Why Making Smart College Money Choices Is More Complicated Now – And 3 Steps to Help
Colleges and universities abruptly closed this spring and sent students home. The impact of the coronavirus threw college life and new student admissions into chaos. Even now, there is much uncertainty as to what college life will look like in the fall. Colleges are making it up as they go along.
If you have teenagers now, you are probably wondering what’s going on and how it’s going to affect your family. The bad news is that the college experience may never be the same again. The good news is that now is a great time to assess what paying for college means to you and decide how you are going to make smart college money choices. Good decisions now can help you build real wealth into the future.
Class of 2020
If you have a student in the class of 2020, this spring has been especially nutso. Usually, schools require a commitment to attend in the fall by May 1. That is when deposits for housing are due and financial aid is basically set. Because of the uncertainty of what the fall will bring, many schools have extended deadlines. Partially because they have no idea what they will be offering come fall, and partially because they are scrambling to fill their freshman classes.
Schools are offering additional financial aid and scholarships, unsolicited. This is a great time to contact the financial aid office and ask for more money to secure your enrollment. Compare your options closely.
This is also the time to assess your family’s financial situation and determine if you have had a change in your financial circumstances. You can ask the financial aid office to reconsider if someone has lost their job or suffered another financial hardship during the last couple of months.
From the parents’ and students’ point of view, it is important to understand what you are paying for. Assess the pieces of the cost of the institution you are considering. Is it worth paying for room and board when you don’t know if living on campus will be possible? Even if your child can live on campus, will classes be online anyway?
Speaking of online, is a high cost of tuition something you can swallow if classes end up being 100% online? Is there a refund policy? What are you going to do if your student unexpectedly can get into their dream school off the waitlist? Don’t expect much financial aid if that’s the case.
Let’s face it, colleges are businesses. They’re scrambling right now to maximize revenue at a time when expenses are climbing. Not all schools will survive and there will be stories about colleges going bankrupt. It is up to each family to decide what is most important for them. It is no longer possible to just blindly go with the status quo and stroke the check (or sign the promissory note) when so much is at stake.
What does the college experience mean to you? There are a lot of students that are considering taking a gap year. They don’t want to have a school without in-person classes or big-time sports. Which leads me to….
Class of 2021
This pandemic won’t be over any time soon. The class of 2021 has already seen their AP and SAT/ACT testing schedules modified, canceled, and some schools are even waiving test requirements for admissions next year and beyond. Those who will be seniors in HS next year don’t know what kind of senior year to expect. They may be less likely to have access to the information they need to make smart college decisions, like guidance counseling and in-person school visits.
In addition, there may be a huge cohort of students who deferred admission this year, that will mean it will be that much more competitive to get admitted next year.
The good news is that these students have more time to evaluate what they really want and need. I’m seeing more families plan to have students stay close to home for the first two years of college. They can get pre-requisites out of the way at a lower-cost local school and transfer later. This is a really good idea for some families and saves a lot of money.
Beyond Class of 2021
If you have kids younger than the class of 2021, you are in luck. I believe this year is one of the final straws that might finally topple the high-priced, debt-financed college education system in this country. No longer will as many people be willing to shell out $75k per year to attend an elite university and end up hundreds of thousands of dollars in debt. You have time to observe what is going on the next couple of years and make better, smarter, college money decisions.
Three Steps to Be Smart About Paying for College
So what do you do now? I recommend families follow the process below to understand their motivations, educate themselves about the financial aid process, evaluate schools based on their financial fit, and consider alternatives to buying into the hype. Now, more than ever, these steps will help you make smart college money decisions. It’s never too late!
Step 1 – Think about your emotions and how they translate to your desire to pay for college.
This is where I ask you to dig deep and understand what is motivating you during your child’s college search. Is it prestige? Is it guilt? Is it fear?
As much as you may want to tell your child they can attend any school they want to, that’s not financial reality for most families. It is important to face reality head on and be realistic about what is possible based on your money. Then tell your kids the budget. Don’t be afraid to be honest. Your future financial self will thank you.
Step 2 – Become knowledgeable about the financial aid process.
You would be amazed how many parents wait until a school is chosen and deposits are due to figure out how they are going to pay for it! Not all schools’ financial aid is created equal.
Does the school you are interested in require the FAFSA and the CSS Profile? Do you know what goes into filling out these financial aid forms? It is possible to plan and maximize your family’s chances for financial aid, but only if you know you should.
Step 3 – Find schools that are a financial fit and make a real plan as to how you are going to pay for at least four years of college.
After going through steps 1 and 2, it will become more clear which schools are good financial choices and which ones are not.
Paying for the first year and then hoping for the best is not the smartest decision. It may make more sense to think about how to reduce the first few years out of pocket costs, and then transition to a different school later.
The other good news is that we can help! Want to learn more about the 3 steps to making smarter college money decisions?
Join us on our free webinar on June 30th, 2020.
We’ll answer your questions and help you evaluate the uncertainty of the current situation. Again, your future financial self will thank you!
Want to learn more about financial planning for college? Check out Nannette’s book “Crazy College Money” on Amazon.
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