What is the Best College for My Child?

We all want the best for our kids, but what does “the best” mean in relation to a college education? To most parents, it means helping our child to enter adult life with a good education and unburdened by debt.

So what’s the best way of reducing the cost of higher education? Talk with your kids, from an early age, about the importance of getting through college at a moderate cost. Expectations, as much as price, determines what you’re likely to pay.  It is not wise to encourage your kids to think that they (or you) can pay for their dream school, if that is not a reality for your financial situation.

If your child gets in to their dream school, and the cost is higher than you can afford, it might be too painful to steer your child away from his or her heart’s desire. The student  might decide to take out larger loans than are prudent. To avoid disappointing him or her, you might take government PLUS loans for parents, or co-sign a private student loan from a financial institution.

The end result may not be good: your child might struggle for years with repayments and your own retirement might even be put at risk.

Here are five important points to consider and discuss with your child:

1. Explain that most of America’s colleges and universities provide good educations, so they should keep an open mind about where they want to go. Around 80 percent of students go to state schools, which means that they provide the majority of the country’s civic and business leaders.
Students generally get attached to whatever school they attend, even if it wasn’t first on their list.

2. Students who have excelled academically can certainly apply to the “top” schools that interest them. They might get large enough grants to make the school competitive with their state university. Some small private colleges offer extra-large grants to attract talented students. But colleges, struggling with financial problems of their own, aren’t as generous as they used to be. Only 35 percent of families received scholarships in the 2011-2012 academic year, compared with 45 percent the year before, according to Sallie Mae.

3. Be open with your children about the dangers of debt.
Student loans cannot be discharged in bankruptcy, unless a judge declares the borrower’s case totally hopeless. That’s rare. In one case on record, a judge refused to clear the loan of a part-time orchestra cellist who gave music lessons, on the ground that he could find higher paying work. Interest and penalties can turn a $25,000 loan into a $100,000 obligation in the blink of an eye. If the graduate can’t pay, he can be hounded by debt collectors for life — wages garnished, tax refunds impounded, disability and Social Security payments garnished, too. His credit score will be a permanent wreck.
The same thing happens to parents, if they co-sign a loan that their child can’t pay, and that they can’t pay, either.

4. Every parent and student has to pay a minimum amount in cash before any grants kick in. Find out now what your obligation is likely to be by using the College Board’s calculator for “Expected Family Contribution.”  College might be years away and tuition costs will rise, your income will probably rise, too. The EFC gives you a reasonable savings target. If you save less than this sum, you will have to borrow to make it up.

5. When your child starts narrowing down his choices, don’t go by the college’s “sticker price” — the published total for tuition, fees, room and board. What matters is the net price — the price after any tuition discounts the school is likely to offer. For your planning, use The College Board’s Net Price Calculator. You’ll get only a very general idea of the probable expense, but it will help manage your expectations. Also, be aware that some private colleges count part of your home equity as being available for college while others don’t.   When making your final choice, always look at the bottom line: How much does the school expect you and your child to borrow to cover the total cost?

Helping your children to understand the risks and burdens of student debt, you’ll have given them values that will serve them all their lives.   Making wise decisions and avoiding student debt also means that a new graduate can choose a career in an area about which they are passionate, regardless of whether it pays a lot.  For most families, reducing cost means reducing debt, and more importantly, improving your child's post-college quality of life.