum amount your student could afford to repay over a 10-year federal student loan. It provides a realistic post-college budget breakdown, including a student loan payment, to give practical insight into how the debt they take on today will impact your student’s financial future. As families go through the college application process, they can continuously use the calculator as a benchmark to determine affordability. The net-net is your child can become a part of the process and see first-hand what their debt will look like from attending various colleges and exploring different majors.
5. Team up with your student to start the search for grants and scholarships to close the gap.
This is vital. Financial aid and student loans are not the end all be all. There are hundreds, if not thousands, of scholarships and grants available to help you cover the gap between financial aid, affordable loans, and the college of your student’s dreams.
The key to all of this is starting early to explore all of the options.
There is no one right path for every student, no one path to achieve their dreams, and no one right path to success.
This post was sponsored by Student Debt Smarter.