3/7/22
At the beginning of the school year, when my son and I started the admissions process, I kind of felt like a schoolgirl thinking - is summer ever going to come? But, now it’s here - not summer, but the result of our application efforts. Many of you will have received most, if not all, of your college acceptance letters by now. (We won’t talk about the rejection letters.) For some, it’s a joyous occasion and the path forward is obvious, but I’m willing to wager that many of you are facing the uglier side of the “We’ll figure it out” financial strategy you employed on the front end of the college list decision. Who can blame you, without the right tools, it’s extremely difficult to figure out how much individual schools will cost you on the front end. But, here you are, wondering what to do now.
Step 1 - Figure out your bottom line for each school
School offers can be presented in different ways, there is no standard template for schools to use, so you have to do a little work after you get your offer to figure out what it all means. Make sure you nail down which costs are firm requirements and which are estimates that you may have to adjust. For example, some schools include an estimate for travel in their cost. This may or may not apply to your student.
After you have the total cost for all four years of school, you can start applying any grants or scholarships you are being offered against that cost. Schools will often try to lump student loans and work study in with this information. Don’t be fooled. Separate the loans and work study out for consideration later on.
Now you should be able to get your bottom line
Total Cost for all 4 years
- Total Grants and Scholarships
________________________
The Bottom Line
Step 2 - Add up your resources
This is where you figure out how much you, your student, and other family members and friends are able to contribute against the cost of college. Remember to consider the following:
Accumulated savings not needed for other financial goals
Ongoing savings during college years
Savings you’ll see in your grocery bill and cash flow once student is in college
Amount your student is willing to dedicate themselves to obtaining in outside scholarships
The Bottom Line
- Your Resources
________________________
= The Gap
Step 3 - Assess the gap.
The gap represents what you or your student will have to borrow to pay for school. Borrowing money now and paying it back later has a couple of financial implications:
The amount you pay back will be much higher than the amount you borrow because of interest
The loan payments will hinder your ability to reach other financial goals, and possibly hinder your ability to pay basic living expenses
To decide if and how much you are comfortable with borrowing, consider the offers you have and how much you would need to borrow for each. Weigh that against your feelings about taking on this debt. Here are a few tiers of borrowing you may use as a guide for deciding what you want your limit to be.
Tier 1 - None - I’m not comfortable with debt
Tier 2 - Up to the amount I can borrow from the Government, about $27,000 for 4 years - I want to stick to the most flexible debt I can access
Tier 3 - Up to the amount I expect to earn my first year out of college - I’m ok with a decent sized, but manageable student loan payment for 10 years after school ends, and I’m ok with making some financial sacrifices to pay it off
Does your tier preference meet or exceed your gap? If so, you’ve got yourself a plan for paying for all four years of college. Just make sure that, if you’re going to need federal loans, you start taking what is offered in your first year because the amount you can borrow per year is limited. You can’t wait until your senior year and borrow all $27,000.
Oh Crap - I still have a gap.
I expect this may be the case for many students, and it’s not the end of the world. This is a time to start brainstorming and applying that out of the box thinking we talk so fondly about here in the United States.
It really comes down to - how bad do you want it, and what are you willing to do to get it. Working part-time during school and full-time during the summer, finding a job that pays more while you’re in school, dedicating yourself to applying for LOTS of scholarships, going to community college for some classes, taking a gap year and working full time to save up more money. I’ve heard students who really want to go to college come up with some very good plans to make it possible.
Getting Help
I’m here to help, so you don’t have to figure this out on your own. If you need guidance to figure out what to do next now that your application results are in - just comment below and I’ll be in touch.
