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Making sense of complex college funding questions just got easier!

Check out the Invite Education YouTube channel for #MyCollegeCorner videos featuring answers to your most common questions, and insight on how best to proceed.

The Free Money Mini-Series begins this week bringing light to the subject of grants and scholarships, your favorite money from the financial aid office since it does not need to be paid back like a loan.   Like, Share and Subscribe!

 

Interview: Invite Education CEO John Hupalo on @KDURradio: “Plan and Finance Your Family’s College Dreams”

Rachel Frederico host of “Off the Rim” at Fort Lewis College Community Radio (@KDURradio) interviewed John Hupalo on the topic of college costs, savings and student loans, providing insight from the new book “Plan and Finance Your Family’s College Dreams.” The interview covers many topics including:

  • How college financing is a holistic planning process covering the years of early childhood leading up to high school graduation.
  • Why 529’s are so advantageous.
  • Translating the “lingo” of the college funding process into plain english.
  • What is a Gap Year and why it matters before college?
  • How can students and parents best manage college loans?

Check out the full recording:

 

Student debt crisis does not require a big government solution. Here’s my full Letter to the Editor of the Wall Street Journal

Kudos to WSJ for maintaining focus on the student debt crisis and offering its pages to voice various views.  On Wednesday, August 10th, the Journal  printed my Letter to the Editor — see the full letter below.

My view in short: families empowered with better information, tools and services AND the emotional demeanor to choose less expensive schools over “brand-name” schools can avoid excessive student debt.  The educational outcome is likely to be excellent and their return on investment substantially better because they did not choose a higher cost, debt laden path.

What do you think?

To the Editor:

My career has been focused on helping families plan and pay for college: 20+ years as student loan investment banker, former CFO of First Marblehead Corporation (NYSE:FMD), school board member, education entrepreneur and, recently, the co-author of “Plan and Finance Your Family’s College Dreams.”

Sheila Bair hits a few of the high notes of the college financing crisis. The root problem: everyone’s to blame. The Congress has tinkered around the edges of a student loan program established in 1965 when it provided many students with low cost loans with caps that nearly covered 100% of education costs. The current Administration’s political response is to find ways to forgive student loans. Colleges have zero incentive to control costs. Some for-profit schools are bogus. Taxpayers appear oblivious to the fact that we pay for every defaulted and forgiven federal loan. Borrowers seemingly prefer the status of victim of greedy lenders and corrupt schools to educated consumer that no one forces to sign a loan note.

College affordability is within the grasp of all families starting with the acceptance of personal responsibility for the contracts signed.   Loans should be the last resort, not the first alternative, to pay for college – no matter what the government or the schools say. Families should first use savings, financial aid, scholarships, current income and other “free money.”  Then project the total amount of debt that might be needed. If it exceeds the projected first year salary after college, the school is not affordable. Finding a less expensive school, working for a year, living at home or taking any number of other actions is far preferable to being the next headlined poster child in the college financing crisis.   This is a solvable problem that does not require a big government solution.

 

Interview: Invite Education CEO John Hupalo featured on “The Experience Pros” talk radio

Invite Education CEO John Hupalo was featured on the Experience Pros  radio show talking about his new Book “Plan and Finance your Family’s College Dreams” and how parents are dealing with higher education costs today.

During the 9 minute interview, hosts Angel and Eric raise key questions that families are dealing with when it comes to paying for college, bringing up topics affecting many today, like savings plans, gap year and more.  Since college is not getting any less expense, parents are concerned.  Some highlights from the interview.

John: “94% of parents believe college costs will impact ability to pay for retirement.  College costs are increasing at a rate above inflation.  Parents are starting to scratch their heads and say “Is the cost really worth what’s on the other side?” Hopefully a graduate without too much debt in their pocket.”

How do we make this affordable if we didn’t start saving when they were toddlers?

John: “Not many families started early enough.  529 plans prevalent today were just barely getting off the ground 20 years ago.  Some families with children in high school woke up today without enough in their savings account, and they ask what do I do?   We say, take a deep breath, it will be ok.  There are opportunities to receive scholarships, need based aid, and merit based aid from the school. It’s a mistake to rule out any particular college before actually going through the financial aid process and getting a financial aid package back from the school.  They may be pleasantly surprised. Even for juniors or seniors in high school, by the time they graduate from college, that might be 5 or 6 years down the road, so saving a dollar today to offset some of those costs tomorrow is a good plan. Every dollar you can put towards actual reduction in that cost of school is a dollar less that has to be borrowed, and that’s a good thing.”

Is “gap year” a good idea?

John: “It depends on each student’s circumstance.  For most kids taking a gap year, it’s a great idea…  For some students it’s an opportunity to go out and work a little bit, maybe put a “down payment” on their college education so they don’t have to actually borrow as much.  Other students may not be properly motivated.  If you look at the data, students who do not complete the college course they are significantly more likely to default on their loans.  So they have debt and no degree — there 0-2.  That’s not a circumstance anyone wants their child to be in.  So a gap year could really be an important maturity year and an opportunity to earn some money.”

What about student’s that are dropping out because of debt?  Is debt impacting graduation rates?

John: “I think that’s right.  The answer is better financial education up front.  What parent would say to their high school senior, “Go to the local car dealer and pick out the car of your dreams and then drive away fully financed without terms that you actually understand.” Sometimes that’s what we do with some of our students, pick the college of your dreams, we’ll figure out how to pay for it later.  That just doesn’t work any more.”

 

3 Tips for Smart Student Borrowing

When it comes to paying for college, the process can seem overwhelming. There are so many financing options out there and you might be feeling lost about how to choose the correct ones for your family. The key is to equip yourself with information so that you can have knowledge you need to make an informed decision.

One of the most common ways to pay for college is student loans. There are two primary sources of student loan funding: federal loans and private credit loans. The two programs differ in fundamental ways: the money for federal loans comes from the Department of Education whereas private loans come from places like banks, credit unions and other financial institutions.  Federal loans are much more standardized providing the same rates and fees to all borrowers. Most students tend to take advantage of federal loans before moving onto private loans if they still need extra money.

For some families, private loans are a good option because offer competitive rates and a cosigner option to help student-borrowers gain approval. Other families will choose federal loans, which can be easier to get and offer flexible repayment options, like income-based repayment.  Whichever type of loan you choose (and some families take out both private and federal loans), there are a few ways to borrow smart.

Don’t borrow more than you need. Many families get caught up in the availability of what may seem like free money and end up taking out a bigger loan than they need, just because the option is there. But a loan is not free money, even though it is labeled as “financial aid” on a student’s award letter. Every cent you borrow has to be paid back in the future, and often with interest, which can sometimes be up to a few thousand dollars on top of the loan principal. Don’t take out too much money from a student loan; it should be used for education costs only. Take a careful look at actual expenses and remember that interest will accrue on the total balance. You can use a Student Loan Payment Amount Estimator to get an idea of what your payments might look like once you’ve graduated. Be smart about the debt you’re taking on. Only borrow the amount you actually need, otherwise you could be quite literally paying for your mistake down the line.

Review federal loans first. They tend to have the most favorable terms and flexible repayment options, and you generally don’t need a co-signer. To receive federal loans, families must submit the FAFSA form, with the 2016 – 2017 version available beginning October 1. Even if you don’t think your family will qualify for need-based aid, you should submit the FAFSA anyway. Every family that files one, regardless of family income level, is eligible for some type of federal student loan. You never know what you might be eligible for or how your family’s needs will change before the fall. There are different types of Federal Direct Student Loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, and Federal Direct PLUS, among others. We will cover the specific differences between these loans in an upcoming post, but all of them are managed by the federal government. Some can be covered by debt forgiveness programs, like the Public Service Loan Forgiveness Program, but when you’re taking out a loan it’s best practice to assume that you will be paying back the entirety of the balance.

If you need more money, look into private loans. Federal loans are limited year-to-year, and if facing a tuition shortfall, you may need to look into private education loans. One of the best known private loan lenders is the company Sallie Mae, but private loans also come from banks, credit unions, and other lenders. In most cases you’ll need a co-signer. All private loans differ, but their interest rates may be fixed or variable and some require a minimum payment while still enrolled in school. You can learn more about the differences between the two types of loans at Studentaid.ed.gov.

When taking out loans, make sure you understand the terms of the loan. How will interest be charged? What is the grace period on the loan, that is, how much time will pass between graduation and when payments are due? Who will be the co-signer on the loan, if you need one? There are many factors to consider and like most aspects of the college process, the answers will differ among families. But with some research, you’ll feel more equipped to make the right choices for you. Good student loan borrowing is about being smart, making the right decisions, and doing what’s best for you and your family.

Early college savings strategies for children

Parents are inspiring their kids to learn financial literacy with a simple message: save for college! It’s a worthwhile goal helping to build healthy financial habits for life and also to reduce the need for student loans in the future. Here are some ways that parents can help their children get on the right track early and stay the course.

  • Learn by doing: The number one way for students to begin saving early for college is to actually do it. The very act of taking money and putting it into a specific account for college savings is instrumental, not just for growing education funds but also learning a healthy financial habit for life. For early savers, it’s simply a matter of motivation.
  • Encourage financial literacy: Embrace financial literacy and learn about money: how to save it, how to spend it, and how to make it work for you. Even with digital money and payment platforms becoming more common, parents can begin to encourage their children to understand financial literacy by explaining about the different coins and dollar bills, and help them put money into a piggy bank or a savings account. As they mature, you might begin talking to older children about investments and different kinds of savings. The key is to have open conversation about personal finance, so that kids learn early that money is something to be managed properly. If that didn’t happen for you, it’s never too late to learn.
  • Learn to budget: This is a great exercise for students and parents. Take a week or two to record all of your purchases and see how much you spend. Record all of your income. Categorize your expenses and determine how much of your income can go into savings. Though “expenses” may be limited, kids should get into the habit of doing this so they can manage a personal budget as they mature. The 50/30/20 method of budgeting suggests breaking things into percentages in the categories of fixed costs, financial goals and flexible spending, but there are many ways to do this.
  • Put a percentage of gifts away: Gifts from birthdays and other holidays are great opportunities to boost college savings accounts. The trick is allocating it to savings before it is spent! Put a percentage of each gift into that account and watch the money grow. One of the most fundamental aspects of starting early is that thanks to interest, your money will be worth more years down the line when you need it.
  • Getting a job: The best way to increase income is to make money on a regular basis through work. A student’s first priority, especially in high school, needs to be their education, but flexible jobs give you the opportunity to earn money of your own. Babysitting is a great job for high schoolers, because it’s flexible and families often need babysitters on the weekends. When the kids go to bed, you often can do homework, accomplishing two things in one go. Other jobs that have weekend shifts include being a cashier at a grocery store or convenience store, working in a bakery, working as a golf caddy, or serving in a restaurant. Students with an entrepreneurial streak might start their own dog walking business or make things to sell.
  • Be consistent: Having a good plan in place is important, but what’s more important is putting that plan into action. If you plan to save $100 a month, continue to do that. It’s important to stick with it until it becomes second nature. You’ll be grateful that you did when you approach college and have a sizable savings account to help pay for it.
  • Parents and children work together: Financial literacy brings families together with a shared goal of greater prosperity. Parents can help set up the paperwork for a college savings plan while their children follow through with their consistent plan to earn and save money.  
  • Keep parents or grandparents as 529 account holders: Make sure to maximize savings in relation to potential financial aid eligibility by making the parent (or even grandparent) the account holder of 529 savings. It turns out that savings in a student’s name can reduce financial aid eligibility, by increasing the family’s “Expected Family Contribution” Money in a child’s name (like in checking/savings accounts) is counted as a student asset on the FAFSA, with as much as 20% of it’s value weighed against financial aid eligibility. This presents an unfortunate situation when it comes to college savings and financial literacy; you want your child to learn about saving money, but you also want to get the best value for college savings. There are significant benefits to keeping the majority of college savings in the parent’s name. A 529 in the parent’s name counts as a parent asset, and is assesses 5.6% of its value against FAFSA eligibility, a lower rate than a student asset. This comes into play during the need analysis process, which shelters parents’ assets more than it does those of their children. There are a number of strategies that you can use to maximize your aid eligibility. For students who are saving for college, it could be helpful to have them save the money but put it into this account under the parent’s name. That way, you are maximizing the potential for aid.

The idea of getting students to start saving for college early isn’t just about growing their contribution to their education savings, though that’s important. It’s also about children learning to manage their money and starting off strong so that they can grow up to be independent adults. It’s important because having them pay for a portion of their college costs gives them more ownership over the process because they’re investing their own money. Financial literacy is a skill for life; by starting young, children are are set up for financial success early.

 

3 Key Points for Grandparents Funding 529 College Savings Plans

It’s wonderful to see so many Grandparents participate in college graduation ceremonies, cheering on their grandchildren!  It turns out many grandparents were also able to provide some financial support along the way which minimized their old time photosgrandchildren’s student loan debt.  If you are a grandparent (Or soon to be one) here are a few things to consider when planning to help with college costs using a 529 plan.

  1. Early savings is key: Most grandparents understand the value and importance of savings and compound interest and the resultant benefit to them and their family members of a patient and disciplined strategy.  Saving for college is a great example, since it takes patience to stick with a  college savings plan for young toddlers and children. Grandparents are already well aware that “time flies” all too fast and what is required when making a long term commitment to a financial goal.   By helping to start a college savings plan, grandparents can make a big difference for long term college savings, increasing college options and minimize student debt for their grandchildren.
  2. Utilize the special 5 year 529 gifting rule for estate planning purposes: Grandparents should consider utilizing their estate plans to kickstart college savings.  Up to $14,000/year in 529 contributions can be made without triggering any gift taxes, considering the annual gift exclusion rule from the IRS. Under the special 5 year accelerating gifting rule, grandparents can gift as much as $70,000 contribution to a particular 529 plan beneficiary in a single year, but this would require no subsequent gifts over the next 5 years in order to average out a $70,000 lump sum within the $14,000 guideline.  Utilizing this rule and infusing a large amount now would certainly make a huge difference in the amount available in the future for college tuition.
  3. Be aware of financial aid policy; Use 529 accounts in junior and senior year of college:  Grandparent assets are not directly disclosed on the Free Application for Federal Student Aid (FAFSA) since they are not the custodial parents or the student, obviously.  However, when 529 funding distributions are provided to the student, the money is treated as “income” in the student’s name for financial aid purposes in the year it was received.  This additional income may actually decrease financial aid eligibility for the student as it is weighed even more heavily against need based grants, even more so than income in the parent’s name!  Wise planners simply look ahead and determine if the student would qualify for need- based funding considering the custodial parent’s household income (Like using Invite Education’s financial calculators).  If drawing high disbursements from the 529 accounts would sacrifice financial aid eligibility, then hold off on disbursements until the student’s junior and senior years.  This way the student can qualify for maximum need based financial aid for the early years, and then use the 529 to fund perhaps the entire cost of their last two years of college.  Or the 529 funding could be used to pay for Graduate school, where need based grants are not awarded on the scale of undergraduates. If there is excess funds, the grandparents can change the beneficiary or even take the money back .  No one wants to be punished for savings, so always go back and re-evaluate the funding strategy each year for optimization.

 

John’s Jots #4: Defining College Affordability

Guess what – there isn’t a standard definition of an affordable college.   Google “Affordable Colleges” or “Is College Affordable for Me?” and you get a hodgepodge. No wonder families are overwhelmed when trying to figure out how they know if they can afford college or if they’re saving enough. How can families assess the financial fit of a college when the “experts” can’t agree on what it means for a college to be affordable?

I’d like to solve this problem for families.  I’ll tell you what I think — let me know if you agree or not — with the hope that we can start to demystify this important question.

First, despite the current good-faith efforts by many, my google search for “Affordable Colleges” amplified the problem.  The returns included:

  • The 100 most affordable colleges — after community colleges and others were eliminated from the sample.  But those that were eliminated are likely very affordable options.
  • Affordable colleges ranked by ROI — a measure that many champion as “the answer” which may be true if you can accurately predict a student’s future income and the total cost of college before your student enters.  Although I like ROI calculations and it’s a financial term that many use because it sounds sophisticated, its fundamental  value is as a backward looking comparative tool.  Like all such measures, the output  can only be as accurate as the inputs, which in the case of predicting college costs and post-graduate wages are highly variable, at best.
  • Affordable colleges ranked by annual tuition and expected income — the winners were the U.S. Naval Academy and West Point, which don’t charge tuition but require a highly selective appointment.
  • Advice to attend a community college for two years, then attend a state school, live at home, buy used textbooks, work at a paying job during the summer and avoid debt.

All good — but not particularly specific to guide a family. So I tried to narrow the search by asking “Is College Affordable for Me?”  I hoped that would give me more personal financial advice.  Here’s what I found:

  • A U.S. Department of Education Blog, which is mostly cheerleading about the  Administration’s efforts. The efforts, like most high-level policies are well intended, but don’t specifically help me unless I like to eat tax credits.
  • Many articles arguing to make some colleges free — likely driven by the election sound bites to make community colleges free.  A interesting political idea but somebody’s still going to have to pay for the college experience.  In this case, taxpayers.
  • A link to The Lumina Foundation’s excellent study arguing that a college is affordable if the total cost of a bachelor’s degree does not exceed the total of 10% of a family’s discretionary income over 5 years plus the amount a student can earn working 10 hours per week during the school year.  It’s mostly applicable to lower income families but is a useful guide.

Kudos to Lumina for more good work and an attempt to address the issue.   But what’s the answer for most families?  How does a family know if a college is affordable?

There are 5 factors that determine if a college is affordable without taking on debt:

  1. The college selected. Families have  COMPLETE control over this important part of the equation.   There are over 7,000 colleges and  universities — one will certainly be a good academic, social and financial fit.  Picking a college based on cost is one sure fire way of ensuring that it is affordable.  The problem: many, if not all, students and parents have a pre-conceived notion (their dream, which I completely get) of the type or specific college they seek, so many choose higher cost alternatives than they may need.  Knowing the student’s longer-term goal is helpful. Do they want/need a job after college or is grad school an immediate option?
  2. Family Income.   Financial aid is mostly driven by family income – not assets.  Need-based aid is readily available at most colleges — and some of the most selective colleges provide 100% aid for low income, high achieving students.
  3. Savings. How much will likely be saved by the start of freshman year?  Very few families will save 100% but establishing a savings plan early  — and contributing routinely — will make a big difference.
  4. Getting “Free Money.”   Grants and scholarships will help defray college costs.  In addition to federal, state and third-party grants and scholarships, many colleges offer generous Merit Aid to students who help the college fill-out the entering class.  The college may be seeking an actor or thespian or woman/man from a particular geographic area and will offer lots of money to them. Other times gifts from relatives and others help students cover college costs.
  5. Current Income.  Will parents and/or students be able to contribute cash while the student is in-school?

If these sources cover the full-cost of college (tuition, fees, room/board, other projected expenses such as travel), the college is affordable.   If there is a gap, the discussion gets more interesting because loans are now necessary — and this is where parents and students get into trouble.

Part of the problem: the federal government allows schools to include loans as “aid” in Financial Aid Award Letter  — including a Parent PLUS loan that is offered for the full amount of attendance with little  regard for whether the parents can actually afford the loan.  So the college indicates that it is affordable — based on packaging a boat load of loans without regard to a family’s capacity to repay them.  Sometimes, schools will also front-end load grants or scholarships that might not be renewed or available after freshman year.   Again, the college may appear to be affordable, but maybe only for freshman year.   It’s mind-boggling but true.  It’s like walking into a car dealership and getting a “no questions asked” loan to buy a Mercedes.   The dealer will no doubt think:  Enjoy the great drive — until we repossess the car because you can’t afford the loan payments (which, by the way, we knew before you drove away).  Don’t let this happen to your family!

In my world, a college is affordable if — after exhausting 1-5 above — the student or parents need a loan to fill the gap and BEFORE taking a loan consider:

  • Student’s post-college life.   Students needs to avoid the trap of simply taking big loans to attend the school of their dream without first UNEMOTIONALLY and REALISTICALLY thinking about what their goals are after college — how much are they likely to earn per month?  Before signing for the first loan, determine how much debt is likely to be necessary over 4 years and see what the monthly payment will be — for 10 or more years after graduation.  There are a few rules of thumb on this: Don’t borrow more than your first year’s starting salary. Don’t borrow more than 15-20% of your projected monthly disposable income.  If the monthly payments do not line up with projected income, that college doesn’t sound affordable to me.
  • Parent’s life style and retirement plans if they co-sign their students or take parent loans.   If parents take on debt to pay for their child’s education, they’re best advised to understand what it will mean to carry that debt for 10 or more years after graduation, which just may happen to coincide with their planned retirement.   Will the college debt extend the number of years they  have to work or substantially reduce the amount of their available retirement savings?   Do they plan to borrow against retirement savings?   If so, that college doesn’t sound affordable to me.

This may all sound simple. Theoretically it is:  choose a college that is affordable and offers a social scene and academic rigor in line with your student’s abilities and interests. We should also consider how the student can make progress from the challenges they face in college.  Ideally they are given the opportunity to learn from failure after giving their best efforts towards something they are passionate about.  Not everything has to be perfect to make for a great learning experience.  The result will be a happy, empowered college graduate who, like fearless Felix Baumgartner, lands on his feet: with a diploma in hand, a well-paying job, and student loans, if necessary, that are manageable.   And parents who have helped their child successfully navigate this process without putting their retirement or life style in jeopardy.

Let me know if you disagree with this train of thought — and why. Together we can help families grapple with this vexing issue.

 

 

 

 

Let’s help college students land on their feet like Fearless Felix

Meet “Fearless” Felix Baumgartner (“Jump” image from Flickr) – an Australian daredevil. Fearless Felix participated in the Red Bull Stratos Project. He rode a helium balloon into the stratosphere – 24 miles up and should be an inspiration for all of us to ask why all college grads can’t be more like him and land on their feet after their diploma hits their hand.Felix_Baumgartner_2013 Wikipedia

After saying,  “I’m coming home,”   Felix casually leaned forward to begin his descent from the high altitude balloon. And what a descent it was:

  • He was in free fall for 4 minutes and 19 seconds.
  • Reached a speed of 843.6 miles per hour – that’s Mach 1.25.
  • He caused a sonic boom – by himself – the first person ever to break the sound barrier without the aid of a vehicle.
  • He also came out of a death spiral. The engineers who modeled his free fall realized that at some point he would start spinning out of control, which had to be stopped in order to deploy the parachute on his back. So they taught him how to right himself if this were to happen.

Watch the You Tube videos of this. It’s mesmerizing and was motivational for me.

After:

  • two years of planning,
  • 2 test jumps,
  • many visits to a sports psychologist to overcome his one fear – claustrophobia, and
  • 1 delayed jump due to bad weather

On October 14, 2012, Felix:

  • jumped from 127,852 feet
  • controlled his in-flight wobble that could easily have resulted in his death
  • and proceeded to land on his feet.

A perfect landing. An Olympic gymnast would have been in awe.

So I have to ask you: How is it that we can dedicate that kind of ingenuity to accomplish such an audacious goal, but we can’t seem to find a way to have our college graduates land on their feet: with a degree, a well-paying job and if they need some loans, with a debt burden that is manageable.   It boggles my mind.

We’ll discuss this in more detail in later posts, but here’s a start for families trying to achieve their dreams of a college education for their children.

Parents and students should recognize that colleges are a business with two primary goals  for admitting next year’s class:

  • Maximize net tuition revenue
  • assemble a diverse class that competes favorably against peer institutions, is well-balanced with a talented pool of matriculants, and will make the class, the administration, the faculty and the alumni proud.

Too often families take a “damn the torpedos” approach and borrow whatever they need for “the best” brand name college    Families that resist basing this important decision mostly on emotion and instead act like traditional consumers — in this case of education — have a much better chance of a college graduate who lands on their feet.  Here’s a simple formula for success for families:

  • Be realistic, college is not for everyone.  Is it the student’s dream, or at least strong desire, to attend college?  Is the student properly motivated to be successful or are they fulfilling what they perceive to be someone else’s dream: a parent, guardian or guidance counselor?  Sometimes delaying college of a year or two, or not attending, is a a better choice than starting, only to drop out.
  • Determine what type of school best fits the student’s needs. Cost aside for this moment, a  4 year private college may be the right answer for many, but not all – particularly the very most selective which admit fewer than 10% of the applicants. Community colleges give many students a terrific start.  Public colleges offer excellent learning environments that are the ticket to success for many students.  The key is finding the best academic and social fit for that particular student.
  • Select a school in that spectrum that is affordable.  There is no magic formula for affordability but a one litmus test:  will the student and/or parent be required to take debt in order for the student to attend?  If so, will the student’s potential post-graduate job prospects likely pay enough to repay the debt. Likewise, is parental debt affordable based on income?  Is the parent’s debt burden affecting their retirement savings?
  • Have these conversations early and over time — starting as early as ninth grade with general thoughts and become increasingly concrete as the student’s record of achievement in high school takes shape, test scores come in, college visits are made and the student’s desires sharpen.  The earlier you start and the franker the discussion you can have, the greater opportunity you  will have to manage expectations and provide our son or daughter with practical advice that they will hopefully listen to.

Following these steps will help high school seniors select a school that is right for them academically and financially ,and will substantial increase the odds that they will land on their feet with a degree, a well-paying job, and student loans, if necessary, that are manageable.

John’s Jots: Reduce Customer Anxiety About Paying for College

More parents worry about paying for their kids’ college (73%) than they do about saving for their own retirement (68%). (Gallup, April 20, 2015). It is good business for you to help them by clarifying their options by offering information, tools and services to give them a chance to finance their family’s college dreams.

Here’s what you can do strategically to help them:

  • Identify the sources of funds they can use to pay for college.   There aren’t many so help them zero in on those that make the most sense for their situation:
    1. Savingsstarting early is preferred but it’s never too late to start. A penny saved today could translate into fewer dollars borrowed tomorrow.
    2. Free Money: The federal government, states, foundations, colleges and others offer financial aid including grants and scholarships.
    3. Current Income: Families who have been saving for college may also continue to contribute while the student is in school to reduce amounts the student might need to borrow.
    4. Loans: Loans should be at the bottom of the list of financing options used to close small gaps in financing. It is critical to help customers understand if the amount borrowed will be affordable after graduation.
  • Focus them on important issues: Paying for college is as much about understanding the cost of the college experience as it is about assembling a financing package. Significant issues that drive the cost of college up or down include:
    • College type: 2 vs. 4 year, public vs. private, in-state or out-of-state
    • Location: travel and living expenses vary widely
    • Living on campus or off?

Provide Resources.   Offer the information, tools and services families need to understand what it takes to fulfill their college dreams.   You have a trusted advisor relationship that affords you a unique opportunity to calm their trepidation while strengthening your bond.   It is a win-win for you and your customer.

Here’s what you can do to help them tactically:

  • Spice up your web site. College planning calculators, content and helpful links are very attractive value-additions to your web site. Invite Education’s experience with a commercial lender in New York is instructive. The bank put a College Planning button on its web site and had more than 20,000 visitors inquire about the service. This is a bank with a commercial focus — illustrating that employees are people too. They may have originally sought information about the bank’s services for their business purpose.  But when they arrived at the site, their personal curiosity prevailed and they sought guidance on an issue that affects them personally. It happens all the time.
  • Sponsor college-planning seminars (live or via webinar) on topics of interest to your customers on topics such as “Savings for College” or “Selecting Affordable Colleges.” There are many local experts, including guidance counselors and others, who would be glad to be featured at your event.
  • Offer a scholarship (and an internship?). It doesn’t have to be a large amount. Perhaps even offer a summer job or internship to the recipient. Students need cash for college but they also need experience for their resumes.   Picture your scholarship winner working at your institution – earning money while gaining experience and serving as your ambassador. You will leverage your scholarship dollars by creating good will in the community many times over.
  • Create a “Student Package.” Provide a package of products that students need (savings accounts, debit card, checking accounts – maybe even a secure credit card and/or loan product) and financial education outlining the benefits and responsibilities of the financial products you offer. These products and services to students — beginning in late high school and into college – will help you establish a customer for life.

Helping your customers and their students (your future customers) reduce their anxiety over the college process is good business. Get started today.

John Hupalo is the Founder and CEO of Invite Education, a company dedicated to providing the information, tools and services families need to effectively plan and pay for college. Learn more about John on LinkedIn and Twitter. His upcoming book Plan and Finance Your Family’s College Dreams: A Parent’s Step-by-Step Guide from Pre-K to Senior Year will be published by Peterson’s in June 2016.