Affording College:
A Family Approach
- Talking About Family Finances
- Explaining the student’s role in family finance
- Helping students understand finance
- Parent support is essential
- Avoiding the financial pitfalls of the college years
Talking About Family Finances
For many families, talking about finances can be difficult. Innocent comments about spending can feel like criticism. What seems like a necessity to one family member might look like a luxury to another. There’s an expectation of “fairness,” but what seems fair to one person feels like selfishness to someone else.
Today’s college students have higher lifestyle expectations than students did a decade or a generation ago. The idea that a college student needs only a bed, desk, and dresser to get by has evolved to expectations of a queen-sized bed; a desk with printer, scanner, speakers, and a large screen computer monitor; and that dresser has been moved sideways to make room for a futon, minifridge, and stackable storage cubes. They compare their furnishings and their spending patterns with roommates and friends, and they expect to have what others have.
Nevertheless, when students understand their family’s financial situation, most are willing to make cutbacks and forego luxuries if needed.
Explaining the student’s role in family finance
It can be difficult for students to understand both the overall cost of college—a huge sum—and the impact of the student’s daily spending habits—just $10 or $20 a day for coffee, snacks, the occasional new T-shirt or a music download.
By breaking down the big budget, students can better understand the concepts.
If the estimated cost of attendance at the
Similarly, expanding the daily expenditures to an annual amount brings them into perspective. A $4 latte every day, Monday through Friday, for a year is more than $1,000. If the family can find five different ways to cut those daily $4 expenses, they’ve realized an extra $5,000 toward the cost of college.
Still, students want a treat now and then, and cutting out lattes altogether may seem like deprivation. No one, whether it’s the parent or the student, wants to ask permission to spend money. But you can suggest that a latte could be a once-a-week treat or that a $2 cup of coffee might be an acceptable substitute.
Helping students understand finance
The options for spending are nearly limitless; sorting through daily temptations requires self-discipline.
Students are most successful with finances when they have a budget and understand how to use it. The One Stop Web site has developed information on money management for college students that can be used by families to discuss such topics as
- Defining spending priorities
- Developing a spending plan
- Filing important papers
- Using credit cards wisely
- Understanding credit scores
See the One Stop Money Management site for more information: http://onestop.umn.edu/finances/manage_money/index.html
Parent support is essential
At the
While many parents remember working their way through college, working part-time during the semester and full-time during summers, it is no longer possible for students to afford college without the help of their family. Financial aid packages include four basic components:
- Expected family contribution (based on the family’s income and assets)
- Grants and scholarships
- Expected student contribution (students are expected to contribute a portion of their expenses through savings and wages)
- Loans
Even if students do work during college, the amount of wages they can receive are unlikely to cover the cost of college. Considering tuition alone, the following chart compares student earnings from 40 years ago with today’s student wages.
Working Your Way through College—Then and Now
|
1968-1969 |
2008-2009 |
|
|
Tuition and Fees |
$385 |
$10,756 |
|
Federal minimum wage |
$1 |
$7 |
|
Amt. available after Social Security and Medicare |
$1 |
$6 |
|
No. of hours per week (52 weeks) to cover costs |
6 hrs |
33.9 hrs |
This means that students would need to work an average of 34 hours every week throughout the year to pay just tuition and fees. Considering that students carrying an academic load of 15 credit hours are in class 15 or more hours a week, and each credit hour means two to three hours of studying outside class per week, their study and work load would be at least the equivalent of two full-time jobs (79 to 94 hours per week).
Avoiding the financial pitfalls of the college years
There are steps students and their families can take that help manage college expenses:
- Fill out the FAFSA (Free Application for Federal Student Aid) every year, as early as possible. The forms can be filled out electronically (http://www.fafsa.ed.gov/), and financial aid packages are based on the information you provide. Even if you believe your income will not qualify for financial aid, by filling out the forms, you will have baseline information on file in case your situation changes during the year. Moreover, many families are surprised to find they do qualify for at least some aid.
- Encourage your student to graduate in four years. By taking an average of 15 credits each semester (some majors will require 16 or 17 credits per semester), students can graduate in four years. Each additional semester means additional costs not only for tuition, but also for student fees and campus-area housing, but also lost wages in a post-graduate job. By modest estimates, late entry into the workforce results in a lifetime loss of earnings exceeding $250,000.
- Consider carefully the amount of loans for college. Most families do not take all the loan dollars they are entitled to. Instead they find available funds, thereby reducing debt for the student and family after graduation. For the student, the larger the debt load after graduation, the higher his or her income will need to be in order to afford the payments. A student graduating with a debt of $35,000 will need an income of about $50,000 to pay for living expenses plus repay college loans. Not many entry level jobs pay $50,000 a year.
- Appropriately use part-time student employment during college. Most students can handle full-time work during the summer and breaks and10 to 20 hours of work per week during the school year (less work for first-semester students making the transition to college). Scheduled work hours help students manage their time, and financial aid packages include an expected student contribution to the total cost of college. When considering part-time jobs, keep in mind that an on-campus job reduces the cost and time of commuting to an off-campus job, and university jobs recognize that a student’s top priority is school, making it easier to schedule work hours.
- Career planning throughout the college years can lead to mentorships, internships, and job experience that will improve a student’s resume. Students should not change majors midway through school just because a field seems to have more employment opportunities. Changing majors can sometimes require an extra year or more of school, and demand for graduates in a specific field can fluctuate. What looks promising now may fade in a few years. Students should keep in mind the kind of jobs they want over a lifetime.
- Consider tuition assistance and loan forgiveness programs. Some
companies provide funds for employees—even part-time employees—to attend
college. Loan forgiveness programs help volunteers or employees pay
back student debt after graduation. A few popular sources of tuition
assistance are UPS, Disney, Google, Starbucks, and Nike. Large hotel
and restaurant chains and some non-profit organizations also provide
tuition assistance or reimbursement. Loan forgiveness programs include
AmeriCorps, Peace Corps, VISTA, Teach for
- “Go Green.” Today’s students embrace the concept of conservation. By considering ways to save energy and resources, you’re likely to find ways to also conserve money.