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How To Afford College For Your Kids

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In today’s world, paying for the college education of our children is one of the top concerns of parents. Without a college degree, it has been increasingly difficult to get a decent job (and in some cases even a crappy job requires a degree).

When I went to college, I assumed financial responsibility for 100% of my college education, using a heavy dose of loans to supplement some grants and scholarships. I’m the youngest of eight kids and my parents owned a small farm – they simply didn’t have any money to contribute. However, I decided that it was worth the cost and became the first college graduate in my family.

Saving money for your children’s college education comes at a cost – as it keeps you from achieving other financial goals as quickly. In many cases, it may delay retirement. What are some options to decrease the financial burden?

Low cost options

You’ll hear differing opinions on public universities versus private colleges. Advocates of private colleges will argue that the quality of education is better. Others might argue that a larger public university gives you the opportunity for a broader diversity of ideas. If you boil the argument simply down to cost, though, in-state schools often have a substantially lower sticker price. That’s because the taxpayers are subsidizing the cost to come extent.

May people also opt to go to a community college (junior college) for a couple of years to take care of general education requirements. These schools are even less expensive, and there’s often a community college very near your home, which could allow your children to live at home while they attend classes – saving a ton in room and board costs.

I attended Iowa State University for four years. I grew up in a small town and want to jump right into a large university with a lot of diversity. My wife attended a community college for two years before transferring to a smaller university in a neighboring state. Everyone needs to figure out the path that is best for them.

Scholarships and Grants

Scholarships and grants are the holy grail of financial aid, because they don’t need to be paid back. The first step toward getting scholarships and grants is to get good grades and get involved in the community. If two students have the same GPA, the student who volunteers at the soup kitchen and plays small forward on the basketball teams is more likely to get scholarships.

Most colleges offer scholarships to students, in addition to the grants and other financial aid options that are available. Contact the school’s financial aid office for assistance in applying for these scholarships. Another option is to apply for federal and state scholarships and grants, as government money is always available as you attempt to further your education. External scholarships are another outstanding option, as there are countless businesses, clubs, organizations and foundations that offer annual awards. All you have to do is apply to become eligible to receive this money. If all else fails, federal and private student loans could become your best option to pay for your schooling.

Don’t overlook any scholarships. When I was in high school, my guidance counselor altered me to a scholarship that had a deadline of the next day. There was a $100 scholarship for each school, and winners advanced to compete for larger prizes. I had to write and record a speech that night and turn it in the next day. It certainly wasn’t the best thing I ever wrote, nor my best recorded speech, but I hit the deadline and won the $100. It wasn’t a ton of money, but it was basically a guaranteed $100 for a couple hours of work. $50/hr isn’t a bad rate for a high school kid.

My small high school (my graduating class was 50 students) also awarded scholarships to the top male and female student and athlete (four total scholarships, worth about $500 each). You could apply for the top student scholarship or the top athlete scholarship, but not both (I don’t know the reason for this rule). One of the top male students in my class was also the center on the basketball team, center on the football team, and pretty much a great guy in general. No other athlete applied for the top male athlete scholarship because it was a foregone conclusion that Jason would win.

However, Jason decided that he didn’t want to be known as a dumb jock and applied for the top male student scholarship. Jason’s GPA was slightly higher than mine, but there was an essay component as part of the application, and my writing skills allowed me to edge him out for the scholarship. That year, since the top male athlete scholarship had no applicants, the scholarship money was divided three ways instead of four. If one of those other athletes had applied for the top male athlete scholarship, they would have received $500 just for the effort of applying.

Subsidized loans

If you have to rely on loans, get subsidized loans whenever possible. When you have a subsidized student loan, no interest accrues while you are in college. When I was in college in the mid 1990s, student loan rates were around 6%. Keeping interest from accruing on that debt while in college saved me a substantial amount of money.

Have them pay their share

My kids are off to a far better financial start. While we are by no means wealthy, my wife and I both have professional careers and we have been fortunate enough to sock away money in 529 plans for several years. It’s certain not enough to pay for college yet, but the kids are just 5 and 3.

My wife and I will certainly help our kids with college expenses. However, how much help is the correct amount? I’m hesitant to just write a check, as I’m not sure if a student is as motivated when they are paying any of the costs.

I have friends who are divorced, and divorce decrees (at least in my state) tend to include agreements that each parent will be responsible for 1/3 of college costs, with the child being responsible for the other 1/3. I’d suggest using this as a starting point and figure out what percentage works best for you.

I held down a job the entire time I was in college. I routinely carried 18 credits of coursework while working about 20 hours per week. Contrary to what your kid may say, this still leaves plenty of time for studying and having fun. Even balancing schoolwork and a job, I had much more free time as a college student than I do now as the father of two kids.

A good lesson to teach your kids is that having a smile on your face can land you a better job. My first college job was working in food service at the dorm. My first semester had a lot of shifts in the dish room washing dirty dishes. That job really sucked. However, my boss quickly realize that I could actually be pleasant to people. The next semester, I was on the front line serving the food – a much better job.

A little debt is OK

I’m not convinced that having someone enter the workforce with a bit of debt on their shoulders is a bad thing. After all, this is an investment in their future, so it seems logical that they should shoulder some of the burden.

When you look at the projections of student loan debt 10 or 15 years in the future, also bear in mind that starting salaries are likely to climb significantly during that span as well, so the ability to pay back a certain amount of money may be somewhat easier than it would at first appear.

Last updated on August 23, 2014.

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3 Responses to “How To Afford College For Your Kids”

  1. David says:

    When I was deciding where to go for undergrad, my Dad forced me to apply for every single available scholarship that I could find. I was a very strong student with strong test scores and a lot of extra curricular activities. I ended up with a full ride at a university but this was all the result of many hours working on applications/essays.

  2. My advice is to encourage your kids to work their tails off in high school. High grades can be translated into acceptance to better schools, scholarships, and a much higher return on their college investment.

  3. Kosmo says:

    @ David – Agreed, it can be a lot of work, but can pay off well. Divide the scholarships/grants earned by the hours of work. Does it beat the pay you’d make at a normal job as an 18 year old?

    @ My Financial Independence Journey – Yeah, it’s amazing how important those high school years are. My Achilles heel was a relative lack of extra-curricular activities, largely driven by lack of opportunity – farm work had a way of interfering.

    For my own kids, I’m hoping nature and nurture come into play a bit. My wife is a CPA, and I have two BS degrees and between us have a pretty well rounded academic background. I tend to look for teaching moments a lot and enjoy explain things to thing.

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