Help your student keep college affordable

Studying with MomAs many families are preparing to send their kids off to college they are silently wondering, “Is College worth it?” Americans are trillions of dollars in debt with student loans. We read horror stories about recent graduates working minimum wage jobs trying to pay off 6-digit loan balances. The cost of a college education gets higher every year. Unemployment was in the double digits for several years during the Great Recession and many recent graduates were moving back in with Mom and Dad instead of striking out on their own. Considering all these factors, it’s no wonder many potential students are being scared away from a college education and questioning the idea that to earn a living they need to go to college. Despite all the horror stories, college is still a ticket to financial success and here’s how you can make it work for your family.

First things first: a real look at what’s out there

Nationwide the average student loan debt for an undergraduate degree was $24,699 in 2012. The average debt in MN was slightly higher than that at a little over $29,000. But averages can be deceptive: according to a Federal Reserve report, the median amount owed on student loans was a mere $13,924. About one-quarter of borrowers owe more than $28,000 and about 10% owe more than $54,000. Only 3.1% of borrowers have a six figure student loan debt. Furthermore many experts point to an increase in the number of students attending college as one reason why the total amount owed is on the rise.

What does a college degree get you?

While a college degree is no guarantee of job security, those with college degrees tend to fare much better in an economic downturn and earn more over their lifetimes. If your young adult doesn’t think college is worth it, here are some staggering statistics to share:

  • The percentage of jobs requiring some college education is expected to grow to 62% by 2018. That’s up from 28% in 1973 and 59% in 2007.
  • The weekly earnings of a college graduate are 64% higher than the earnings of people who only have a high school diploma.
  • The lifetime earning potential of a college graduate averages over $2 million – nearly twice that of people who didn’t get a degree past high school
  • During the Great Recession the unemployment rate for those with a 2 – 4 year degree ranged from 5-8%. Yes that’s high, but compare it to the 10.5% unemployment rate for those with a high school diploma and the 15.6% for those with less than a high school diploma. Where do you want your teen to fall on that spectrum?

How to keep college affordable

Student loan cap and money bannerAll that said it is still fairly easy to “buy an education that won’t pay off” according to Liz Weston, author of The 10 Commandments of Money. In her chapter on getting a college education you can afford she lays out the changes in the rules. The “old school rules” said: Not everybody needs a college degree to get ahead. There are plenty of good-paying, secure jobs for people with high school diplomas. The “Bubble Economy Rules” said: Get the best education you can, regardless of the cost. Student lenders will give you as much money as you need. It’s easy to see how that mindset, coupled with the rise in college costs and the emotionally driven choice to attend private colleges, played a part in large student loan amounts.

So what are the new rules? According to Weston, “The New Rules” are: You need at least a two-year degree to get ahead, but limit how much you borrow for any education. What does that mean for your family and for your college-bound teens? Here are some tips for you to follow:

  1. Start saving early (if your kids are still young)
    Yes, the amount you have saved may have an effect on the amount of student aid (non-loan) your child will receive, but better to receive less grant money then wind up in the 10% owing more than $58,000 or worse, the 3.1% owing 6-digit loans. To learn more about ways to save for college read this blog from the America Saves website.
  2. Set limits to how much you are willing and able to contribute: the sky is not the limit if you have to borrow
    This conversation should start sometime around your child’s freshman year in high school. If you haven’t had it yet there is no time like the present, even if you have all your student’s belongings packed up and ready to go for college orientation. Estimating what your Expected Family Contribution (the amount the family is expected to contribute towards college) will help you plan ahead. Use this calculator to help you out. A good rule of thumb is to not borrow more than what your student can earn in their first year out of school. The Bureau of Labor Statistics puts out the Occupational Outlook Handbook where you can access this information.
    A special note to parents: Planning to retire someday? Federal Parent PLUS loans and co-signing on private student loans (including those from state boards of higher education), could make those dreams a thing of the past. Over-borrowing to give your child the education of his/her dreams could turn the future into a nightmare of debt for all of you.
  3. Borrow only enough to pay for tuition, fees, and school costs
    Living on campus and traveling abroad are fantastic experiences, but they increase the amount of debt that students and parents take on exponentially. Room and Board can add $10,000 a year + to a tuition bill. Can your student live at home? Work part-time to cover those extra costs? Very frequently I meet with clients who went to out-of-state schools (higher tuition), lived on campus, didn’t work, traveled abroad, or did all of the above. Many students say to me that they can’t work part-time and go to school. For a few this may truly be the case, but unfortunately, choosing to not work while in school may mean that your student will be working two jobs to pay back their loans once they are a graduate. Working a full-time job and a part time job to pay back loans for living expenses or that trip to study abroad for a semester may make it feel like college really wasn’t worth it.
  4. Consider Community Colleges or State Universities for at least the first two years, if not the complete education
    Reality is, not everyone is college material, but that doesn’t mean they can’t complete a two year degree at a community or technical college. And getting your “brainiac’s” generals out of the way of at a community college or state school will make you both look smarter when those loans come due! Not sure which college is right for your student? There is a great publication on choosing colleges at the Minnesota Office of Higher Education. Not from Minnesota? Most states have their own higher education boards: use your search engine to find the one for your state.
  5. Do your own student loan review once per year with your student
    If your child is already in college meet with them once a year to take a look at how much they owe (and if you have taken out Parent PLUS loans look at your total debt loads as well). If your child’s school makes it difficult to get a full picture of their total amounts owed you can go to the National Student Loan Data System site and complete a financial aid review. All their federal loans will be listed there. Parent PLUS loans will be listed there as well, but since they are the parent’s obligation they will be under your name. You will need your FAFSA PIN number to sign in. Use this calculator to figure out what the future payments will be.
  6. Discourage college-hopping and numerous major changes
    Make sure your (and your students’) investment in college counts. I have met with many people with student loans who have transferred schools and majors so many times that they hit the limit for federal student loans (about $30,000) and have no degree to show for it! So not only do they have high loan payments, they are unable to complete their degree without taking out private student loans, which are much more costly, have few-to-zero flexible repayment options, and are just as difficult to get rid of as federal student loans. Not to mention that they will not reap any of the benefits of having that 2 – 4 year degree. If your student is going to college because they don’t know what else to do, encourage them to work for a couple years until they figure it out.

College choices can be daunting and so can planning for how to pay for college. Therefore, do your research before you or your children take out loans. Visit the U.S. Department of Education website for information about applying for financial aid, applying for school, understanding types of financial aid, and even loan repayment.

Author Shannon Doyle is a Certified Financial Counselor with LSS Financial Counseling and she specializes in student loans and budget/debt counseling. Want more information? Call us at 888.577.2227 or visit our website at

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2 comments on “Help your student keep college affordable
  1. V Erickson says:

    Excellent article on laying out the various options on how to keep school affordable for both parents and students. Each play a significant part in paying for the costs for post-secondary education, which continue to rise each year. It is never too late to start saving… and every dollar saved is a dollar less you will have to borrow. Scholarships should not be overlooked as an avenue for some extra dollars – millions go unclaimed each year because students aren’t applying. And you don’t always need high SAT scores, think about community, sports and other activities.

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