3 Steps to Relieve the Stress of College Planning
Essential advice for parents and their high school children
When the financial pressure is on and the stakes are high, how can you and your kids relax as you make decisions about college?
Keep in mind what Joe Allen, former dean of enrollment at the University of Southern California, once said when advising students about the college application process: “There is no one 'perfect college' that is right for you. Rather, there are many schools that will be a great fit, meet your academic and social needs, and, most of all, challenge you to be the best student you can be.”
Words of wisdom from a leading college admission expert who, sadly, left us several years ago. But Allen’s words should still bring comfort to the hordes of striving students and their anxious parents, determined to find that perfect college.
Not only is there no one perfect school, but there are likely several schools that students should consider. Admission counselors point out that to reduce the anxiety of college selection, families should focus on three things:
1. Parents Shouldn’t Hover
Most admission counselors agree that the most frightening words they hear from parents are: “We are applying to your school.” It was a phrase that made Allen cringe, as he envisioned helicopter parents hovering above their child throughout the admission process.
If students have too little say in their school selection, it only adds to the high level of stress inherent in going away to college for the first time, making the transition more difficult and leading to dissatisfaction. The student should be leading the process; the role of the parent should be more advisory.
2. Face Financial Facts
It’s important for the parents and the undergrad-to-be to understand the real costs of going to college, how financial aid works, how much out-of-pocket money the family is expected to provide (not the rack rate listed on the college website or in guidebooks), how much the family is prepared to spend and what role the student is expected to take in paying the costs, such as by working or borrowing.
Students and their families should think about how paying for college is an investment, not just an expenditure to be paid out from current income. College is paid for in three ways: before entering (by saving), while the student is attending (from the family's income and any financial aid) and after college, through loan repayments.
Hopefully, by the time a student is ready to apply, the family has already done some saving, through various means, including 529 and prepaid tuition plans.
Knowing how much the household can afford to pay from current income is another important piece of the puzzle, and parents should be mindful to continue saving for their other children and for their own retirement. Remember that there’s no financial aid for retirement.
Deciding how much your student can reasonably expect to contribute to his or her college expenses is another important consideration. Keep in mind that students generally do well academically when paid work is limited to fewer than 20 hours per week during the school year. Schoolwork generally suffers when their jobs take up more time than that.
Knowing how much the student can reasonably expect to receive in grants and scholarships — that is, “free” money the student won’t have to pay back or work for — is equally important. Fortunately, there are ways to get a realistic estimate, and families should take advantage of those resources. Visit the college’s website and look for what's known as the “net price calculator.” This figure, although a ballpark estimate, will provide a sense of how much grant aid the college might provide, thus reducing your out of pocket obligation.
Don’t rule out high-priced private colleges; many of them offer so much aid that the true cost to the family can be less than at a state school. Yes, you read that correctly. Many of the top-notch colleges and universities invest in their students by making enrollment accessible, and not just for extremely low-income students. Many of the Ivies and schools of that caliber guarantee that students whose families earn less than $100,000 won't be required to take out loans to attend.
So before ruling out any college and freaking out about the sticker price, read up on how the colleges you and your child are considering award financial aid. If your son or daughter is a year or more away from applying, wait to read up on this because 2016 will bring substantial changes to the financial aid process. (Shameless plug: You may want to consult my forthcoming book, Graduating from College Without any Debt (or Almost).
If your need is more immediate, you can read a great deal on www.collegeboard.org. Before buying any books on choosing a college, check their publication dates to avoid outdated information about applying for financial aid.
3. Look at Loans
If you read the headlines, you may be worried about student loans. But take a breath. True, graduates owe over a trillion dollars in student debt and oversized debt levels can be a problem. But for students who borrow reasonable amounts, loans can be a perfectly rational and smart way to invest in an education.
The latest figures show that the total “average” debt for the 70 percent of undergraduate students who borrow is about $35,000 (for public college graduates, it's less; for private college grads, it's more). If the $35,000 comes from a federal student loan and the borrower pays the money back using the standard plan, the payments will be about $350 per month for 10 years. That’s the equivalent of a couple of lattes a day! (Surely that will not upend our economy, although it could have a deleterious effect on Starbucks.)
Assuming the graduate's yearly income straight out of college is $45,000 or so (the current average for humanities majors; the figure is considerably higher for science and engineering majors), paying about 9 percent of that initial annual income towards student debt is hardly astronomical. But even if the young adult's income is less or the amount borrowed is substantially more, there are other repayment options such as “Income-based Repayment,” which is limited to 10 percent of discretionary income.
High student debt may be a public policy concern, but on an individual basis, it may be the smartest investment students and families can make given the high payoff for a college degree.