Getting the Kids
Involved in Saving for College
The World War II
generation got a taste of higher education through the G.I. Bill and made
it a point to supplement or pay their kids’ tuition. It was a struggle,
but a far more manageable one than it is in this day and age. Figures from
the University of Texas in 2005 showed that since the 1960s, the price of
a public higher education has risen from about five percent of median
family income to more than 17 percent today.
Based on the current
pace, that number could rise to 30 percent of median family income by
2020. Private universities could approach 50 percent.
Scary numbers
indeed. That’s why it makes sense for families to make college
affordability a family effort - with both parents and kids pitching
in. That’s a big change in 40 years, where parents considered it a badge
of honor to put their kids through school with no debt.
But there’s a
bright side to involving your child in the process of saving for college.
They’ll get an early education in money decisions that will have a
direct impact on their future. Here are ways to make sure you’re well
informed about the college savings process and how to involve your child:
Get advice as early
as possible. Even if your
child has only a short time until high school graduation, get advice
tailored to your own situation from a trained expert such as a financial
planner. Parents often forget that their first financial goal is
retirement planning, not college saving, so they need to start with the
following points:
Involve your child
in the discussion. Armed
with knowledge from the financial planning process or your own research,
start talking with your child about their financial contribution through
money from part-time jobs, savings or, as a last resort, debt after
college. Parents might decide to schedule two advisory meetings with a
planner – one for themselves, and a second one with the child.
Lack of money isn’t
the only reason kids may be asked to contribute or shoulder debt. Blended
families with ex-spouses who either don’t want to make a contribution or
haven’t agreed to pay tuition as part of a divorce settlement can be a
sticking point. Whatever the reason may be it needs to be presented
honestly to the child.
Tackle the FAFSA
first. The dreaded Free
Application for Federal Student Aid (FAFSA) is a necessity for all parents
who believe there will be some shortfall in paying for college after
savings, grants and scholarships. It’s a good idea to fill it out even
if your needs aren’t immediate; family finances can change for the
worse. Your child won’t qualify for federal student loans until you fill
out this form. To speed the process, get your taxes done as early as
possible in the year your child will need the funds. Colleges typically
dole out money on a first-come, first-served basis, so you’ll need your
income documentation in order.
Once the FAFSA is
processed, the Department of Education determines financial need and the
parent’s EFC, or the expected financial contribution. If parents can’t
cover the EFC, the student has to come up with a way to close the gap.
There’s a way to rough out what your EFC might be – go to http://finaid.org/calculators/quickefc.phtml.
Start looking for free money. On
the community level, you might find corporations, associations and other
groups that offer scholarships and grants for local students, particularly
those going off to state or local schools. Students can generally find out
about local opportunities through their high school guidance counselor. If
the student works for a company on a part-time basis, there might be
college support there. Also, the College Board (www.collegeboard.com)
Web site features a good online clearinghouse for scholarships, grants,
internships and loans, as well as www.fastweb.com.
April 2007— This column is
produced by the Financial Planning Association, the membership
organization for the financial planning community, and is provided by
McGuire & Co., LLC, a local member of the FPA.
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