It’s easy to assume that the role of a parent diminishes as a child approaches high school graduation. This is when many parents choose to step back and allow their kids to become the primary decision-makers in their own lives.
But the time between high school and college is more than just a symbolic transition from childhood to adulthood – it’s a period of life-changing and complicated decisions. How your child navigates the questions of school choice, financial aid and student loan debt will have a major impact on not just their college years, but the trajectory of their entire adult life.
You can’t make those choices for them, but you can help guide them through the process. Here’s how to do it.
Apply for the FAFSA Together
The Free Application for Federal Student Aid (FAFSA) is the form that determines how much financial aid a student can receive. The federal government uses the FAFSA to calculate a family’s expected financial contribution and then decides how much the student should receive in federal grants and scholarships.
Universities also use the FAFSA to assign their own financial aid, both need-based and merit-based. Families can apply for the FAFSA starting October 1, and it’s best to apply as soon as possible.
Keep your child in the loop with the FAFSA so they understand how the process works. Explain why you can’t afford to pay for the entire tuition bill and how they’ll need to find outside funding.
Parents have to fill out the FAFSA every year to account for any changes in income and family size. If you suspect your financial situation will affect your child’s FAFSA results, let them know as soon as possible.
Explain Federal and Private Student Loans
There are two types of student loans, federal and private. Federal loans are backed by the Department of Education and have a variety of income-based repayment options for struggling students. Parents fill out the FAFSA to determine student loan eligibility.
Private loans have higher interest rates and are less likely to have income-based repayment options. If your child loses his or her job after college and can’t afford payments, the private lender is unlikely to work with them. They’ll have more repayment options with federal loans.
Most students borrow private loans after they reach the limit for federal student loans. Parents often have to cosign private loans, because the lender needs an adult with a solid credit score and stable income to provide assurance that the loan won’t default.
Parents and students can both take out federal loans to pay for a college education. The government has a special Parent PLUS loan program which allows parents to borrow the difference between the attendance cost and any other financial aid their child qualifies for.
If you’re going to take out a student loan for your child, decide early on who will be responsible for paying it back. Will you ask your child to take over payments after graduation, or will you handle them yourself? If you take out a loan in your name, your child won’t have any legal obligation to pay them back.
Encourage Your Child to Apply for Scholarships
When I reached the second semester of my senior year in high school, all my motivation went out the window. I was ready to graduate and start my new life. I had already been accepted to college and had a decent financial aid package. I spent my free time watching movies and dreaming about how to decorate my dorm.
My parents and college counselor encouraged me to apply for scholarships, but my senioritis was too strong. The bulk of my financial aid was already accounted for, and I didn’t want to spend hours working on an application for a $500 scholarship.
It wasn’t until I started paying back my student loans that I realized what a big difference all those little scholarships could have made. I was only earning $1,750 a month after taxes, so all of a sudden $500 seemed like a big deal.
Encourage your child to apply for as many scholarships as possible – even the ones that seem like a long shot. Remind them to keep applying even after they start college. I got a few scholarships as an upperclassman that reduced my loan burden.
Help Them Understand their Student Loans
When I was in high school, I applied to both public and private colleges, including ones I knew I couldn’t afford. My parents made it clear that borrowing $100,000 to get a journalism degree wasn’t a wise choice, so I made my final choice partly based on affordability. Even then, I didn’t understand the impact student loan debt would have on my life.
When I graduated college with $24,000 in student loans, it took me five months to find a full-time job. I eventually landed a gig as a newspaper reporter making $28,000 a year, and shortly after that my first student loan payment arrived. The payment was $350 and I was making $1,750 a month after taxes, so 20% of my take-home pay was going to student loans.
This was a hard reality for me to accept. I had been so responsible, choosing an affordable college and not borrowing more than I thought I could pay back – so how was my debt burden still so high?
I was able to scrape by and make the payments, but I didn’t have much left over for discretionary spending. Most of my weekend nights were spent in my cheap apartment watching Netflix, and a candy bar from the nearby gas station was the fanciest luxury I could afford.
Give your child a mock budget to show how student loans will affect their life after college. I wish I had understood how my loans would affect my ability to travel, pay for car repairs or splurge every once in a while. Show them how choosing a more affordable school will provide more options after graduation. Even if they still choose to take on significant student loan debt, they’ll do so with a full understanding of the consequences.