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Be Smart About College Funding

College is a business. Non-profit or for profit, they are all in the business of recruiting the best class of incoming students and graduating the most employable class. They select their need and merit-based scholarship recipients to achieve these goals. Understanding how you and your student look to these schools as early as possible can potentially shave off some of that overwhelming post college debt.

Just like higher education institutions, you can approach college planning with a business perspective. When your student is talking with you about a future major or they get their ACT or SAT scores, talk about looking for schools that want to compete for their scores and diversity. Talk with them about creating a plan for paying for school.  Whether you are helping your child pay for school or not, every parent who has a student matriculating must file a FAFSA even if you expect to be denied. Schools use the FAFSA data for their own need and merit-based scholarships. Did you know that the income that counts for the FAFSA is the income you are earning in the spring of your student’s sophomore year and the fall of junior year? Knowing that, could you defer some income to get a better result on the FAFSA to help your child?

Engage with your student in 8th and 9th grades, talk about how grades and test scores can open possibilities for schools your student could consider. If they knew that an ACT prep class could reap tuition benefits in the future would they feel better about the time spent there? I’ve talked with my son about saving $20,000 of tuition with better scores, the resulting monthly payment savings, and the car he could buy with that same payment. Yeah, that resonated.

The next time to have a reality based financial discussion is when you have your FAFSA determination letter and your list of schools. That’s when students need to understand what the true cost of each school will be and how to close the financial gap with a clear eye to future income and smart debt. Not all majors are created equal and this is the time to talk with kids about their starting salary out of college and how much debt they will really be able to afford. Michigan State does a regular study of these starting salaries: https://msutoday.msu.edu/news/2016/starting-salaries-strong-for-college-graduates/ as a place to start.

College funding is a critical subject and a great opportunity to start healthy financial habits and communication for our next generation.

Marietta Hall, CFP®
Financial Advisor


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