Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

Teach Your Children Well-Part 4: Have the College Cost Conversation Early

July 28, 2016 at 12:00 AM

I see parents let down their college bound kids all the time. Not because they can’t afford to foot the often insanely high bill for a four-year private college education, but because they don’t explain the family’s college finance reality up front. And by upfront, I mean ninth grade. No later. To wait until senior year of high school is incredibly disrespectful to your child. Have the conversation early and you and your child can work together on the best college plan that fits your family’s finances.

Here’s how:

Explain Why Saving for College is Job #2. Job #1? Well that’s saving for your retirement, of course. Look, I know this isn’t easy, but it is necessary that your child understand that there are strategies for finding an affordable school (more on this in a second) and there are loans for college. But there are no loans for retirement. Don’t feel guilty about this. Nor should you make a child feel guilty. Just lay out the reality in a non-threatening way that makes it clear what you think your annual contribution to their college expenses may be. If that’s going to be zero, say so. If $5,000 is reasonable, say so.

Introduce the Financial Safety School Concept. There are two general strategies for reducing your family’s out of pocket expenses for school: choose a private college or university that will be so eager to have your child enroll that they will likely pony up a significant aid package that is true aid, not boatloads of loans for you and your child. The other option is to consider an in-state school; the cost of attendance for in-state residents is typically a fraction of what out-of-state students are charged, and much less than private-school costs.

Build your Borrowing Plan Early. Debt to pay for an education is my idea of “good” debt, but only if it is done with care. I have four rules for smart college borrowing:

  • Your Kid Borrows First. Federal loans for kids are cheaper than any other type of college loan. Stafford loans are available to everyone.
  • A child’s total borrowing should not exceed their anticipated first year’s salary. College finance expert Mark Kantrowitz pored through student borrowing data and found that putting this limit on your kid’s borrowing reduces the risk that they will be unable to pay back their loans. 
  • Parents should only borrow what they can pay back before retirement. The federal PLUS loan program for parents has a dangerous flaw. It allows parents to borrow as much as they want, without any advice on what is a responsible amount to borrow. That’s on you. Listen up: You are to only borrow if you can also stay on track with your retirement saving. And you are only to borrow an amount that you can pay back before age 60-65. 
  • No Private Loans. Neither you nor your child is to take out private student loans offered by banks and credit unions. The rates are often variable, and that in itself is dangerous given the likelihood that rates will rise from their current lows over time. And the payback options on private loans are very rigid. Federal loans come with a variety of payback programs, including loan forgiveness for public-service.

By having these conversations sooner than later you are empowering your child. A ninth grader can double-down on getting great grades and building out her extra-curricular resume in pursuit of a solid financial aid package. You are also laying down an incredibly important goal: You want your child to attend the best school possible that also meets your family’s financial needs. That’s not settling. That is setting you and your child up for a very secure future that is not over-run with disappointment and too much school debt.

Tag Cloud

do not pay allowance for good behaviorFinancial Power of Attorneyengaged in financesCombo Insurance Productssecured carddon't extend mortgage term insuranceOne Wallet At A TimeMarlo ThomasSuze Orman spouse Kathy TravisSuze Orman's Money WarsHigh Credit ScoreCOLAdream schoolhealthy gumsMost Influential Celebrities ListTeachhigh FICO scorerefinanceAdequate Auto and Home Insurancehome loan credit score below 740 Overspendinglower interest rateunder 18 financial giftrequired disclosurehighest possible benefitno fee transferopen enrollment review HDHP'sPBS SpecialPrime Rate Rise 2015overcome financial fearscredit utilization ratereduce monthly payment2016 adjust withholdingcommunity bankpurely financial standpointfinancial argumentsgift not loanpercentage men widowed 75-84universal college accessdeath benefit needs for family2016 adjust estimated taxlower premiumraise insurance deductibleis it kind?permanent life insurancebecome member public service career student loan repayment Personal Financedon't blow tax refundMotherfederal student loan deferment is it necessary?leave a legacyHow To Build Creditfocus on new truth children under 18summer job match income doctors in networkPhyllis Shelton expert long-term careCommencementfinancial independencebest interest of investorFederal Reservedon't defer interest paymentsFinancial Adviceprotect and provide for minor child College of Veterinary Medicinereal estate mistakesstrained relationshiplong term careStaffords this year have a fixed 6.8% interest rate6 month waiting periodIRA contribution gifted moneycredit cardBank2017 Taxesgrandparent IRA contribution prescription tiernot enough life insurancemoney-aware childChanging Livesmultiple lenderscar buying mistakesno retirement funds for down paymentSwap Older Annuities or Life Insurance letter to suzeFinal Goodbyetaxesfinancial aidheartacheRetirement Savingswomen outlive men4 Must Have Documents death benefit 20 to 25 times annual incometeensnear historic lows2015 record year car salesloved ones dependent on incomegift grandchild IRA contributionpresident Obamaknow before you oweSelfish15-year refinance dealEmployer Matched Contributionlife insurancepush yourself to save more for retirementcostly legal powerfulLong Term Care shoppingwives should be involved in retirementco-sign AccuQuote.comsocial securityARM Cautionloan is giftAARP Social security calculatorRoth 401(k)home buying seasongift up to 14,000mortgage brokerInvest for savings growth15 year mortgagemonthly benefit LTCi ASAP20 to 25 times annual incomeFinancial SystemBankruptcypay off debtno late fee save moneyno sneaking in feesstaycationFinancial EducatorDurable Power of Attorney for Health Carepoint cost offset by savingsiffy incomeGiftsEasy Life Insurance unsubsidized Stafford loanJose Rodriguezshorter payback periodburn outdental discount planlive below your meansdebtSandy Hook Elementary Schoolcut monthly cellular billmax benefit coveredraising interest ratespercentage of women widowed 75-84Federal Stafford loantake actionMoney-SavingGoodbye3 savings buckets Student Debthigh deductible health care planhome related tax break bonus financial concernlearn good financial choicesMust Have DocumentsFiscal Responsibilityfull retirement ageSave Us Moneycredit unionHDHP's are good for youSandy Hook Promisecar leasingFederal Funds RateHolidayautomate student loan paymentsswitch to spouse coveragestudent loan debtget credit cardincreased auto insurance premiumsidelinedfraudulent returnPay Off Debt Before Retirementbalance transfer protect loved ones Financial Awareness Video Festivalorigination feesbe kind to yourselfbe true to yourselfone annual feefiduciarylow-cost index mutual fundLong Term Care Insurance HSA tax savingsis it necessaryone credit cardsecure credithigher monthly paymentSuze OrmanLegal Guardiandear suzebig results healthy retirement blood pressureavoid burn outUrbana-ChampaignPrime Rate IncreaseWashingtonvalentines daymonthly dental insurance premiumclosing disclosurealways use all paid time offexercise reguarlyreduce withholdingswitch to roth 401(k)8 Rulessavingsdon't ignore open enrollmentfinancial goal phraseprofessional advisorreferrals 20% down payment avoid feespositivepay high rate off firstcredit managementpaying for collegeadvice for college graduatesfour steps to retirement savings no tax on withdrawlsbest loan deal Suze Orman Scholarshipraise deductiblesno waiting periodForeclosureAlarm Clocklife insurance name trust as beneficiarybe good examplewaive home inspection bidbudgetwould you decline a bonushealthy teethdon't do five year car loanitemized deductionHoliday Seasonunexpected expenseemployer funding HSAcalculate dependents annual income needsstretch out haircut appointmentspay down car loanfile taxes quicklyCNBCdon't cover cosmetic dentistryno private loanvalue moneysame-sex marriagesave 20% equityenjoy saving insurancewomen long term caremortgage disclosurecan you afford itlower ratetitle insurancejanuary billsteach importance of helping otherstelevision hosthome buying mistakes740 credit scorestore credit cardsstudent loan repaymentno negativityStudent Loan20% down paymentnegotiate points with bank or sellergay marriage ban end Florida ultimate compounding giftinitial tax break rolloverhigh down paymentgraduationFHA loan feesVital DocumentsHDHP/HSAeliminate credit card debtincrease emergency savingsroth irafocus on needssetup automatic savings withdrawclosing fees50 over 50Financialborrow each year, capitalization is going to pile up children's bookFICO ScoreMoney Marketignore 6 month grace period 3 step financial road mapRevocable Living Trustsocial security not going broketoo expensive schoolNew York Lifedangerous retirement planFree Debt Eliminatoreight month living expense at worst still pay 75% benefitMass MutualYoung Adult repay student loansLifestylecommunity collegepay interest while in schoolbetter loan rates40% toward financial goalFundsearn allowance10 year repayment plan Interestloan necessityCivil Rightsmortgage interest tax deductionBeautyaffordabilityCredit Card Rate Increasecost of capitalization calculatorquick closingallowancedental insurance confidentEmergency Savingsbetter termsyours, mine & ourshigher insurance deductiblebad decisionsSelectQuote.comprotect dependent CPI-Wemotional stakesreal estate marketFinancial Solutions For Youapproved medical 100% tax-freehome ownershipInflation Benefitmaintain standard of livingclosing costs 2% of loansocial security never insolventearn more on savingskids schedule paymentsface your financial fearHigh FICO Score = Better Rateemergency fund savingsbuying car 2016max employee matchlong-term care Baby Boomerscostly insurance mistaketax ID theftnew carsame sex marriage band end FloridaplanFixed Rate Mortgageretirment savingsUniversity of IllinoisCiti Simplicity Card overspend on nights outConventional loan PMIzero rate transfer dealshigh credit score discountMinor Children back-to-school budgetdebt freeconfident of solution8 month emergency fundhealthy retirement weight2015 financial roadmapno interestGay Rightsincentives for health care wellness screeningLong Term Care premiumsbuy home you can affordsmall changes Richcollege studentholiday spendingreduce interest raterefundthree year car loanTelepicturesescrowadd teendebit cardMortgage Credit Availability Indexreplace permanent life insurance with termSuze approvedoverspend on dining outteens and moneyCommunication Skills 30 year mortgage Stock InvestmentsPost-Divorceonly offered while employed dangerous money seasonWall Streetritual scheduleLovespecial saving accounthome buying budget3 bucket approachfamily save at least $100 monthlystudent loan repayment estimatorFinancial Gift CliffHDHP is it true? Influentialsraising mortgage rates savings pleasurelow down paymentsocial workSchool of Social Workcredit reportinsurance yearly reviewprovider of financial supportpay more than minimumterm life insurancestudentloan no longer than 36monthsget over life insurance phobiawomen live longerno private loansjuggle multiple financial goalsFinancial Awarenessmental healthidentity theftemergency fund traditional vs roth 401(k)manage student loansUniversity of Floridapaid vacationhigh premiumsresponsible with moneydental savings planrent vs buymarriage financial responsibilitytax refund fraudFederal PLUS loanonly refinance if it payscommissionscontribute household expenses Death Benefitmeet monthly create new truthinterest capitalizationno apologystandard ratesuccessCory Bookershort term goal best interest ratesFICO credit score credit card mortgageaccelerate dental workkid borrow firststay positiveautomatic paymentWarner Bros Television GroupSuze changed my lifecompare monthly expensesdoctor no longer in networkmobile appInfluential Celebritydon't derail retirement savingsbill paying prioritiescompare provider pricingbetter loan dealsborrowing plan 401(k) Contributionsproperty taxadjust allocations low credit scorebuy homebuy down Suze is my biggest mentormax employer matched 401(k) contributionpeace of mindARMno splurge Spendingworst financial mistakeinterest on student loansRetirement IncomemortgageGiftRevocable Trustcar loansuitablewrite new goalcontribution 401Kdon't spend FICO at least 720Credit score20 year level term Heartderailed planAmericans don't use all paid vacation timeautomatic withdraw to savings grandchild summer job IRA contributionpremiumMoneycut monthly cable billAuto Savings home insuranceCD'sretain separate credit cardscouple financesSatisfyingage appropriate goalsphysical healthpay down student loan debtget health insurancehealthy aging responsiblenot gender specific Willinsurance mistakeUS Tax Codemake saving a pleasureschool raise your deductibledon't use allowance as bribeLTCstandard deduction pay credit debt ASAPkeep a scheduleback door Roth IRAThe Suze Orman Showhousing marketspeak new goalEric Dodge FRAconsider roth 401(k)long-term care premiumsGraceincrease retirement contribution rateBill and Pennybuying a carETF's8 month safety netstudent loan repayment planNew american Dream bad retirement planningfinancing car 19 years cash flow problempaid in fulldon't charge a pennyoverspend on giftspreexisting condition not coveredmoney vowsnon conventional routelow mileage discountidentity fraudwomen longer life spanAARPloan big picture marriage inequalityprotect your familylong term goalLTC shoppingadult childrenHDHP's are not badlower overall drug costno life insurance financially irresponsibleworkaholiccnbc alarm clockanticipated salaryForbes Top 10Gay Couplesemployer offered life insuranceCredit Card Interest RateNewtowndo you need life insurancecharges on credit cardpublic service loan forgiveness programlowest cost fund optioncommitFinancial Cliffalternative FICO scoredon't buy wantsForbesrequire chore in exchange for allowancecollege graduatelousy investmentExhibitionannual cost of living adjustmentretirementlower mortgage interestverify retirement plan with HR or plan sponsorteach your child good money habitsretirement planretirement accountsdepreciating asset verify wellness screening and programsincrease retirement savingsAshley Springerget the most out of social security shop online guaranteed level term policyfinancial fearsspring summer comparison shoppingrising home pricesVeterinary School10% donate to charityHoliday ShoppingAmy Lacyetallowance taskage appropriate chorefile asapStudent Debt Crisisaffordable premiumhealthy youlet them have 50% controlhome budget after tax costschedule vacationbreakdown projected monthly housing costpay 100% cash!00% tuition paid3% debt transferred

View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel