Planning for College Costs Now Can Save on Stress Later

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Military families worldwide are sitting down with their high school seniors and figuring out which college is going to be the best financial fit. As the mom of four college students, I encourage you to plot out what all four (or five) years of college are going to cost -- and how you are going to pay for it -- before making that final decision. It will help you make a smarter decision and decrease stress about college expenses.

Understand your aid packages

It's absolutely vital that you fully understand the student's financial-aid offers. Every school uses their own format, and the details aren't always as clear as they should be.

Start by identifying what is merit-based aid, need-based aid and loans. Then verify that the merit aid is awarded for all four years and find out the credit and grade-point requirements to keep the aid in place. Consider whether your financial circumstances will change during your child's college education, and how that will impact his or her need-based aid.

Look critically at the loans that are offered, whether they are student-owned loans or parent-owned loans, their interest rate and loan repayment terms. Do a little math on the total amount you anticipate borrowing and what that repayment will look like; student loan calculators are available online. How will that payment impact your student's life as a young adult? If you're borrowing in the parent's name, how will the parent make that loan payment? (This is an especially important question if the parent hasn't been saving for college until now.)

One-year scholarships

Some students secure outside scholarships to help offset their college expenses, and they really can help. If your child has any of these scholarships, understand which ones are for one year only. (Most are.) Some may be renewed if certain criteria are met. While there are still many scholarships out there, a significant chunk are only available to first-year students.

Be realistic about how motivated your child will be to apply for scholarships in future years. Are they currently doing an amazing job of tracking deadlines and gathering requirements for applications, or are they getting a lot of help from someone else (who may not be with them at school next year)? Many scholarship applications are due in February and March, when students may face midterms and papers. Will they actually apply for these scholarships in future years?

Budget for increases

Build price increases into your plans, including tuition, fees, room and board. The average cost of college increases every year, sometimes with big jumps. Do a little digging to find out the average increase at the schools you are considering, and see whether there is any news about budget shortfalls or financial struggles. Since I can't know for sure what will happen in the future, I budget an extra 1% each year and hope it all evens out. (So far, so good. But I'm keeping my fingers crossed.)

Don't make assumptions about things like work study or other employment. One of the big lessons of 2020 is that things can change in an instant. Many college-age kids were unable to work last summer, and that caused some serious financial hardship last fall. If your child plans to work to pay for their expenses, have a backup plan -- and then another backup plan.

Don't plan to figure it out later

One of the worst things you can do is plan to figure out later years as they come along. I have seen so many students who had to leave college before graduation because the money ran out. I have a dear friend who had to leave college as a senior because there was no way to pay for the last year. (She finished eventually and it all worked out, but such heartache!)

College is a four- (or five-)year investment for most students. Take the extra time to plot out the entire expense, and how you'll pay for it, before your student decides where he or she will go to school. It can prevent a lot of heartache in the long term, and even if all goes well, it will make your life less stressful. And everyone likes less stress.

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