It's College Acceptance Season

It’s College Acceptance Season  

If you thought helping your kid navigate the college application process was a heavy lift, I have news for you. Your most important work comes now, after the acceptance letters arrive.  

If you have applied for financial aid, please be very careful in comparing offers from different schools. 

The sad fact is that there is no single format for how schools must present aid packages. And even sadder is that some schools list parental loans as “aid.”  That is nuts. Aid is money you don’t have to pay. A federal PLUS or a private parental loan is not aid. It is a cost you will bear. It should be listed as a family contribution, not as aid. 

Even if loans taken out by parents are correctly categorized as part of your family’s contribution, I want you to carefully consider if you can afford to take on this debt. 

If you stand in your truth, I think many of you will realize you should chose the school that does not require you to take out a PLUS loan. (And please be very, very careful considering a private parental loan for college. Those loans typically have variable interest rates and often lack important repayment options and protections available through the federal PLUS loan program.) 

Before you agree to borrow for a child’s college education, ask yourself the following questions: 

• Do I/we have a 1-year emergency savings fund? 

• Am I/we on track with our retirement savings? 
• Can I/we continue to save for retirement and cover the monthly PLUS loan payment? 
• Do I/we pay off our credit card bills in full every month? 

If you answered no to any of those questions you should not be borrowing a penny for a child’s college education.  

Don’t tell me that’s harsh, or cold. You want harsh and cold?: Fast forward 25 or so years and your now very-adult kid needs to step in and help you pay your bills in retirement, because you didn’t save enough. That’s what may happen if you borrow more now at a time when you are behind on important financial goals.  

I am asking you to practice one of the most important lessons: Say No Out of Love, Not Yes Out of Fear. As a family, don’t choose the school that will make a mess of your family’s long-term financial security. Leave the borrowing to your child-- federal undergrad loans are a better deal and limit the amount that can be borrowed, which is important.