Life is expensive, it seems like just yesterday gas was $0.80 a gallon and a ticket to the movies was $4.00. I recently heard that gas could rise to more than $4.50 a gallon this summer and I recently paid $9 to see a movie! There is no doubt that things just cost more and more.
I recently finished up my masters degree – so naturally I have college costs on the mind. When I started at the university a parking pass was $75 for the year (which I thought was outrageous). By the time I graduated with my MBA the same parking pass was going for $275 per year.
Want to see a parent sweat? Talk about paying for college!
With tax time and the FAFSA upon us, I thought I would take a moment to talk about the options out there to pay for college. So here is a brief overview of the options:
1. Federal Pell Grant
- Need based grant which is dependant on the Expected Family Contribution
- Only for students that have not earned a bachelors degree
2. Stafford Loan
- These are student loans
- Primary type of financial aid provided by the Department of Education
- There are two types: Subsidized and Unsubsidized
- Subsidized loan: the interest is paid by the government while the student is in school. These are need based loans.
- Unsubsidized loan: interest is accrued as soon as the funds are disbursed. These are not need based loans.
3. Parent Loans for Undergraduate Students (PLUS)
- Loans used for parents to pay for their children’s studies.
- These loans are not need based and are not subsidized
4. Federal Perkins Loan Program
- Need based loan program for students with very low Expected Family Contributions.
Those are the options out there from the Department of Education. But of course there are several other good options including:
- Scholarships
- Grants
- Work Study
- Part Time Employment
- Private Student Loans
Here is the deal.
Many parents start having heart palpitations when they think about the idea of perhaps not paying for the entire bill on their child’s behalf. I get it – you love little Susie or Jimmy so much that you want to provide every hand-up possible. But let me give it to you this way; which would you rather? Pay for your child to have a great college experience with all the bells and whistles while taking on a load of debt, draining your savings, and pushing you to financial strain.
OR
Put the responsibility back on to your child. Let them take on the financial responsibility of tuition, living on their own, socializing, and experiencing grown-up life.
In simple terms your child has the rest of their life after college to pay back the student loans they took out. You only have the next 20 to 30 years to prepare for retirement. If you choose to finance your child’s college at the detriment of saving for retirement you better start praying that they get a sweet job – because odds are that you will be living with them when you want to retire.
My parents chose the second option – not because they wanted to but because they had to.
I took college more seriously! I suddenly had to learn to evaluate wants versus needs, I learned return on investment in a hurry, and I had to work full time jobs all the way through undergrad and graduate school. And you know what? I am not a very unique case!! I personally know dozens of colleagues who did the same thing.
When you start the process of investigating paying for college everything you see will bombard you with the idea that kids should only be responsible for studying. Trust me – your child can handle some responsibility. The kids who have to work hard to go to school end up being academically superior, they have actual work experience, and they don't end up coming back home to live with you after graduation.
This is obviously a topic that I am passionate about. I have been there, I know how scary and overwhelming it can be. I am a resource to you. Feel free to ask questions, bounce ideas or simply just lament about how much it costs – I get it.
I'm going with option #2!
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