Are you losing sleep over your child’s college finances decision?
Applications have been filed; acceptance letters are starting to roll in and you are patiently waiting for the financial aid packages to arrive. There are a few items to consider from a financial perspective when making the choice for college finances.
Before we get started, we want to strongly encourage you to bring your child in on this decision. Walk them through how a major decision is made.
FINANCIAL AID PACKAGE
Let’s jump in on the financial aid package, which is the first place you will look for college finances. Look at every piece of the package. Start with scholarships. Ask some good questions about college finances. Don’t look at this just for the upcoming year, take into consideration the next 4 years because you are going to ask better questions.
Scholarships
- How are long are they good for? One year? Do they expire at 4 years?
- What happens if your child extends and goes a 5th year?
- What does your child need to do in order to maintain that scholarship? Do they need to stay a nursing major? Because we know, most likely, they are going to change their major when they get to school.
Asking these types of questions will help you be aware of the expectations.
Financial Aid
Moving on to the financial aid portion of the package. This is based off of your finances. The question you should ask yourself is, “Are my finances going to change?” because that’s important. You need to talk to the financial aid officer about how your income impacts the package.
- If your income changes, what happens to the package?
- What if your spouse is going back to work and your income jumps up? Do you lose that financial aid?
Think through the next 4 years and bring up any scenario that could change your income and ask how that changes the financial aid.
Now that you have an idea of what the cost of college will be to you, let’s look at the loans.
Loans
Most children qualify on their own for a direct loan. It’s usually under $6,000. Unfortunately, that doesn’t usually cover the full cost. Parents may need to step in and help with the rest.
- Parent loan?
- Private loan?
Those are all things to consider. Make sure you are reading the terms. Understand what the interest rate is and when payments are expected to begin.
- Is it now?
- Is it when the child graduates?
And don’t for get to also ask if something happens to you or the child:
- What happens to the loan?
- Can you defer it?
529 Plans
Many students have 529 plans and the question always is, do you take it out all the first year or do you spread it out over 4 years?
It’s going to depend on who owns that 529 account. That will tell you what type of impact it will have on your financial aid.
So again, talk to your financial aid officer about what is best.
Lastly, we encourage you to ask yourself the question of “What is the long-term impact of this decision going to be on you and your family.”
- Is it going to delay your retirement?
- Is it going to require your spouse to go back to work?
- Is it going to drown your child in debt?
You need to answer these questions. It will not set you up for success if you do not ask the hard questions to be sure you are doing what’s best for you and your family.
We’ve created a free guide Funding Your Future: The financial side of college decisions that goes over all of the items discussed here. Simply download it and use it as a guide on your college journey.
We know this can all be confusing and stressful. That’s why we’ve made it our mission to unravel it all. Taking you from confusion to clarity, Accountabilities has you covered.