With the summer in full swing and many parents making plans to keep their children busy during the summer months, it seems appropriate to discuss college planning. Alright I’ll admit that is kind of a stretch, but it always amazing when parents come in to talk with us at how little time they have spent toward planning their children’s college expenses. Parents must create a game plan for financing college. The purpose in this article will be to discuss some steps that parents can use to begin the college planning process.
Here are some simple questions to ask your student and it will help greatly in the rest of the college planning process:
- Why do you want to go to college?
- Where do you want tot go to college, and why do you want to go there?
- What career (vocation) are you looking at, and why do you want to get into this field?
The answers to these questions will most certainly help to create a plan. If the answers to some of these questions are things such as “Well, I don’t know” or ” I’ll figure out what I want to study once I get to school” or ” All of my friends are going to school there and I want to be with them,” you will need to know that your plan for their college plan also changes at that point.
For a lot of teenagers, just going to college is a big life step. So it is certainly possible that their career plans will change and they just want to experience college life. But plans ought to be put in place to help them navigate through this process. We see far too many people in our practice who have taken out massive amounts of student loans trying to figure out what career path they are going to pursue. This all leads to the importance of planning ahead for college.
Why is it so imperative that you plan ahead for college?
Many older people will say that they changed their career paths during their college studies. My own father was going to be dentist and was in his final year of undergrad studies in biology. He tells of a course he took in that final year where the professor took a soup can and had the students pick up items with tweezers. The professor then said something to the effect to the class “Now as dentists, imagine you will be doing this practice all day.”
It wasn’t long after that my Dad decided being a dentist wasn’t his life goal. He ended up changing majors (business) and went on to have a successful business career with major corporate companies. But with the way tuition costs have skyrocketed in last ten years, this change would have cost a small fortune and not to mention the time wasted in non-transferable credits.
It is not uncommon these days for students and their families to end up with debt varying from $50,000 to $200,000. If your student has chosen a career path that requires a graduate or even higher degree, careful planning must be done to mitigate the cost. Remember our goal is to graduate your student with the lowest net cost possible for them to achieve their career goals.
To help you get started we have created to-do lists for both students and parents before getting started in their college planning:
Student To-Do List
- Career Assessment – This step is important to avoid the aforementioned changing degree
- College Selection – Find 6-10 colleges that are appealing and offer the degree you are seeking.
- Campus Visit – This is an important step. Do face-to-face visits with the admission and financial aid officers. This will help to get you a clear idea where you stand
- ACT/SAT prep – Learn the requirements for the school and begin prepping to achieve these scores on your ACT/SAT.
- Extracurricular Activities – Find the activities that will boost your application and highlight your achievements.
- Grade Transcript and Essay Preparation – Have these items ready to go for the early application and acceptance stage
Parent To-Do List
- EFC Planning – As mentioned previously, your EFC will play a major role into determining your financial aid eligibility. Find out this number to help begin the planning stage.
- Loan Planning – Find out your loan options to help finance your student’s education without jeopardizing your retirement plans
- Tax Planning – Upon receiving your 1040 taxes, discover any plans that could be put in place to be converted to funding college costs.
- Cash Flow Planning – Review your investments, health costs, insurance costs, mortgage costs, and current living expenses. Doing so will potentially discover areas to show cash flow improvement that can be used for college costs
- Investment Planning – Review your current investments to discover the “real rate of return” (Internal Rate of Return”. Many of the hidden costs can be converted to cash flow that can be used for college.
Sending your student off to college to experience the world is often an exciting and subsequently anxious time for both student and parents. By creating a game plan for financing college, you can enjoy this next step more fully.
If you have a student who is a junior or senior and is planning to attend college in next two years, now is the time to take a proactive approach. By delaying the planning stage, they will lose their advantage in time, money and leverage. This can impact not only their future but also your lifestyle and retirement plans as well.