The Truth About Saving Money for College: Your Parents Should Have Crushed Your Dreams Long Ago

Posted in Cents in the City , Savings Account , Student Loans • October 19, 2012

rising cost of collegeWhen I think back to the cost of my college education and realize that I could have purchased a house with the amount of money I spent, well, you can probably imagine the wave of depression that quickly sets in. Until recently, I had never considered the very real, very enormous cost of my college aspirations — and that’s the reality for many of today’s graduates who are burdened by huge student loans to repay upon receiving their degrees.

I was always told by my parents and close relatives that going to a “good college” was the key to getting a “good job.” And being the obnoxious overachiever I am, a “good” college wasn’t good enough. My self-worth was dependent upon the school that accepted me and its level of prestige. So when I got my acceptance letter in the mail to a private university near my home town — which just so happened to charge about $30,000 per year in tuition alone — my family and I were overjoyed. It wasn’t until I received the bill for my first semester of classes that my mother asked me, “How are we going to pay for this?”

Why are you asking me?

The Reality of the Rising Cost of College

Matt Kabala and Gene Natali Jr. write in “The Missing Semester,” a book about the consequences of young adults’ financial choices, that the sticker price of college has risen 498 percent in the past 30 years. Unfortunately, student loans are increasingly becoming the go-to source of funding these expensive educations, as Kabala and Natali explain student loan debt topped an estimated $1 trillion in 2011.

The fact that higher education can be very expensive is no secret, yet families aren’t preparing adequately for that reality. They’re either just not saving money needed to cover the full cost of college, or applying to schools that are out of their price range due to the ongoing societal expectation that the university name on your degree dictates how important and successful you will be in the future.

The price of college was a subject my mom and I touched upon every now and then, especially around March when the FAFSA application was due. However, one thing we never really discussed was how much we could afford as a family to spend on school. I always assumed I’d attend my pick of colleges, get some financial aid and a scholarship or two, and she would handle the rest.

There was no conversation about choosing a school in a specific price range, or what we would do if there wasn’t enough money to cover the rising cost of college. I have a feeling this conversation fails to happen in thousands of households every year.

Tough Conversations about Affording College Need to Happen

If you have plans to go to college and are in the process of considering schools, make sure that if your parents haven’t already sat you down to discuss the financial aspects of your decision, you make it happen. It’s a conversation no one really wants to have, but it’s imperative you ask these tough questions so you’re not burdened by student loan debt for decades after graduation.

1. Will you be paying for college on your own, or are your parents helping? The answer to this question will have a significant impact on how much you can spend on college costs. It’s not unusual for parents to place the responsibility of paying for school solely in the hands of their children, so make expectations clear before you set your heart on an Ivy League.

2. How are you covering the price of college? Determine whether you qualify for financial aid or will be paying mostly out-of-pocket. Will you need loans? If so, will they be in your name or your parents’?

3. What is your total budget? Do you have a savings account set aside for college costs, or perhaps a 529 plan? How much are in those accounts? Consider financial aid, too — apply for grants and scholarships well in advance, including the ones offered by specific schools you want to attend, and factor that money into your total available funds.

4. Will your earning potential match the price tag of your education? Remember that you will have to begin repaying any loans as soon as you graduate, so think about whether your degree is within a field that pays enough to warrant the costs of getting it. I graduated with a degree in English — a field with high competition and generally low paying entry-level positions; thinking back, I probably didn’t need that $100k private university education.

5. What are Plan A, B and C? It’s okay to go after your dream school, as long as you can pay for it. If it turns out you didn’t qualify for that big scholarship, you have to come to terms with the reality that a different school may be in order. Apply for back-up schools that are less expensive than your top choice in case you can’t come up with the money needed.

I was lucky enough to have older relatives who thought about all of these things and left me the money needed to pay for my college education, allowing me to graduate debt-free. Even so, knowing what I do now, I probably would have made a different choice about the school I attended.

I would be just as smart and successful today if I had received a degree from a less expensive school, and that’s a realization more parents need to inspire in their university-bound children. College is just a few years of your life, but burdensome debt can follow you around for much longer. Make sure you understand the lasting financial impact of your decisions, and talk to your parents about what makes sense for the family when it comes to affording college.

 

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