Attending a four-year college can be one of the costliest decisions anyone makes. From tuition to room and board to transportation, expenses pile up quickly. Having a discussion about finances can be awkward, but it’s essential for students and parents to understand where things stand. “It’s a very important conversation to have, and most people really don’t approach it correctly,” says Judy Sciaky, a certified college planning specialist and the founder of AP&G Financial in Bala Cynwyd. “It’s a two-way street.”
Prior to that discussion, Sciaky recommends that parents have a thorough understanding of their own finances and how much they can afford to contribute. A 2014 study conducted by Sallie Mae, a bank specializing in student loans, found that nearly 20 percent of parents paid for their children’s college education solely with their own money. For those who sought some form of financial aid, the study found that parent income and savings accounted for about 30 percent of the cost, as did grants and scholarships. Student borrowing and a student’s own income and savings made up for the rest, at 15 and 12 percent, respectively, putting a large burden on parents.
“It’s really important to be able to apply for college or think about college in a way that’s not going to completely decimate a family’s lifestyle,” says Sciaky. “[Parents] have to sit down and explain to their child where they stand financially.”
She recommends beginning that conversation when a child starts expressing interest in college, which can be as early as middle school or as late as junior year of high school. “Some families are forthcoming, and some aren’t,” says Liz Rihl-Lewinsky, assistant vice president of enrollment management at Arcadia University. “There are parents who haven’t shared any information with their kids and are fairly shocked to learn about the cost of college today.”
A net price calculator is found on every school’s website, as required by the United States Department of Education. It can assist parents and students in estimating expenses. Inputting information like expected year of entry, current GPA and test scores helps compute expected costs for a given student.
While the initial burden of researching finances falls on students and parents, the institution must disseminate information about financial aid and payment options. “The challenge is meeting a student or their parents and getting them engaged in the process,” says Erin DiMarco, senior vice president of academic support services at Wilmington University. “There needs to be a lot of communication before a student chooses a school. The onus falls on the school—the website, materials, communication at open-house nights.”
DiMarco says it’s not uncommon to see students and parents forego questions because they don’t know what to ask or where to begin. They may also be too embarrassed to ask about financial aid. “It’s an overwhelming process,” she says.
To help alleviate some of those challenges, most colleges and universities send out information as soon as a student expresses interest, whether by signing up for a mailing list or visiting the school. “We send communications about how to finance a degree, what the loan options are, and how to apply for a scholarship,” DiMarco says.
To help ensure that students understand their offerings, the Department of Education has moved the opening date for the Free
Application for Federal Student Aid (FAFSA) from January to October of the previous year. Students now can look at the loan possibilities ahead of time, though they won’t be able to act until their financial- aid packages are calculated and they’ve committed to attending a school. Knowing what to expect, however, is helpful. “It’s important for them to know the terms associated with any loans—what the requirements are, if there are origination fees, what the interest rate is, and what the repayment options are,” says Rihl-Lewinsky. “We try to be very transparent in sharing that information up front with students, so they’re not surprised when they graduate.”
Ultimately, these are planning tools, and understanding the scope of the financial-aid package won’t come until much later in the process. “The student needs to be accepted for admission before the full financial-aid package is calculated,” says Rihl-Lewinsky.
Aid also varies from school to school, so students and parents need to factor that in. To accommodate those variations, Sciaky recommends applying to six to 10 schools to ensure plenty of options.
“Colleges need to satisfy three criteria: the academic needs of the child, the social needs of the child, and the financial ability of the parent—assuming the parents are the ones paying,” Sciaky says.