Day 6: How to Pay for College
Free Email Video Series – Day 6
Here’s a quick run-down of what you’ll learn in this video.
It’s indisputable. College is expensive. So how will you pay for it?
Unfortunately, most families ask this question at the end of the process, rather than at the beginning. By waiting to the end, however, families get themselves into a world of trouble.
I believe that all school choices should begin with a firm understanding of your budget. And your budget is built not only on your access to financial resources (your savings, your assets, and perhaps a lottery ticket or two) but also upon your values.
As one of my wealthier clients once confided in me, “Just because I can buy a BMW doesn’t mean I will buy one.”
No matter your resources, you need to make some sound, reality-based decisions about your priorities. Then you need to try to put a dollar value on those priorities.
Overall, however, the most important thing to keep in mind as you consider how to pay for college is that miracles do not exist.
Don’t believe in them.
Too many families in every income bracket fail to consider the cost of college. Instead, they blithely tell themselves, “we’ll work it out somehow.”
But hope is not a plan. Money does not fall from the sky. And still there are tuition bills that must be paid. So how do you do it?
The most obvious and important way to pay for college.
Some of us are lousy savers, however. We never save enough. If you haven’t started to save for college now, you need to start. It will be hard. It will require some sacrifice. But you must save as much as you can.
College will be much more expensive than you can imagine right now. So save.
2. Need-based financial aid
If you have modest income and assets, you should calculate your need and understand the ways in which financial aid is both calculated and allocated.
Suffice it to say that if you haven’t already looked at the FAFSA4caster.gov website and calculated your Expected Family Contribution (EFC), you should do so immediately.
You can also look at Net Price Calculators (NPC) on every college’s website to give you an idea of whether you will qualify for need- based financial aid.
3. Scholarships from colleges
The greatest single source of money for college comes from the colleges themselves.
Colleges will pay for students they want most; they will offer tuition discounts to attractive applicants.
As we have reiterated throughout this course, the decisions you make are pivotal in the outcome of the entire college process.
If you select colleges that are more likely to offer your family these merit-based discounts—or scholarships—then your costs will inevitably go down.
The better informed you are as to how these discounts are awarded and calculated, the better able you will be to reduce the overall cost of a higher education.
Two words: avoid them.
I realize as I write these words that most families will ignore me; debt is as American as apple pie and baseball.
But too many families look at college as priceless investment. Of course, you are investing your hard-earned dollars in your child’s future.
But the investment doesn’t have a calculable return like a bank deposit, a real estate investment, or a hunk of pure gold. College is an experience: it is not something that we can later sell at a profit.
Our general advice is that families should take out no more than the $27,000 that students themselves can borrow through the Federal student loan program. But this is over the entire four years of college.
You will need to come up with the rest.
But this is possible if you choose your college carefully. This is possible if you save diligently in advance of college.
If you must take out more loans above and beyond what is accessible from the Federal student loan program, be careful about interest rates and terms. And know that student debt will never be forgiven, even in bankruptcy. Furthermore, these are loans that parents must co-sign: without income and assets, students are eligible only for that $27,000 maximum.
Also do your homework and understand what your debt burden will mean upon graduation.
Don’t just ignore the stack of debt you are piling up. You need to make a plan for how to repay it.
And your career choices beyond college may have to take into account your ability to pay the debt off in a reasonable amount of time. In any event, try to minimize your debt load as much as possible.
For your homework, your assignment is to create your college budget. We offer you a spreadsheet to get you started, and to ensure there will be no surprises once it comes time to make that first tuition payment.
You owe it to each other to carefully plan for your college expenses, and to map out a plan to pay them. Hope is not a method. Don’t count on miracles.
As a special offer to you for going through my email video masterclass, I’m offering you our Roadmap Planning Session, normally $450, for only $375—a $75 discount.
So if you’re freaking out about how to pay for college—or anything else in this crazy process—just sign up for the Roadmap Planning Session with me for the low price of $375.
Next time, we’ll focus on how to craft an outstanding application by beginning with a coherent strategy for presenting yourself to colleges.