What are parents supposed to do once their kids are ready for college if they have not saved a cent for the costs? And what are they supposed to say to their children about why they haven't and what will need to happen next? Given the rising cost of college and the uneven economic recovery, there will be a lot more families facing this sort of thing in the coming years. Here are eight things to consider:
Kids should know where they stand.
So how much have you saved? How much can you spend? How much are you willing to borrow? And how soon can you sit down and explain it to your high school sophomore or junior? If you don't know the answers, that's fine. Just say so and explain what the variables are that might affect the outcome.
These aren't always easy discussions. But keep in mind that when you fill out the FAFSA (the application for federal financial aid), your child will need to sign it, and it will include your income and other information. So you'll need to reveal all sooner or later.
So you haven't saved anything. Maybe you have some regrets. Chances are, however, you've put a lot of your discretionary money into a nicer place for your family to live, enrichment activities for your kids and family experiences that will create lifelong memories.
These are good things. Your children probably do not resent you for them. You certainly don't owe them an apology, given that you don't yet know where they're going to college and what the outcome will be.
Many high schools do not do a great job giving students advice on picking the right college. Fewer still know a lot about the finer points of financial aid. So you'll want to turn to your community for advice. Who has been through this recently? What did they learn?
LOTS OF SCHOOLS
There may be a private college that's willing to give your kids so many grants that the overall cost will fall below what the state university would charge. There's only one way to know for sure, though, and that's to apply to as many schools as possible. Include at least a few where a child would be well above average; the schools might be willing to discount generously to attract a handful of special first-year students. Yes, there are application fees for each, though you can ask for a waiver if money is particularly tight.
There is no rule saying that every 18-year-old has to go straight from high school to college. Military service comes with many financial benefits. Other high school graduates live at home for a year and work as many hours as they can to save money for college. Even if they only bank $10,000 in 12 months, that money represents loans they won't have to take out later. Meanwhile, older students tend to get better grades than 18-year-olds sprung loose from home for the first time. A year of experience may also help with other jobs later.
Few employers and graduate schools care where you started. So if there is a good community college nearby, living at home and starting college there may be a good idea. Just be strategic about it from Day 1 and figure out what you need to do to transfer to a top four-year school with your credits intact.
LACK OF ASSETS AS ASSET
Not every teenager can write well about what it's like to have less or what they've learned from hard work. Those who can, however, may set themselves apart when writing college admissions essays.
Your child will probably need to borrow money to pay for college. You may decide to, as well, depending on your priorities. But if the student needs to borrow more than the maximum amount that the federal student loan program allows each year, then it's probably too much. Once students start borrowing from banks in addition to the government, the debt from the private lender isn't eligible for the federal income-based repayment program. That option can keep people out of financial trouble if they're having problems affording their federal student loan payments.
With parents, it's trickier. The federal government will lend you whatever you need to pay for college costs if you pass a basic credit check. Whether you should borrow, however, depends on how many children you have, how much money you'll need to retire and how long you can keep working, among other things. If you think there's a chance that you'll become a financial burden to your adult child later, then taking on a lot of new debt is probably not wise.