Top Tips for College Financial Planning During High School

As your child enters high school, you’ve undoubtedly started to think about the costs of college. Figuring out how exactly to pay for college and navigate the financial aid system can be overwhelming, but you don’t have to do it alone. 
Keep reading for our top tips on how to take stock of your finances and involve your child in financial conversations early on in high school. 
[ GOOD TO KNOW: The Ultimate Guide to FAFSA and Financial Aid ]
 

The early high school years are the perfect time to speak to an accountant or financial advisor to avoid financial moves that could unexpectedly impact your aid. Considerations including the following can have meaningful consequences:

• In whose name an asset is held (parent, student, or other relatives)
• When distributions are received from a 529 plan outside of the immediate family
• Income fluctuations year to year (from employment or investments)
• Your home equity

Be wary of schemes that promise to help you hide your assets or reduce your EFC through complex or drastic financial maneuvers. Even setting aside the ethical implications, it will be a better use of your time to focus on finding affordable colleges that will be generous with families like yours rather than to try to game a complex system to eke out a few thousand dollars.
For example, lawmakers and college officials are alert to a scam where parents give up guardianship of their high school-aged children to render them independent students without assets. Some colleges have even said they will not provide financial aid to students they determine have used such dubious approaches to obtain financial aid for which they are otherwise ineligible.

Paying for college is often best approached as a family endeavor, and the first couple of years of high school aren’t too early to begin the conversation.
This may be one of the first times you have frank discussions about finances with your child about what is and is not affordable. Some parents make it clear to children that their college choice will depend on whichever school will cost the least. Other parents present more of a cost-benefit analysis—for example, explaining to the student that they could also afford a car if she chooses the less costly option of a four-year public college over a private college. Some parents encourage their child to work full-time in the summer to earn a certain amount in order to make college work financially. Perhaps you could pay for college in full, but you want your child to have some financial responsibility, so you expect them to contribute a certain amount or take a small loan (even if it’s from you, interest-free).
These are difficult conversations to have because many high school students are not longterm planners and don’t generally have extensive experience with these financial concepts. Here are some of the discussion topics you should introduce early with your child.

The financial aid system is complicated—that is in part because colleges and universities are trying to allocate their dollars fairly so that families can afford their education. But it’s also because colleges and universities have their own business considerations to keep in mind. Different students are asked to pay different prices so that colleges can maximize their revenue while admitting a diverse class.
Because of demographic, economic, and other trends, many colleges are having difficulties with their business model. You may have seen news stories about small colleges shuttering their doors because their enrollments were down and they could no longer make it work. As a result, competition for students is getting more intense. Colleges need and want you to say yes! This is why net prices are not actually growing as fast as the published prices. There is often more “discounting” available.
Families should act like consumers in the college process and know that they have buying power. In other words, while you’re applying to get in, you should also be aware that you’re offering something to the college that they want and need. When you are empowered with that information you’ll be able to find the school that will offer the best value.

 
As with most everything, who pays for college and how much they pay varies family to family and household to household. Though there is no right answer for how you and your family should divide the cost of school, you may be interested in some of the available data to give you an idea of trends happening across the United States.
A recent study by Sallie Mae, How America Pays for College (2019), surveyed college-going students and their families and found the following:

• 43% of college costs were covered by family savings and income (34% from parents’ income and savings, and 13% from students’).
• Both parents and students borrowed money to cover education costs. On average, parents borrowed 10% of the total amount due while students borrowed 14%.
• 28% of the cost of college was covered by scholarships and grants won by the student.
• The final 2% was covered by relatives and friends.

According to the same study, 39% of families say parents made the decision on their own and 24% say students made the decision on their own. Thirty percent of families make the decision together. Parents tend to be more confident in their financial planning choices (84%) than students (78%).
Of course, the numbers in this study show trends, not requirements – a good conversation starter about how to cover the cost of school.

Of course, choosing a college is a big decision, one that encompasses not only a family’s finances but also your student’s and your collective values and future goals. College is where critical reasoning and life skills are developed, career paths are forged, and lifelong friendships established.
But given that it’s such a big financial decision, one that could either lead to a great return on investment or a long-term struggle with student loan debt, families will want to approach the college decision in as level-headed a manner as possible.
For now, get your child acquainted with the concept of “return on investment.” A higher cost requires a higher gain to achieve the same ROI as a lower-cost investment. Getting a college education leads to higher earnings and lower unemployment rates in the long-term. It also provides many other benefits that may be less tangible and whose value is specific to the student—factors like campus culture, diversity, and opportunities for extracurriculars or professional development. Encourage your student to start thinking about what’s most important to your family in the college decision.