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Personal Finance from the Broke Perspective

How We Plan to Help Our Kids with College

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How We Plan to Help Our Kids with College

My husband and I have been on a tight budget for most of our married life. Luckily, one of us has always worked at a college, so we planned to send our kids to college where ever we worked so that the kids would get a tuition discount. Since our budget was so tight, we didn’t have the money to save for college (we still drive an 18-year-old vehicle!), so this plan worked perfectly. . .until it didn’t. My husband couldn’t pass up an excellent job opportunity last year—our oldest’s senior year in high school—so he left his job at the university. While staying at his old job for the tuition discount was tempting, the new job offered a better position, more money, and more opportunities for advancement. However, we then had to work out how we plan to help our kids with college.

Since we had zero saved, we knew we’d have to take a non-traditional track to get our kids through college.

How We Plan to Help Our Kids with College

We had our kids in our mid-to-late 30s, so we are focused on retirement savings now that my husband has a better job. Still, we plan to help our kids with college as we can. Here is the plan. (We have one in college and two more who will be in college in the next four to five years.)

Pay for Community College

Our oldest currently attends a community college. He received a scholarship that pays half of his tuition. We cover the other half.

Likewise, we homeschool our younger two, so we plan to have them take dual credit classes at our local community college when they’re in high school. We will pay for those classes.

Pay for Some Living Expenses

Our oldest lives with a family relative out-of-state while attending community college. We pay for all of his groceries every month. We also pay for any medicine he needs, haircuts, and his college books.

He does not currently have a car, but if he gets one, he will be responsible for the gas and car insurance. (We’re hoping he waits as long as possible to get a car so he doesn’t have any added expenses.)

Give Them a Set Amount

When our oldest transfers from the community college to a four-year university, we have told him we have a set amount we can contribute to his education. He knows what that amount is. To pay the difference, he will need to take out loans and/or get a job. We’re hoping he chooses the most economical option, so he doesn’t saddle himself with student loans.

When our younger two go to college, we will also let them know the set amount we can pay each year.

Encourage Applying for Scholarships

We have encouraged all of our children to apply for college scholarships. The more scholarship money they can earn, the less they will hopefully have to pay in student loans.

Final Thoughts

College is costly. Unfortunately, our plan to get 50 percent off tuition at the university my husband was employed did not work because he left the job. While that was unexpected, we have found ways to help our kids pay for college.

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Beware These Financial Pitfalls When Choosing a College,

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Beware These Financial Pitfalls When Choosing a College

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Financial Pitfalls When Choosing a College

With more and more high school students deciding to attend college, the race to find the “perfect” college often begins as early as a high school student’s sophomore year, though more typically their junior year. Students may consider a school’s “vibe,” and its ranking when picking a college, but there are more important things to consider. As the parent, stepping into your child’s college search with a dose of reality is necessary. After all, attending college can cost tens of thousands of dollars. Advise your child to beware of these financial pitfalls when choosing a college.

Financial Pitfalls When Choosing a College

College is expensive! Even if your child attends a local university and lives on campus, the price tag could be $20,000 per year or more. For that kind of investment, you should carefully consider these factors, which will save you money and help you and your child choose the right college carefully.

The Retention Rate

How many students who come in as freshmen come back for their sophomore year? That is the college’s retention rate. Colleges with high retention rates are likely doing something right for their students. If the college your child is considering has a low retention rate, be concerned.

Transferring to a different college because your child is unhappy at the one she initially chose can be expensive. Not all of your child’s credits may transfer, which means she may have to pay more to complete her college degree, which happened to me. I left my initial college after one semester. It ultimately took me five years to graduate college, in part because of the college I initially chose and the fact that some credits didn’t transfer.

The average retention rate nationwide is 78%. If the college your child wants to attend is lower than that, make sure you understand why before sending your child.

The Graduation Rate

How likely are incoming freshmen to graduate in four years? That is the graduation rate. Unfortunately, the nationwide graduation rate is surprisingly low. “According to the National Center for Education Statistics, just 41% of first-time full-time college students earn a bachelor’s degree in four years, and only 59% earn a bachelor’s in six years” (CNBC).

What do those lower graduation rates represent?

Financial Pitfalls When Choosing a College

First, some students drop out and never complete their degrees. My cousin dropped out of law school after one year, and he had tens of thousands of dollars of debt to show for it without the law degree. He did eventually get his Master’s in a different field, but paying off the law school loans took him years. This is the worst-case scenario.

Second, if your child does graduate but takes five or six years to do so, your child is in a better position—he has his degree. However, do you have the money to pay for an additional one or two years of college? Most families expect their child to graduate in four years and budget for that. When graduating takes longer, many families are left taking out additional loans they hadn’t planned on. Unfortunately, this scenario is surprisingly common as most schools have fairly low four-year graduation rates.

Some Scholarships Aren’t Renewable

If your child qualifies for financial aid, be forewarned that the college can usually manipulate the first-year financial-aid package to make attending the school possible. However, they often do that by finding scholarships the college offers. Yet, what you may not realize is that some of these scholarships aren’t renewable.

Perhaps for the first year of college, parents need to pay $7,000. However, for sophomore year, after some of these one-time scholarships end, you may be looking at a bill of $15,000 a year. Can you afford that if you were expecting to pay just $7,000 a year? That can be a shock to many parents.

Make sure when you sign your financial aid agreement that you know which scholarships are renewable and which are one-time scholarships so you’re not surprised next year.

Paying for College Can Increase Your Income

Some parents choose to pay for college by taking money out of their retirement accounts. However, when they do this, the money they withdraw counts as income in the next tax return that they file. Then, when the college sees this, they see that the parents’ income has gone up, and financial aid is further reduced.

Ideally, have a way to pay for college that won’t make your income increase and reduce the amount of financial aid for which you qualify. If you feel that taking money out of your retirement fund is the only way to pay, consider choosing another college. Or, choose to take out PLUS loans and either pay them back traditionally or pay them back with money from your retirement fund after your child graduates. Then, doing so won’t affect your financial aid offer.

Consider Living Expenses

Financial Pitfalls When Choosing a College

When people think of the price of college, they most often consider tuition and room and board. However, your child will have many more expenses than that. Consider the following additional costs students may incur:

  • travel home for vacations,
  • clothing if the climate at school is different from the climate at home,
  • entertainment,
  • food when the college cafeteria is closed,
  • fraternity or sorority fees if they are pledging,
  • laundry,
  • parking fees,
  • summer storage for their college furniture and other goods when they are home on summer break

Final Thoughts

Choosing a college can be exciting, but make sure your child isn’t swayed by the college’s slick advertising. More importantly, consider the many financial pitfalls when choosing a college. Investigate the college’s retention and graduation rates. Understand your financial aid package, especially if the scholarships that your child receives are renewable or one-time scholarships. Don’t forget to also account for living expenses. If you consider all of these variables, you will be more financially prepared for what is to come in the next four (or six!) years your child is a college student.

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The Higher Education Path Not Taken

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I’m not sure about you, but I have a hard time with keeping myself from constantly over-analyzing everything.  You name it, and I’ve analyzed it.  Even things that I cannot change, like my choice in Colleges.  Should I have gone to a different college?  Perhaps.

If I look at it from a strictly financial perspective, the answer is a definitive yes.  I went to Jamestown College, which is a private school.  While it isn’t the most expensive private school you can choose, it’s not nearly as affordable as a state school would have been.  Instead of the student loan debt that I am paying on now, I would have only about half of it had I gone to a state school.  Maybe less.

If I had gone to a school closer to home, I could have saved money over the summers by moving back in with my parents.  Traveling home would have been a far cheaper endeavor, and certainly would have been a shorter endeavor.  It’s over 950 miles from Jamestown to Hamilton, MT, where my parents live.  Even with the best car I had, mileage wise, it cost at least $200 to drive home and back.  And that’s without stopping along the way at a hotel.   And don’t even get me started on the money I could have saved on laundry by bringing it home and using the washer and dryer at home!

Of course, not every decision in life can be judged solely by it’s financial merits.  (Not that I was all that adept at anything financial back then anyways.)  Something as important as college has many factors that go into it’s choosing.  For me, the money did come into play simply because my family didn’t have much of it, and I needed to be able to get enough financial assistance to go to the college I chose.  I also wanted to play football, so the college had to have a team.  I’m not a big fan of lots and lots of people, so the school needed to be smaller.

Having had pretty good grades in high school, I was able to get scholarships and financial assistance to go to all of the schools that I applied to.  I had ruled out the main state schools as being too big.  They also got ruled out because I wouldn’t be able to play football.  In the end, the choice came down to a smaller state school, a private school closer to home, and Jamestown College.  All offered everything that I was looking for.  All were good schools.  What it finally came down to was friendliness.  Of the three schools I had narrowed it down to, only JC took the time have a enrollment counselor call me.  The football coach at JC was the only one to call me and personally invite me.

Sorry, I’ve gotten off on a tangent, and it’s turned into a bit of a love fest.  But, there’s a reason for that too.  It’s the funny thing about college.  No matter where a person goes to college, the college they went to was the awesomest college ever!  It’s not about the money.  It’s not about the education.  It’s not about the faculty, or even the sports teams.  Those all play a part in the choosing of the school, but, really, play very little part, if any, in how you feel about the school.  No, the college you attend is the best school because of the people you meet, the adventures you have, and the growing up (hopefully) that you do while you’re there.

When I think back on my higher education, I can say that I got a good education, but I can also say that I could have just as easily gone anywhere and gotten a good education.  I was able to play a couple of years of football, and that was cool.  I could have played at several other schools too.  I certainly could have gone to a cheaper school and had less student loan debt when I was done.  But, what really made college, college was the people I met.  Either directly, or indirectly, through college, I met my wife, and made so many friends.  We had so many shenanigans!  And that is what made college worth every penny.

Let’s do something fun.  Tell us all what college you attended in the comments below.  Maybe we’ll find some fellow alumni!  (Also, I’m curious how many of you are Ivy League-ers. 🙂 )
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