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Can your child afford the college he/she wants to go to?

By Gerri on Sunday, April 25th, 2010 | 1 Comment

May 1st is often the date that a student needs to make a decision about which college they will go to if they have been accepted at multiple ones.  By now most financial aid packages are out and you may be horrified at the amount of money the college is expecting you to come up with.

First things first, has your child applied for all eligible scholarships and grants?  This is free money so you need to head their first.  But, before you spend a lot of time on this, find out how the college treats outside scholarships.  In some cases, the school uses this to reduce the aid that they are giving to you.  In others the college will allow you to use these scholarships to reduce the cash you have to come up with out of pocket. If the college is not going to use the money to reduce your portion, it is not worth a lot of time being spent to find scholarship dollars.

If you need to head to Paent Plus or private student loans, you should consider the long term effect of this before deciding on your school.

For example, if your child is going to have to borrow $40,000 a year for the next four years as loans, what will the payment be for you or that student when he gets out of school?  If you anticipate some increases in tuition and are looking at an interest rate of 8.5% which it could easily be a 30 year loan payment of over $1300 per month.

If your child is saddled with that kind of loan payment, what does that mean?  Can he afford rent, car payment, utilities, insurance and everything else to be able to live on his own or is he going to end up back in his old bedroom?  That new worker would probably need to come out making $60,000 or $70,000 his first year to be able to survive on his own.  Is that possible in his intented occupation?

I know it is the dream of every parent to allow their child to go whereever they want to school, but you could be dooming him for life if he is saddled with a loan payment that he cannot afford.  Student loan payments do not go away in bankruptcy.  The federal government and many state governments will keep take refunds to pay back payments.  Wages may be garnisheed.  Payments may be deferred for a period of time, but rarely go away.

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