What scares you the most about paying for college? Do you even know how you're going to pay for college? Do you understand exactly how much your family will have to pay for college?
How do those questions make you feel?
First of all, I want you to decide right now that you won't let your children borrow for college. Really. Enough lives have been ruined with this toxin.
We've all seen the headlines and heard the stories of how student debt is ruining people's lives. We should take this as a cautionary tale and make sure that our kids won't suffer this fate. We should agree that our kids should have debt-free and regret-free degrees.
So, what are the 5 mistakes smart parents make? The mistakes that result in kids - now adults- calling Dave Ramsey looking for help. The ones who are so desperate and don't know how to get out of the mess they're in. By the way - if you have any doubts that student debt is terrible - any doubts at all - tune in to the Dave Ramsey podcast. That is what made me truly realize what a catastrophe we have on our hands. People call in on every episode with absolutely staggering amounts of debt. People whose student debt loads are multiples of their annual income. What were they thinking?
So, here we go:
Mistake #1 - Not Having Saved Enough
Enough said, right? Hopefully by now you have been scared stiff by the student debt horror stories, and will make saving for college a priority. That being said, it doesn't mean your child is doomed to debt if you haven't saved a lot yet. You should just take preventative measures - like having your child start at a community college. Hey, it may not be glamorous, but it gets the job done - at a fraction of the cost of a 4 year school. There are a few other reasons community college can work in your favor, as I lay out in this article.
Mistake #2 - Letting Our Kids Fall in Love With a School
My son tells me he'd like to go to UT Austin. Great school, I know. He hasn't given me any specific reason why he wants to go there. Nor do I know if he can even get in - it's pretty competitive. But the point is that the school costs about $50k per year for out of state students. Our budget is $30k per year. (Do you have a budget?)
I could either take the approach of "anything you want dear" (so I don't hurt his self-esteem, you know) and just have him borrow the $20k incremental amount per year, and have him graduate with $80,000 in student loans. Or I can say no.
Maybe your child has her eye on NYU, or Georgetown or some other pricey designer school. If you don't have the funds to pay for it, and you can't get enough aid, you should not let your child go to the school. Period. They will be thank you for it. At some point. Probably when they're in their 30s and looking to buy a home - and are able to because they have been able to save money, rather than having to pay off debt.
Mistake #3 - Out-of-State Tuition
This is a biggie. It is one of the most common expensive mistakes people make.
I work with two men now who have daughters going to Penn State. One of the men lives in New Jersey, and the other in Connecticut. Penn State is about $47k per year out of state. Ouch.
You hear the justifications "but the school has such a great alumni network - they'll have an easy time getting jobs!". Are we sure? And, how much do those jobs pay? Remember, your child's own aptitude and abilities will play a larger part in their successful careers than some alumni network.
Call me a cynic, but is the Penn State Football program playing any role in the decision making process? I'm just asking.
Mistake #4 - Not Keeping An Open Mind
If you want to get the best college value for your child, you need to keep an open mind. Some of the biggest misconceptions are that:
How about you? Have you said any of these things?
Mistake #5 - Not Telling Your Child "No"
We all want the best for our kids. But part of being a good parent is doing what is best for your child - whether they see it that way, or not. We as parents should recognize that debt is a terrible thing. And not to let our kids join that toxic club. Even if it's a school they claim they "have to" go to.
The common theme here is that we parents can and should influence our children and their college decision. I believe they can be just as happy at one school over another. What they definitely won't be happy with, is graduating with a mountain of debt.
Take my son, for example. As I mentioned in Mistake #1 above, he says he wants to go to UT Austin. On the face of it, it is too expensive. But there are options. As I describe in this blog post, there are ways he can go to school in Texas. He can:
A wise man said "there's always an option". You just have to work at it. The less money you have saved, the harder you will have to work at your solution. I'm here to help you!
Here is a bonus mistake:
Bonus Mistake - Not Matching The Degree To The School
If you want to be a teacher, you do not need to go to an expensive liberal arts school. Am I right? Most people go to regular schools, and can have very decent careers. In my 30 year career, I think I can count on one hand, maybe two, the number of people that I've worked with who went to an Ivy League or other fancy school. And I've worked at some top companies. In fact one guy would always be a bit embarrassed when people found out that he want to Yale, because the predominant reaction was an unspoken "and this is the job you have?"
So, please decide that you won't let your child borrow for college. Then figure out how you can get them through with the a) cash you have saved b) cash you can save between now and then and c) what you can pay out of cash flow. You may have to research more schools, or have your child go to a different type of school than you first thought, but that doesn't mean they will be unhappy.
After all, one third of all students transfer at some point in their college career. We all know people who have done this - so, couldn't a transfer be strategic? Such as starting at a community college.
As with my Texan example above, maybe you can afford the pricey school - but maybe just two years of it. Only the final school shows up on their LinkedIn profile, so I won't tell if you won't.
I'm a personal finance geek. A real estate investor. An accountant, a single mother. And I'm going to get my kids through college without student debt! Will you?