The transition to college is an exciting time, full of anticipation for the next chapter of life. But with new opportunities come uncertainties, from financing an education to picking the right courses.
“Paying for college and having kids leave the house is new territory for most parents and children. But with research and preparation, parents can help kids learn how to maximize available funds, borrow responsibly and manage their new lives,” says Jodi Okun, founder of College Financial Aid Advisors and brand ambassador for Discover Student Loans. “Parents should encourage kids to take responsibility for forming a long-term financial plan they can work through together.”
Okun offers the following tips for a smooth transition:
• Empower students: Let students start with smaller decisions, such as what to do with high school graduation money, and then build to bigger ones, such as finding and applying for additional scholarships, and deciding whether they can balance school with work-study or a part-time job. Encourage students to form meaningful relationships with their school’s financial aid office.
• Balance dreams with opportunities. While students often pick a major based on childhood passions, parents may steer them toward an in-demand field with a good salary and career trajectory. In fact, 70 percent of parents say job potential after college is as important or more important than choice of major, according to a recent Discover Student Loans survey. Starting salary should also guide how much debt the student takes on. For example, if a student anticipates a $40,000 a year starting salary, he or she should take on no more than $40,000 in student loans over the course of college.
• Figure out the parents’ role. The majority of student loans are for students, but there are loans specifically for parents (e.g., Parent PLUS Loans and some private student loans). Consider the advantages of each and decide whether parent student loans, traditional student loans or a combination is best. Regardless of what’s decided, parents should discuss options and expectations with their child.
• Exhaust free money first. Grants, scholarships and other free financial aid can help students pay for costs. Resources such as Discover’s Free Scholarship Search and Studentaid.ed.gov can help students and parents identify and apply for important free money.
• Choose the right student loan. With so many choices for loans, choosing the right one can be overwhelming. Families should compare federal and private student loans based on key components, such as interest rates, origination fees and repayment options and then choose the loans that best fit their financial needs.
• Seek consultation. Financing college can be an overwhelming and confusing process. Consider talking to a financial planner who can offer sound advice.
As college costs rise, understanding the financial resources available, as well as having conversations about who is responsible for what, will ultimately provide peace of mind for students and parents.