How To Talk To Your Child About College Finances

Sep 11, 2024 | Syndication Cloud

Originally Posted On: https://www.ascentfunding.com/blog/how-to-talk-to-your-child-about-college-finances/

How to Help Your Child Plan for College (and the Cost)

 

Preparing for college is a big deal for students and parents alike. You want your child to have a bright future full of financial, professional, and personal success, and helping them plan for college is an important step in setting them up for success.

Private college tuition and fees increased by over 4% in the 2023-24 school year, which means it is more important than ever to get ahead of financial planning. From supporting your child’s school and major choice to understanding how to cover tuition expenses, parents and guardians can play a critical role in driving informed financial decisions during this critical life stage.

Encourage Financial Literacy Early

One of the best ways to support your child as they prepare for adulthood is to encourage financial wellness. From budgeting basics to credit scores and interest rates, the more they understand about money now, the stronger of a foundation they will have for their future.

Financial literacy helps your child learn how to effectively manage their money and achieve specific financial goals. You can improve your child’s financial literacy by helping them learn about budgeting, borrowing money, investing, and how to manage their earnings.

As you and your child prepare for college, you can talk to them about paying for college and discuss the financial needs beyond just tuition. For example, if they have a job, you can encourage them to open a checking or savings account and teach them how to budget their earnings to ensure they have enough to pay for essentials like food, clothing, and transportation. These basic skills can help your child build confidence, and instill the importance of making informed financial decisions early on to help them achieve their goals down the road.

Understand the Impact of Selecting a Major

After the arduous process of filling out applications and awaiting those acceptance letters, it’s time to choose a school and a major. These are big life decisions that can have a lasting impact on your child’s personal and professional life, and being there to listen and share your own stories can help them feel more supported.

Naturally, some students won’t know what they want to study right out the gate, while others may already be committed to pursuing a specific major. Parents can encourage their children to pursue their passion and interests, while socializing how choosing a school and major can impact the financial return on your college investment.

Here are a few considerations to keep in mind when discussing school or major selection with your child:

  • Learn about the jobs and industries your child is interested in. If you don’t know—ask!
  • Use a college ROI calculator to help understand the impact the school and major they pursue may have on their future earning potential.
  • Research colleges together to ensure they offer your child’s desired major, while meeting any other desired criteria such as budget or lifestyle.
  • Compare programs based on the faculty, classes offered, student/teacher ratio, reviews, and other factors that speak to the program’s reputation.

Navigate Financial Aid Options With Them

You want to make sure your child is financially prepared to cover the cost of whichever college they choose. Recent statistics show that about 55% of students at public universities take out student loans, so it’s never too early to start researching financial aid options with your child so you are prepared when the time comes to apply.

Here are some simple ways you can help your child get started:

  • Encourage them to complete the FAFSA. The FAFSA is used to determine eligibility for federal financial aid and should be the first place you start. Parents can also complete the FAFSA on behalf of their dependent child.
  • Help research scholarships and grants. Scholarships and grants are forms of aid that do not need to be repaid, making them a great place to start. Not all scholarships are need-based, and some are open to eligible students and parents—so don’t underestimate the amount of free money out there.
  • Consider private student loans to cover any gaps. The reality is that many students do not receive enough federal financial aid or scholarship funds to cover the full cost of college. Private student loans can help cover any remaining gap between federal aid and the total expected costs of college, and in many cases can even be applied to expenses like housing and textbooks. Some lenders also offer parent student loans tailored to parents or guardians looking to take out a loan on behalf of their child.

More resources for college planning

Whether you are touring colleges or helping your child get a student loan, parents can plan a huge role in helping to navigate the decisions your child will face on their path to higher education. Helping them make informed choices now can help your child pave a road for long-term personal, professional, and financial success well beyond graduation.

For more tips on proactive financial planning for college, visit the Federal Student Aid website or download the Ultimate Guide to Paying for College today.

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