Thank you for the great articles on how to pay for college. It's so important for parents and future college students to understand the best ways to approach this.
My future brother-in-law is a junior in high school. He insists that he cannot go to school in-state, but his family isn't in a position to help him pay for his education. My fiancée went through the same situation and we are now saddled with more than $100,000 in debt. I plan to pass on your articles in hopes that my future brother-in-law can avoid this mistake.
Thanks for the kind words. As I wrote at the start of my series (opens in new tab), keeping college costs under control starts with an honest appraisal of how much your family can and should pay.
Surprisingly, despite all the attention being paid to student loans, only a small percentage of students say they choose a school based on affordability, according to a survey by Key Bank. Of the students polled, 36% said curriculum was the most important factor when selecting a school; only 12% selected a school based on affordability.
Of course, choosing a school is an educational decision. But economics also plays a big part -- as the students themselves discovered. Once kids got to college, making ends meet financially was the number-one concern of students in the Key Bank study -- cited by 25% -- ahead of keeping up with the workload (20%) and getting good grades (16%). But it's a little late to find that out after you've sent in the deposit.
To get an idea of how much debt is reasonable, start with the Student Loan Advisor calculator at www.finaid.com (opens in new tab). Students plug in their field of study, expected graduation date and loan interest rate. The site gives them the maximum loan amount they can safely handle, assuming they want to limit their monthly payments to between 10% and 15% of their income.
Say your future brother-in-law plans to major in education. As a teacher, he can anticipate a starting salary of $35,100, according to the calculator. To limit his payment to 10% of his income, he could borrow about $25,500 at a 6.8% interest rate (the rate on new government-sponsored Stafford loans) with a ten-year repayment schedule.
If he's planning to be a chemical engineer, with a projected starting salary of $60,300, he can borrow $43,700, given the same assumptions.
That's more manageable than $100,000, but it's still a lot of debt. Which brings me back to where I started my series of columns: If money is an issue, consider going to school in-state at a public college or university, or start at a local community college and then transfer. If you still decide to borrow more money to attend an expensive school, do it with eyes wide open and have a plan to pay off the debt.
Janet's college-financing series:
Does the IRS Audit Some Taxpayers More Than Others?
A study of IRS audits, from Stanford University researchers and the U.S. Treasury Department, looked at whether some taxpayers are audited more than others.
By Kelley R. Taylor • Published
Different Approach to Financial Planning Addresses ‘the Missing Middle’
Nontraditional financial planning model allows you to pay for the expenses you incur between now and retirement — the middle of your life — without losing the ability to build wealth.
By Brian Skrobonja, Chartered Financial Consultant (ChFC®) • Published
Student Loan Forgiveness Blocked For Now Due to Court Rulings
Biden's student loan debt forgiveness program is on hold until the U.S. Supreme Court can weigh in.
By Kelley R. Taylor • Published
529 Plan Contribution Deadlines
Many states have year-end deadlines for making 529 college savings plan contributions.
By Kelley R. Taylor • Last updated
3 Key Ways You Can Help a Child or Grandchild Pay for College
college Options such as 529 plans, education savings accounts and tax-free gifts can ensure you don’t carry a child’s student loan debt into your golden years.
By Tony Drake, CFP®, Investment Advisor Representative • Published
Borrowers Over 50 With Student Loan Debt
Paying for College Millions of borrowers 50 and older are struggling to repay loans for themselves and their children, some delaying retirement. There’s a trick, though, to help with repayment.
By Elaine Silvestrini • Published
How to Spend $1,000: Find Cheap (or Free) Online Courses to Build Career Skills
Smart Buying There's a huge array of skill-building online courses that can level up your career for under $1,000.
By Kim Clark • Published
PODCAST: Tax Breaks for College Finance with Kalman Chany
Paying for College Paying for (ever-pricier) college is a challenge that this consultant meets head on with highly specific guidance.
By David Muhlbaum • Published
Tax Breaks to Help You Pay for College
Paying for College Everyone knows education is pricey and getting pricier. But not everyone knows about the tax relief available at all stages.
By Sandra Block • Published
Chasing Athletic Scholarship Dreams Can Be a Costly Mistake
Paying for College Camps. Equipment. Travel to tournaments. Recruiting fees. It’s expensive to have a high school student-athlete in your home. But who doesn’t dream of a full-ride scholarship to your child’s dream school? Here’s an athletic scholarship reality check to help you make the right spending choices for your family.
By Erin Wood, CFP®, CRPC®, FBSⓇ • Published