High school seniors across the country begin to receive their college acceptance letters this month, and many will be breathing a sigh of relief. Getting in is the hard part, right? But the process of paying for college is just as tough for many families – and it shouldn’t be an afterthought.
1. College in 2011 is expensive, and decisions are more complicated than ever. College enrollment is rising, and President Obama’s goal is to add 8 million college graduates by 2020. The fact that almost everyone wants to go means there are more choices than ever, from community colleges to for-profit schools to big-name private institutions. Meanwhile, the price of getting that degree is skyrocketing, and many students end up crippled by loan debt. If fact, 41% of federal borrowers face delinquency or default, according to a study of recent graduates released this month by the Institute for Higher Education Policy.
2. New must-do: Talk about cost with your kid. The old wisdom – get into the best school you can, and worry about money later – no longer applies. Parents should be discussing finances from the beginning of the college search. Young people cannot ignore the realities of graduating from college with tens of thousands of dollars in debt. That debt can follow you for the rest of your life, hurting your credit score and even directing your career choices. If you have $300 a month in extra bills, you’ll have to reconsider that low-paying but rewarding job in publishing.
3. Are school counselors giving the right advice? “I see very few kids who understand the financial impact of going into debt,” Steve Schneider, a school counselor at Sheboygan South High School in Wisconsin, told me. He tries to steer students toward more affordable paths to achieving their goals; for instance, starting at an affordable two-year school and then transferring elsewhere to finish the degree. Not all counselors are on top of these issues. A study from the nonprofit Public Agenda last year found that 59% of young adults rated their high school counselors as “poor” or “fair” when it came to informing them about paying for college. But little by little, families are getting the message that finances matter when it comes to school selection. Jeff Stahlman, a counselor at New Albany High School near Columbus, OH, said people have slowly been waking up to this issue over the last decade. “I see families more concerned with the bottom line,” he said, “asking themselves questions like, ‘Is it worth it to do this at this school?’”
4. More help is on the way. Even the best school counselor can’t make a student’s college decision for her. Some extra help will arrive in October, when new federal rules kick in requiring that every college post a “net-price calculator” on its website. The calculators ask visitors to fill out a short form, then they spit out a rough estimate of the true cost of attending a particular college (after grants and financial aid). The calculators won’t be perfect, but Mark Kantrowitz, who runs the invaluable financial aid resource FinAid.org, says they will probably be accurate within $5,000 or so. “The calculator will be useful to see if [a school’s price] is in the right ballpark,” he told me, “but not for distinguishing between home plate and center field.” For now, that’s still something to be thankful for.
5. So what’s a parent to do in the meantime? Books like Kalman Chany’s “Paying for College Without Going Broke” and Mark Kantrowitz’s “Secrets to Winning a Scholarship” offer a lot of help. Don’t make the mistake of giving your child a large cash gift; under FAFSA’s financial aid formula, kids’ assets can be assessed at up to 20%, while your rate will be much lower. If your child has his heart set on an expensive school, consider suggesting that he start at a 2-year school and then transfer. (Remind him to get good grades to increase his chances of merit aid!) And get informed about your child’s options for paying the loan back. Income-Based Repayment, for example, is a relatively new federal program that sets your loan payments based on how much money you make, not how much you owe. If you work in public service, you can even get your loans forgiven after 10 years. You can find more info at www.IBRinfo.org and www.finaid.org.