College Research – Part 7, The Financial Conversation

Hi friend! Welcome back to the blog. This post is a continuation of a series we are doing on finding the right college fit for your student. We are starting to get into the nitty gritty of college research. Click here if you want to go to the first post in the series.

Focus on Three Things

Remember as you are doing this, to keep your focus on three things:

1. Their passions. What are they interested in?
2. Their gifts. Where do they excel in life?
3. Your total financial bottom line – including their ability to earn scholarships and/or work a job and what that job could pay, your savings, your (Expected Family Contribution) EFC from the FAFSA, and your monthly budget.

We already talked in the 3rd post in this series about having a discussion as a family about what parameters you are looking for in a college. Big, small, greek, not greek, sports to watch, don’t care about sports, etc.

Have a Financial Discussion

You should also sit down and discuss your financial situation with your student. They need to know the following:

1. Approximate average costs of colleges they might be interested in. We began to research this in part 5 of this series and we made a spreadsheet to hold all our data.
2. What you expect they will contribute as a student – are they working? do they have any savings built up? will they need to work part time while they go to school?
3. What you are prepared to offer them? Do you have any savings, 529 plan, plan for moving some money around to free up some money you can add to the college fund? monthly budgeted amount that could be used towards college?
4. Perhaps you want to set some qualifiers on what you will pay for and won’t pay for. Here are some examples that you could consider.
   1. “We will help you with your Bachelor’s degree, but if you plan to go to any graduate programs for M.S. or PhD, you will have to figure out how to pay for it.”
   2. “We will provide housing and living expenses (i.e. room and meal plan on campus), but you will pay for any personal spending, trips with friends, study abroad, etc.”
   3. Or, you may say, “We will pay for one study abroad trip during the college years, but you will pay for any other trips / excursions.”
   4. Some folks give their kids an amount they are responsible for, such as, saying, “We want you to commit to earning $3,000 each year and using that towards your college tuition.”
5. Next, make sure you discuss with them if there is a gap between what you intend to pay and what the college is going to cost, then how could they possibly fill in that gap? What scholarships are out there? What will it take for them to get the scholarship? Do you need to invest in an SAT or ACT tutor? Yes, this is an investment. Let’s say you pay $500 for a test prep class. And then your student’s score goes up so that you receive $10,000 more dollars per year. I’d say that investment paid off. We will discuss more about scholarships in the next post in this series.
6. Finally, make sure you understand the vast differences in prices at different colleges. For example, one college that is a total of $18,000 per year would be considered a “value-school” as compared to another one that is $40,000 per year. What are your expectations in terms of value and reputation of the colleges on your list?  Also realize the different scholarships you may receive will change your bottom line, which is the most important figure to keep in front of you. Getting $15,000 a year off a $40,000 school is not better than getting $10,000 a year in scholarships at a $25,000 school.  Just because the scholarship is more, the college’s price is more as well. It’s all going to come down to the bottom line. Make sure you compare apples to apples and not apples to oranges. This is why your spreadsheet will come in handy as you load in the numbers.

So you see, these are some big questions you need to discuss and have a plan for implementing. Everyone’s financial situation is different and it’s quite a personal topic. But your student needs to know enough to help them be motivated to do what they can do in order to achieve their goals. Having this conversation with them can help them get excited about where their future may be headed, especially if it starts to seem doable.

What have you learned from talking to your student about finances?    This is post 7 in a series on college research.  If you want to go back to the beginning, click here.  If you want to go to the next post in the series, click here!

Blessings,

Michelle