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A parent’s guide to college funding
How to support your student and still stay on track
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In 2014-2015, total published charges for at four-year public universities for tuition, fees, room and board in-state averaged over $18,900, while out-of-state charges averaged over $32,700, according to the College Board. Four-year private schools averaged over $42,400. And that’s just for one year.
How can you afford to pay for your child’s education – especially if you have more than one child – and remain on track to become financially free? Well, the first question you will need to ask yourself is, “Should I?”
Should you pay for your student’s education?
You want your child to have access to a good education, and you want him or her to be successful in life. But is footing the bill for their entire college career helping or hurting them? Although parental financial aid increases the odds of graduation, it also decreases student GPA, according to research by the University of California – Merced.
Walking the line between helping your child be successful and financially enabling them may feel like a high wire act, and we are not here to tell you what you what is best for you and your child. However, we do want to provide you with options and information so you can make educated decisions about what is best for your situation.
What is clear is that your student should work to help support himself or herself. Researchers have found that students perform better academically if they have a vested interest in their own education. Part-time work doesn’t adversely affect GPA, although full-time work does. Quantitative studies consistently show higher retention rates for students working a modest number of hours weekly compared with those who don’t work or who work more than 15 hours weekly, according to a 2010 article published by the American Association of University Professors.
So how can you support your student without hindering their growth into adulthood?
Strategies to nurture your student’s independence and life skills
1. Put your kids in charge of crunching the numbers for their school and living expenses, how much they’ll be able to earn at a part-time job and what financial aid they have qualified for or scholarships they have earned. It may be overwhelming to them at first, but it’s better that they learn to count the cost now than when they’re swimming in debt. If they don’t know how to keep a basic budget yet, help them keep one for each month of the summer so they can practice before they go to college.
2. If you want to contribute financially but don’t want to pay for everything, there are a multitude of options. You could offer to match a scholarship or grant, or contribute a certain amount for each one they earn. Another option is to agree to foot half of your adult child’s bill, applying any scholarships to their half. Ultimately you have to decide what is best for your situation and that of your student.
3. Provide non-financial help as your child begins to take on more responsibility. Be a second set of eyes on their spending plan, their emails to landlords or prospective employers. As they gain experience they’ll become more confident, but you can be a valuable resource without simply doing everything for your child.
4. Finally, don’t continuously bail them out if they develop a pattern of unwise decisions. Show them that you have faith in their ability to problem solve and be resourceful by not always fixing their mistakes.
Weigh the options before writing a check
1. Comparison shop for colleges, calculating the costs of tuition, fees and living expenses minus the grants, merit aid, etc. available. Consider a school based on the best net cost.
Additionally, if your student really wants to attend one school, but another school has offered more money, call the financial aid department of the first choice school and see if they’d be willing to match the award package of the competing school.
2. Although starting at a community college may sound less appealing to your student, transferring to a university after two years will leave them with the same university name on their diploma. Remind them that eating ramen in their 30’s because of crippling debt is way more uncool than going to community college for a couple of years.
3. Believe it or not, sometimes studying abroad is more financially viable than studying in the United States – especially now while the dollar is strong. Canada’s McGill University charges just $14,400 for Americans studying for a bachelor’s degree, which is less than average in-state tuition. And tuition at St. Andrews of Edinburgh (yes, where Prince William and Kate Middleton met) costs just over $25,000 for American undergraduate students of 2014-2015. That’s cheaper than out-of-state in some cases, and your student would also get to experience a different culture.
4. College isn’t for everyone. Only 56% of students complete a four-year degree within 6 years, according to the Harvard Graduate School of Education. But that doesn’t mean a young person should lack for an education. Here are a few non-traditional educational paths for the self-motivated student.
Thiel Fellowship: If your child has expressed interest in starting their own company, the Thiel Fellowship is a unique opportunity outside of college. Founder Peter Thiel (co-founder of venture such as PayPal and Founders Fund, and an early investor in Facebook) gives 20 students $100,000 to build future companies for a commitment of two years. They are mentored by extremely successful entrepreneurs and gain experience offered nowhere else.
University of the People: Founded in 2009, UoPeople partners with the likes of Microsoft and NYU to offer tuition-free online associate’s and bachelor degree programs in Business Administration and Computer Science. Thus far the university as admitted over 2,000 students from over 150 countries.
Self-education: For those driven individuals with limited resources, websites such as MIT’s Open Courseware, Udemy, Treehouse, and many others offer skills training for minimal costs, often within the technology industry.
Practical strategies to fund their education
If your child isn’t ready for college yet, consider saving towards your child’s higher education with a 529 education savings plan. Keep this account in the your name so that it doesn’t count against your child when the government calculates the expected family contribution towards college costs and a student’s eligibility via the Free Application for Federal Student Aid (FASFA).
If your student has graduated high school, they should be working over the summer before college in order to save towards their college expenses.
In addition to university-specific scholarships, have your student research whether they qualify for other funding based on hobbies they pursue, the major they have chosen and the organizations that you or your child belong to.
Make a trade
Your student may want to consider partnering with a program such as AmeriCorps, Peace Corp, National Health Services Corps, or ROTC, which offer college money in exchange for a service commitment.
The American Opportunity Tax Credit (AOTC) is available until 2017 and offers a significant tax break to parents. The credit reduced your federal tax bill dollar-for-dollar by up to $2,500 per year for each eligible college student for whom you pay qualified tuition expenses, according to Forbes. It can be claimed on behalf of an undergraduate for four years, which is a $10,000 tax subsidy over four years. If you have more than one child in college at the same time, you can claim more than one credit. If the student is not claimed on his or her parent’s tax return, then the student can claim the credit personally.
Header image © Marie C Fields/shutterstock, Article images © ArtWell, Jean-Phillippe, Zurijeta, Diego Cervo, andras_csontos