“More parents are realizing that while there are countless options out there for paying for college, there is no such thing as a loan that will support you through your retirement,” says Jocelyn Wright, consultant at The American College of Financial Services. “And for many families, that’s what this debate comes down to: Is your child’s education the priority over your nest egg? It shouldn’t be.”
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Unfortunately, parents may be the only ones enjoying a stress-free mindset around student debt — students seem to have absorbed their folks’ financial worries. According to Chegg’s 2018 State of the Student report, a majority of students — 62 percent — all have the same main life stressor in common: their finances. Additionally, the report found that the greatest source of social pressure for college students is to spend more money than they can afford and nearly one-in-five struggle to afford housing.
“Unfortunately, students who stress about finances become adults who stress about finances,” Wright says. “So many students don’t ever get financial education. They go to school not understanding their options around financial aid, taking out loans, what their debt will be, or how the repayments may impact them when they graduate and start working. All these unknowns can be a great source of stress, which is why education is so important.”
Getting On The Same Page
Conversations about college costs need to start early — In 2017, students had enough income and savings to cover 11 percent of their college costs, or around $2,600, according to Sallie Mae. Additionally, nearly half of all students received some kind of scholarship in 2017. But both of those efforts require a head start, on either earning money or on finding and filling out scholarship applications. “Parents are the ones who need to initiate those conversations,” Wright says. “Paying for college is a team effort, and everyone has to be on the same page.”
A few ways to get there include:
- Set clear expectations about how much you’ll contribute toward college and how much you expect your child to pay. Sit down with your kids and break down the costs of college together, including tuition, housing and books, says Rebecca Safier of Student Loan Hero. “When it comes to choosing a college, encourage your child to consider cost of attendance along with other factors, such as location, size, and academic programs.” The U.S. Department of Education offers a usefulnet price calculator that families can use to estimate the net cost at different colleges.
- Discuss the pros and cons of borrowing student loans, and help your child understand what paying back a loan would involve, Safier says. Use astudent loan calculator so your child can see and understand exactly how much their monthly payments would be on any debt they borrowed.
- Encourage your child to work part-time if possible. A job can be an excellent resume builder as well as a stream of income. If the sticker price of a full semester is intimidating, help your child identify a specific portion that they’re expected to cover — a meal plan, books, or housing may be a good place to start.
- Discuss some of the financial pressures your child may encounter in college. This includes the pressure to overspend on social events, Safier says.“Managing money isn’t just a matter of numbers; it can be a very emotional and psychological issue, too. Opening up space for your child to share their concerns and feelings around money could help them understand their money mindset and prepare for the challenges they could face in the years to come.”
- Encourage a cheaper start in a community college. Suggest that your child start college with a semester or two of community college under their belts, Wright suggests. “Get creative. That four-year model may need to be turned on its side.”
- Recommend that your child take a financial planning course. You don’t have to major in it, but do take a course in it so you can be armed with the tools you need so you don’t have to be stressed about money, Wright says.
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Kathryn Tuggle contributed to this report.