It can be completely normal to have some moments when looking at potential college expenses and seeing how much money you will have in your retirement fund to feel as though one of these dreams is quietly destroying the other.
Of course, you want to help young people achieve; you do, most definitely. You remember the first time your child, grandchild, nephew or niece, etc., discussed his or her future plans with both anxiety and enthusiasm. Perhaps they wish to be a nurse, teacher, engineer, designer, mechanic, accountant, etc., although they may not have fully defined their desired career yet. Then the costs begin to mount.
Housing costs. Book costs. Food costs. Transportation costs. Fees that seemingly develop overnight. Quickly, love begins to sound like a financial decision. This is the point at which many families become “stuck.”
Determine What You Can Afford To Contribute Financially Before You Offer Any Assistance
Before committing to contribute to a young person’s education, assess your financial ability to do so. Do not review this information with fear; rather, review it with honesty.
Review your retirement funds, monthly income, debt, emergency funds, medical costs, home costs, and your intended lifestyle. It is very easy to say, “We’ll figure it out,” when a young person’s future is at stake. Retirement does not offer borrowers the same options as colleges do. That is important.
You may be able to assist with books, groceries, application fees, and other expenses. You may be able to pay for 2 years of community college before transferring. You may be able to establish a specific amount of assistance per year and nothing else.
Your financial support does not diminish its value simply because it is limited. Your financial support is sustainable. Boundary establishment is far kinder than an open-ended promise to assist that you later regret.
Remove Emotional Ties From The Actual College Cost
College decisions usually involve emotions such as pride, anxiety, hopefulness, and, occasionally, even guilt. Students may develop strong ties to campuses before thoroughly evaluating all associated costs. Parents may be reluctant to acknowledge that an institution is overly costly. Grandparents may be inclined to intervene due to their own past struggles. Pause before anyone provides a commitment.
Request the complete cost of attendance for the student(s) at each college being evaluated, including tuition, room and board, food, housing, transportation, textbooks, insurance, fees, etc. Compare the institutions based on the total costs.
An institution with a higher listed cost may actually offer superior financial aid packages. A less appealing institution may allow the student more flexibility post-graduation. Local institutions may make more sense for 1-2 years. Trade programs, certificates, apprenticeships, and community colleges may align more closely with the student’s objectives than a traditional 4-year route.
The best institutional choice is typically not the one with the most attractive marketing materials. Rather, it is typically the one that affords the student a viable path forward with minimal added financial burdens.
Include The Student As A Collaborator In Developing Their Education Plan
While it is normal to want to shield young adults from the financial burdens of education, developing a collaborative education plan typically leads to greater success. Do not frighten them by sharing cost details. Include them in establishing those costs.
Discuss how much each individual can contribute. Illustrate what a semester will cost. Discuss how many hours they must work during the summer months to offset costs. Review how to access or utilize federal or state grants, scholarships, work-study funds, savings plans, family support mechanisms, and student loans.
Exercising Caution When Co-Signing For Loans
Although it might appear to be an easy solution to the problem of insufficient credit history, co-signing a loan should not be taken lightly, and has its own set of very real consequences.
You could potentially have lenders attempt to collect payment from you because the borrower is unable to pay on time. A poor credit rating will negatively affect your ability to secure credit once you retire. This could become one of several major issues in your retirement years.
Before becoming a co-borrower on any type of loan (and ultimately being responsible for all or part of the debt), evaluate how the potential negative effects described above may affect you:
Could you afford to pay off the entire amount borrowed if the borrower defaults on the loan? Would paying back the loan require changes in your home mortgage payments? Medical bills? Financing for your business? Your retirement fund?
Just as it is perfectly fine to deny a request for financial assistance while providing non-monetary help with education-related needs, it is also perfectly fine to provide similar types of aid, such as assisting students in finding affordable college funding, assisting students in applying for grants, helping students prepare their budget, and providing them with alternatives to the most expensive educational opportunities.
Not signing as a co-borrower doesn’t mean you won’t be supporting their future endeavors.
Create An Educational Plan That May Flexibly Adapt To Changes
As with life changes, majors change, costs increase, jobs develop and disappear, students require an additional semester, and families experience budgetary constraints, your educational plan must be flexible and periodically reviewed.
Once a year, gather with your family and evaluate progress toward your educational objectives. Have grades improved? Has the chosen institution remained consistent with its original goals? Has the student taken on more student debt than initially anticipated? Are there new scholarship opportunities available? Can the student generate additional summer employment income without impacting their academic performance?
Periodic reviews of your educational plan will ensure that any adjustments made early in the process do not cause undue hardship or panic later. Additionally, periodic reviews will facilitate a calm dialogue throughout the process. Finances will be managed jointly by all parties, not discussed only when there is a problem.
Provide Support That Enables All Parties To Succeed
You can show that you truly care about a young adult’s future at the same time as protecting your personal interests. It is possible to protect both of these concerns; they do not have to be mutually exclusive.
Rather than provide money for everything related to a young adult’s college education, the goal should be to assist them with making those decisions responsibly. In some cases, this will include assisting financially. In other cases, it will include developing boundaries and encouragement, investigating alternative methods of obtaining an education, helping the student find affordable means of commuting, etc.
When family members develop a collaborative approach to creating an educational plan, each party is empowered, each party has the resources needed to achieve their academic goals, and there is less anxiety regarding securing sufficient funding for retirement.
