Can You Still Afford College? 12 Insights To Consider

It almost doesn’t matter how old your kids are: If you’re a parent, you’re already worrying about how you’re going to pay for their college, especially now with the economy in the grips of a serious and new recession.

Between reduced employment prospects and income, rising tuition, the ever-escalating cost of living, and the high academic standards most colleges demand, higher education now feels less like the American dream and more like, well, a pipe dream.

But personal finance expert and best-selling author Eric Tyson have some reassuring words: Arm yourself with the right information and you can help your kids pay for college.

“Yes, financing a college education is daunting for many families, but that doesn’t mean it’s undoable,”

says Tyson, author of Paying For College For Dummies® (Wiley, April 2020, ISBN: 978-1-119-65147-5, $22.99). “With smart planning and saving, you can set aside some money, take advantage of assistance, and ensure that your kids don’t end up drowning in debt.”

In his book, Tyson lays out a concrete financial plan for affording a college education. He offers tried-and-true strategic advice on how to understand loans, know your options, and how to improve your financial fitness while paying down your student loan debt. You may consider applying for a private student loan settlement to help you pay this debt in the future.

Armed with the checklists and timelines, you’ll be able to:

• Figure out what colleges actually cost
• Get to know the FAFSA® and CSS ProfileTM
• Research scholarship opportunities
• Quickly compare financial aid offers from different schools
• Find creative ways to lighten your debt load
• Explore alternatives such as apprenticeships, boot camps, and last-mile programs

The book is filled with practical guidance for parents with kids of all ages. Even if your kids are older—in their tweens or even their teenage years—Tyson says you can still save money and help kids take the non-money-related steps needed to achieve their higher education goals.

Read on for some of Tyson’s advice.

Commit early on to spending less than you earn. It’s a good idea for everyone to save money throughout life, but it’s especially wise if your goals include sending your kids to college. Saving 10 percent is a good starting point, says Tyson, but you may need to save more than that to hit your goals. There are numerous ways to crunch some numbers to see how much you should be saving monthly to hit a particular goal.

DO put away money for your own retirement in tax-sheltered retirement accounts. Colleges typically vary their pricing based upon each family’s individual financial situation. For this reason, you’re best off keeping as much money as possible in tax-sheltered retirement accounts. The college financial aid process generally ignores this money because it’s earmarked for your retirement and generally not accessible before you turn age 59½ without penalty.

DON’T put money in your child’s name. Children’s assets are typically assessed at a 20 percent rate—much higher than the parents’ assets assessed rate of 5.65 percent. If you plan to apply for financial aid and a reduced price from colleges, save money only in your name, not in the names of your children.

Carefully consider the pros and cons of a 529 plan. A parent or grandparent can generally put upwards of $300,000 per beneficiary into one of these state-sponsored college savings plans. The attraction of the 529 plans is that money inside the plans compounds without taxation, and if it’s used upon withdrawal to pay for college tuition, room and board, and other related qualifying education expenses, the investment earnings and appreciation can be withdrawn tax-free. A potential drawback of the 529 plans is that college financial aid offices treat assets in these plans as parental non-retirement assets. If your family isn’t wealthy, you gain better tax benefits and help your financial aid profile if you instead put your extra tax dollars into your retirement account(s).

Urge your kids to stay academically competitive. Colleges are more likely to give merit scholarship money to students with higher GPAs. They should also be taking advanced placement courses. This demonstrates ambition; plus, some colleges also give credits to students who earn a good score on AP tests, which can accelerate their college experience and save you money. Finally, ensure that your kids study for and take the SAT and ACT—including practice tests of each test.

Take a “quality over quantity” approach to their non-academic activities. Many teens try to juggle too many activities in hopes of bolstering their college admissions chances. Encourage your kids to be selective about what they sign up to do outside of their academics. Furthermore, it’s important to strike a balance between extracurricular activities and the commitments of your first job, as it’s crucial to manage your time effectively to avoid feeling overwhelmed or neglecting your college responsibilities. Finding a healthy balance will allow you to excel in both areas while avoiding unnecessary stress and burnout.

Furthermore, it’s important to strike a balance between extracurricular activities and the commitments of your first job, as it’s crucial to manage your time effectively to avoid feeling overwhelmed or neglecting your college responsibilities. Finding a healthy balance will allow you to excel in both areas while avoiding unnecessary stress and burnout.

“Admissions officers and evaluators at colleges and other post-high school options will not be impressed that your child is enrolled in enough activities to fill up multiple pages on their application forms,” says Tyson.

“Common sense suggests that students with scads of listed activities typically haven’t invested themselves much in any of them.”

Use colleges’ “net price calculator” to estimate costs. Colleges are required to have a net price calculator (NPC) on their websites.

You can usually find this in the financial aid section of a school’s website. The NPC is different for each college, so while you will be asked similar questions by each, the resulting prices can vary quite widely. One reason for this is that different colleges treat various aspects of your situation—like your home’s equity (the difference between market value and the mortgage on the property)—quite differently.

“I’ve seen situations for a given family where the pricing among private colleges can differ by tens of thousands of dollars among schools driven by factors like how much equity a family has in their home,” notes Tyson.

DO apply for financial aid—you most likely qualify. Don’t rule yourself out because of income or academics, says Tyson. And don’t rule out a college because you think it’s too expensive. The higher the cost, the more aid you may receive.

The Free Application for Federal Student Aid—also known as the FAFSA® form—is the starting point in applying for financial aid and determining what is called the expected family contribution (EFC). The information and the analysis of the answers you provide on it are used by many colleges and universities as a starting point for determining your aid eligibility and ultimately how much a given school will charge your offspring to attend.

“If at all possible, fill out the online version of the form,” says Tyson. “You can complete it over time, and the online version enables you to zap your information out to up to ten colleges at a time, whereas the paper version allows sharing the information with up to only four colleges at a time.”

DON’T forget to apply for merit money. Families can also receive a price reduction through merit scholarships. Awarded by the school, scholarships can be given for academic merit to students with high GPAs and standardized test scores.

Consider alternatives to traditional college (and whether they are right for your child). While college is a traditional path that many high school seniors follow, there are increasing numbers of attractive, low-cost, and faster alternatives to consider. For example:

• Last-mile boot camps. Last-mile programs such as Galvanize, PrepMD, and Always Hired to teach students technical skills and clear the pathways to jobs in growing industries like technology, biotech, fintech, and healthcare.
• College minimum viable products (MVPs). These programs combine the technical skill training and placement of traditional last-mile programs with significant cognitive and non-cognitive skill development that students get from a good college.
• Apprenticeships. Emerging apprenticeships provide pathways for jobs in the manufacturing, healthcare, pharmacy, IT, insurance, financial services, and software development industries.
• Staffing firms like Manpower, Allegis, Adecco, Randstad, and Kelly Services hire workers and staff them out to clients. Revature, an IT staffing company, hires experienced software developers. Avenica places students from many colleges and offers last-mile training across many industries.
• Vocational and trade schools—also known as career and technical education (CTE)—provide gateways to a wide range of jobs in the automotive industry, culinary arts, emergency services, healthcare, and more.

“I am a big fan of alternatives to the traditional college path,” says Tyson. “Not only is the traditional path not right for everyone, but the increasing numbers of cost-effective alternative options that are springing up are also putting pressure on colleges to contain their costs and better meet the needs of their students. This is a win for everyone, especially during these challenging economic times.”

Look for late-in-the-game ways to save. In an ideal world, you manage your finances with a long-term perspective. But in the real world, stuff happens. If you find yourself needing to pay for college in the near future, there are still steps you can take to maximize your financial picture.

• Reduce your cash by making planned purchases. If your car needs replacing, you might do so before your kids apply to college and use up some of your cash for that purpose. Don’t go overboard, but the reduced cash should improve the pricing offers you get from colleges.
• Pay off high-cost debt. Again, reduced cash can help improve your financial aid rewards. And the financial aid needs analysis doesn’t make any allowance for your consumer debt.
• Use assets in kids’ names. If you put money into your kids’ names in the past and now realize that wasn’t a wise move, perhaps you have current expenses for their benefit that you can use some of this money for.

Ask for a better price. When a school makes a financial aid offer, it is not cast in stone and may well be negotiable, depending in part upon the financial condition of the college and how badly they want a particular student. Some schools leave some bargaining room. To get a better price, you will “appeal” the financial aid award. A few tactics to try:

• Put your appeal in writing and document anything that has changed for the negative since you completed the financial aid documents—such as unexpected expenses, reduced work hours and pay, etc.
• Call the financial aid office and express concern about the high cost of attendance given the offer and ask if there were specific aspects of your situation that led to the relatively low offer. Don’t say too much in the phone call. Use it primarily to learn why you got the financial aid offer that you did.
• If the offers include merit money and your son’s or daughter’s academic numbers have improved since applying, update the school. The updated numbers may lead to more merit money.

“Whether it’s traditional college or an alternative path, higher learning is within reach for your child,” concludes Tyson. “You don’t have to be affluent to make it happen. If your child is committed to pursuing post-high school learning—and especially if you are an engaged and supportive parent who is willing to help them do some research and planning—together, you can make it happen.”