Helping your Student Pay for College

Sep 10, 2023 | Budget

Two senior adults and two young adults walk along a beach with bicycles. The text reads, "Helping Your Student Pay for College," along with the logo of Stewardship Trust Advisors.

You think back fondly on those collegiate days–studying in the quad, late-night pizza, tailgating for the big tailgating game, dorm living, tossing your graduation cap in the air…beyond the lifelong friends and the fun, college helped you get to where you are today. Looking ahead, your student is planning on following in your footsteps and will be receiving that admissions letter of acceptance sooner than you think. Have you considered the details of helping your student pay for college?

Unfortunately, it’s getting increasingly more difficult to afford college. Formal higher education is the institutional stamp of approval that will grant your child entrance into the workforce, but that stamp comes at a steep cost that has increased more than 500 percent since 1985. The average cost of tuition and fees was $9,410 for state residents at public colleges, $23,893 for out-of-state residents attending public universities, and $32,405 for private colleges. These average tuitions mark a 2.9% increase in tuition over the 2014-15 school year (before adjusting for inflation). Student loans end up being the solution for most college-bound students which come tied to their own set of issues; 43 million Americans hold student loan debt at a collective total of $1.26 trillion. Plus, approximately 43% of Americans who took out federal student loans are not making any payments.

Some scholarships and grants lower the price tag of higher education, but they also make navigating the complicated world of financing college even more challenging.

Finance 101: A Lesson in Helping Your Student Pay for College

Take these tips into consideration as you help your student apply and prepare to pay for college:

Know your budget

Like purchasing many large, expensive items like a car or a house, it’s wise to know your budget going into the search for the right fit. If you don’t, you run the risk of test-driving luxury cars out of your budget or touring houses outside of your price range, and then what you can afford seems not good enough. The same goes for schools. If your family cannot realistically afford Harvey Mudd College (the most expensive college in the country as of tuition year 2015-16), then don’t tour the campus. And sure, a full-ride scholarship would be great…but isn’t likely. Narrow down choices within a reasonable range (and with 4,726 degree-granting institutions in the U.S. there are indeed plenty of choices), and then help your students decipher what’s important to them about what’s offered.

Start acknowledging affordability by running the numbers through the Expected Family Contribution (EFC) calculator to learn what colleges are likely going to say your contribution should be. If you calculate a high EFC number (meaning you are wealthier), you still won’t want to pay full price for school. In that case, look for schools that are generous with merit scholarships for students regardless of financial need. If you calculate a low EFC rate, look for schools that have substantial financial aid.

Understand the financial breakdown

Your student likely won’t be paying the total sticker price for a year’s tuition at college. That means you’re looking at the total net price (sticker price minus total aid). When your child receives the acceptance letter with the financial aid award breakdown (scholarships, grants, etc.), it can be difficult to decipher what means what. For example, the line item “financial aid” can be used in place of what are loans. Then there’s often a question around how much Expected Family Contribution there is and how it can be applied to what–is it just tuition or does that include room and board? Avoid confusion preemptively with a secure online tool like College Abacus which allows for the comparison of net price estimates, given your situation, before financial aid is determined.

Expand the search

Don’t be afraid to expand the search parameters for colleges. Some colleges are so popular and see such high applicant numbers they can afford to be selective in who they accept and who they offer money to, resulting in less generous overall financial aid. Schools with lower application rates are usually small, lesser-known, private colleges that may have higher reserves of financial aid to grant.

Learn from an expert

Make an appointment with the financial aid offices at the colleges your student is considering to gain a better understanding of how they will calculate financial contributions. They’ll be able to tell you if elements like home equity will be factored in. (This is not information required for the FAFSA, but is required information at some private colleges.) They will also be able to answer any specific questions that apply to your situation that a general college financial FAQs webpage cannot answer. Additionally, a meeting with your financial advisor well before your student pays that first-semester bill is wise to ensure you won’t be met with any surprises when taxes come due.

The Big Picture

Having your overall financial house in order goes a long way in helping your student pay for college. Do you have a solid financial plan in place? Schedule a consultation with Stewardship Trust Advisors today.

These weekly articles which are produced and distributed by Pilgrims Capital Advisors, Inc. contain information on topics about investing, tax planning, estate planning, asset allocation, insurance, and many other financial subjects. Please note that they are very general in nature and must be applied to your own individual circumstances through the services of a trained or licensed professional who specializes in these areas. If you have questions or needs related to the subject matter of this article please contact us by clicking on the link below and we will point you in the right direction.

Pilgrims Capital Advisors, Inc. is a Registered Investment Advisory Firm located in the state of Michigan.

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