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Top 10 Check list for Parents of College-Bound Students
Deric C. Bowden, MBA
If you are the parent of a student who will be starting college soon, you are probably facing many new financial issues. In addition to the challenge of financing your child's education, you should be planning numerous insurance, banking and spending strategies. Following is a checklist for parents of college-bound students that highlight 10 essential steps to prepare and pay for this transition.
1. Research private scholarship options
Private scholarships average $2,051 each and are awarded to students either with or without a financial need. Approximately 6% of college students receive them, which means your child's odds are about 1 in 17. Start researching grants early, ideally when your student is in his or her freshman year of high school, when students can choose high school classes and activities to boost their odds of winning scholarships. Sites such as www.Petersons.com list awards that total nearly $4 billion. Also, consider the numerous community scholarships available through Lions Clubs, Rotary Clubs and Parent-Teacher Associations, among others that offer small sums of money and may boost your child's chances of appealing to a larger organization down the road.
2. Seek help from Uncle Sam
According to The National Center for Education Statistics, there are 750,000 government scholarships totaling $1.2 billion are earmarked for needy students. For example, nearly 40% of enrolled college students who meet certain financial criteria receive free government money in the form of Pell grants, averaging $2,000 each. To apply for a federal grant, submit a Free Application for Federal Student Aid (FAFSA) and contact the U.S. Department of Education at (800) 433-3243 if you have questions. Research other federal grant options, including the Stafford student loan, a federally subsidized loan program that allows students to borrow from private lenders and the government at low interest rates. Also, consider the Guaranteed Student Loan program, PLUS loans, Supplemental Education Opportunity grants and Perkins loans.
3. Review alternative ways to finance
With dwindling state and federal aid, lower endowments and drops in fundraising, many colleges have raised tuition prices. If your child has not been successful in attaining financial aid or scholarships, or if you need further financial assistance, there are many options:
- Accelerated classes - These intense classes condense a semester's worth of material into six-or eight-week sessions and can help move up your child's graduation date, getting your child a degree at a much lower price.
- Transfer credits - Credits earned at a less expensive college often can be transferred and applied toward a degree at an elite school, so your child can earn a prestigious diploma at a fraction of the price of a four-year education.
- Tuition-free schools - Your child can get a college education without a fee at colleges that offer a trade for work. Some schools require students to work 10 to15 hours a week on campus in jobs related to their majors.
- Lock-in tuition - Many colleges offer locked-in tuition programs, which means the rate you pay when your child is a freshman is guaranteed until he or she graduates.
4. Remember that it's never too late to save
Education savings tools such as 529 plans, can offer significant benefits and tax advantages over other college savings programs. If you don't have a 529 plan in place, consider starting one now for your college-bound student or other children who may be following in their path in the years to come. It's better late than never.
5. Update homeowner's insurance
Make sure that electronic goods and personal items moved to a dorm room or apartment are fully covered against theft. If not, consider purchasing renter's insurance, which might be required if your student lives off campus. It can be expensive, but any claims won't affect your homeowner's insurance.
6. Confirm auto insurance eligibility
You may be eligible for lower premiums if your teen takes a car to college. Also inform your agent if your child goes to school without a car. Having one less driver could mean a lower premium.
7. Check health insurance coverage
Your medical plan generally covers your children until they reach 20 or 24 years old and are still considered a resident of your home. Many schools, however, offer low-cost health insurance coverage that may be cheaper than your existing plan.
8. Set up student banking
Most schools have banks and ATMs on or near campus and make it convenient to open an account. Other options include online banking and debit cards. Parents can transfer money into an account, and students can use the cards to make purchases and withdraw cash from an ATM.
9. Encourage responsible spending
Talk with your college-bound student about living on a budget and create a reasonable spending plan to cover his or her meals, entertainment, laundry, long-distance phone calls and personal items. Monitor this budget with your child monthly to make sure it is working. If your student has a credit card, be sure to educate them on responsible spending, the value of good credit and risks of credit card debt. You may want to consider a charge card instead of a credit card, since the full balance is due monthly and interest charges will not accumulate.
10. Get professional help
Take this opportunity to meet with your financial advisor and update your financial plan for this important transition period and beyond.
Deric is a former Army officer and current financial advisor with American Express Financial Advisors Inc. For questions or comments, contact Deric at: Deric.c.bowden@aexp.com.
This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation. Investments are not guaranteed and are subject to investment risk including the possible loss of principal.
American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.
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