Before embarking on one of the most expensive journeys of a lifetime, your student should understand the total cost to obtain the education needed for a specific career.
Why it matters
- The total picture is important. Although your student will receive financial aid notifications before enrolling in college or a certificate program, these only show costs and aid for the first year. Making a final decision based on only one-fourth or less of the necessary information is like agreeing to pay for a car knowing only the cost of the tires and insurance.
- It’s time to plan for contingencies. Your student, should understand the estimated financial picture for each year of a program. Each year, families of students one, two or three years into their college careers realize they don’t have the funds to finish, requiring students to take time off to earn money, transfer to less-expensive programs or take on crippling debt.
What your student can do now
- Make a realistic guess about program length. Will your student be able to complete a chosen program in four years, or is five years more likely? Suppose your student’s chosen path is a two-year degree or a certificate program or, conversely, will involve advanced degrees. Your student may take more or less time based on previously earned credits, difficulty registering for high-demand classes and other considerations.
- Consider real-life earnings, savings and expenses. If your student has been earning money for a while or making purchases, he or she should have a good idea of how much of each paycheck goes to savings versus ongoing expenses. Using this information, you and your student should make a realistic estimate on how much can be earned and saved while focusing on education. Then, use this information to decide how to meet the gap between the cost of attendance and available resources for each program year.
What your student can do later
- Use a Net Price Calculator. Net price is the amount a student pays to attend a higher education institution in one academic year after scholarships and grants are subtracted from the school’s total cost of attendance. Often referred to as “the bottom line,” students and their families must determine how that amount will be paid, whether from savings, college savings accounts, work earnings, loans, or a combination them.
- Make a financially sound decision. Using the results of the above exercises, your student should determine which programs make financial sense without requiring unmanageable debt before graduation. One guideline is total debt for all years of a program should not exceed a realistic estimated first-year salary.
- Continue to keep an eye on progress. Periodic re-evaluation of current income and expenses and time to complete the program should help your student avoid some of the more severe consequences such as being forced to drop out for financial reasons.
- Christine Hensley is an Iowa Student Loan Board member.