By Team Tomorrow
Published September 13, 2021
Fewer parents can afford rising college costs.
Tuition increases make it harder to pay for school. Grants can help, but the average federal grant amount award to each student on an annual basis is $5,179, while the average federal loan is about $8,285.
To minimize the amount of loans your child will have to pay back one day, you should talk to your child about rising college costs and how to cover them. After all, if you don’t talk to your child about financial responsibility, who will?
Saving for College suggests talking to your kid about rising college costs by the time they’re 15. This is usually when they’re freshman in high school, and may be beginning to think about life after graduation.
Talking to them early gives them ample time to apply for scholarships. It may also encourage them to try harder to get better grades, because they’ll have more opportunities to have scholarships offset their tuition tab.
Have an optimistic tone when talking about college costs. You don’t want to overwhelm your kids—or worse—make them feel like college is too burdensome. Be realistic about the price tag and your own experiences with loans or mistakes you’ve learned from. Be genuine, honest, and make this talk an ongoing conversation. Also, check in every couple of months to see where your kid’s mind is at.
Money.com suggests focusing on grants and scholarships to keep rising college cost talks optimistic. Grants differ from loans because you don’t have to pay them back. For example, the federal government runs the Pell Grant Program, which helps undergraduates from low-income families. Last year, Pell Grants covered as much as $6,345 of a student’s college expenses.
You can also check out specific state financial aid programs here.
Scholarships are another great source of “free money.” There’s a scholarship for pretty much everything, including being tall, a marble champion, or a flying musician.
Here are a few sites to get you started:
More than 1.7 million private scholarships and fellowships are awarded each year, totaling more than $7.4 billion. By putting in the work, your child could qualify for enough cover some, or even all, of their college tab.
60% of graduates from nonprofit colleges left school with student debt in 2019.
There are two types of loans: federal and private. The government issues federal loans. They usually have low interest rates and more flexibility for borrowers. Private loans come from banks or other institutions and tend to be more expensive.
Federal loans also come in two categories: direct subsidized loans and unsubsidized loans (also known as Stafford loans). Direct subsidized loans go to undergrads with financial need, and they don’t accrue any interest until six months after your child graduates. Unsubsidized loans, which aren’t need-based, accrue interest while your child is still in school.
This should be your order in which you apply for loans:
Private loans can be a nightmare. If you take any of them out, pay them off first and as quickly as possible.
After laying the framework for college costs, sit down with your child and create a plan to pay for it. If you have a college savings account or some money stashed away, tell them how much it is. Research how much financial assistance you may get and how much their dream school(s) cost. Doing this will give you a rough estimate of how much additional money they’ll need for school.
Set aside a couple hours a week or month to research and apply for scholarships. Your child could make way more per hour doing this than working at the local coffee shop. If they do have a part-time job, offer to match a select amount they set aside for college (if you can afford to do so). Also, create a visual that shows how much you need, create milestones, and celebrate them.
Lastly, be prepared to talk about whether the college is worth it. Will your child be prepared to walk away from a university that costs more than they can afford? It’s a tough, but necessary conversation to have.
Talking about rising college costs will help you secure your family’s future. Continue doing so by visiting Tomorrow.
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