College is expensive. As with all expensive things, planning and talking through plans – even hopes and dreams – can make the situation more affordable in the long run.
Case in point: paying for college. Back in the 1960’s, 70’s and 80’s when a lot of the people reading this note went to college, college was mostly affordable depending on the choice of schools. The most expensive colleges and universities cost less than $15,000 or $20,000 per year (definitely, in the 1960’s and 1970’s). Although families still struggled to pay the cost for college in lots of cases.
Which brings us to today when the cost of colleges, universities and graduate programs has skyrocketed across the board. The amounts are staggering. In time, the answer for college affordability has come to be “borrow, borrow, borrow.”
Over the past several years, nearly all my clients have needed – or wanted – to address this major financial issue for their kids as young as newborns all the way to teenagers. Grandparents have brought up the topic for their newborn through teenage grandkids. OR my clients who get married gain a financial liability from their new spouse or share their own college debt with a new spouse. This issue touches nearly everyone these days.
A future issue of TGIF 2 Minutes can discuss various savings options available for college. But the topic TODAY is addressing the debt decision when it is staring a person in the face – and the decision of “whether or not” or “how and how much debt” to take on for college in the first place.
One amazing solution that has worked for several of my best clients and friends is to EARLY ON, TALK ABOUT THE SUBJECT EXTENSIVELY AND SPECIFICALLY WITH THE KIDS! This can be a grand teaching moment. Whether or not to take on huge college debt – by the parents, student or both – could be one of the biggest and smartest financial decisions a person or family ever makes.
- Go over together the entire cost of in-state versus out-of-state or private tuition, room & board, books and meal plan for the schools where the student gains admission. The stark comparisons can aid in the decision process for the student as well as the adult.
- Talk prior to applying to various schools about the cost of each one – just like one would compare the costs of various homes and a mortgage options (the additional “house debt” will come down the line anyway!)
- Talk about what debt means, understand how many years it will take to pay off college debts and think through what the future credit score or spousal implications will be.
Often, the process may reveal that it is not worth taking on debt from a “prestigious” institution if a similar degree can be gained from an in-state or less expensive option. The concept of parents and kids sharing debt or the student “having skin in the game” can be powerful, even for kids whose parents can afford the entire bill.
Financial independence starts with these types of conversations – at as young an age as possible.