What to Do When Your Finances Aren’t Ready

College is expensive.  According to the College Board, the average cost of tuition and fees for the 2015–2016 school year was $32,405 at private colleges, $9,410 for state residents at public colleges, and $23,893 for out-of-state residents attending public universities. Perhaps you started putting away a little each month when your children were just infants, and you’ll be ready to write each semester’s check as it comes, with extra for books, dorm fees and a student meal account.

But what if you aren’t ready?

by Alicia Wanek

Let’s face it—there could be any number of reasons why you’re not.  Any of this sound familiar?

“I just didn’t save enough.”

“Our finances took a big hit when I was out of a job.”

“I paid for my own college; my kids can too.”

“The divorce changed our situation.”

“I just didn’t have enough time.”

“We have more kids than we have money for college expenses.”

The good news? Bryan Camper, certified financial planner with Camper Rogers, says, “It’s never too late.”  The first rule though is to make sure you don’t sacrifice your own financial security.  “Don’t put college before retirement.”  After all, there are outside funds available for education and time to pay loans back. But retirement is coming sooner, and you are the only one contributing. If, however, you know your retirement account is in order, you can consider decreasing the amount you’re contributing for a short period of time to put those additional funds toward college tuition. On the flip side, because retirement accounts are not considered as part of your assets by financial aid sources, you may consider increasing your retirement investment quickly to shield those assets in order to increase the amount your child may get in financial assistance.

For the student needing additional funds, applying for financial aid is the first step, Bryan says. The Free Application for Federal Student Aid (FAFSA) is available online. Any student who meets basic citizenship and enrollment criteria can fill out this application annually.  The most common funds available are via Pell Grants, which do not have to be repaid, and Stafford Loans, which offer funds at very low interest rates (currently 4.29%) that the government covers as long as the student is enrolled half time. Once students graduate and get that great job, they can start to pay their loans back.

When students fill out the FAFSA, they will need to be able to enter the “expected family contribution.” This amount considers everything from parents’ income, number of children in college and even students’ assets. “If a student has assets in his own name, he will be expected to contribute 20% of that toward his college expenses,” according to Bryan.

Once students find out what federal monies they are eligible for, they need to look at how to fund the rest of their expenses.  Bryan suggests several things to consider:

Parents don’t need to foot the whole bill

Studies show that students who have been responsible for at least some portion of their own education have higher GPAs on average and higher rates of graduation.  It’s okay to expect your child to work at least part-time to contribute toward his own educational expenses.

Community college is a great place to start

The core classes most students will take in their first two years would be about the same whether at a community college or a large university.  Community colleges offer significantly lower tuition rates and smaller class sizes and give parents more oversight in helping with their child’s transition to complete independence. See our article on Richland Collegiate High School.

Don’t spend more for an Ivy League education if what your child wants to be doesn’t require it

Since the financial crisis, we’ve heard of more and more college graduates who have significant debt and yet can’t find a job.  If your child wants to go into education or public service, for example, he doesn’t need to take on the costs of an expensive private university.  If, however, he wants to go to law school, it makes sense to take on the level of debt at a more prestigious university.

Apply for everything 

The application process can take a while, but each year a huge amount of scholarship money goes to waste.  These days there are all kinds of services and even apps to help students find scholarships for which they qualify.  It can’t hurt to try.

Consider re-taking the ACT or SAT

If your child has a good GPA but didn’t do quite as well on the standardized tests as he thinks he could have, he may be able to boost his chances to qualify for merit-based aid, especially through the university, if he can boost his scores. See our article on Victory Step Test Prep.

Look at your Roth IRAs 

Your contributions can be withdrawn at any time without tax to apply toward your portion of the tuition bill.

“Ideally, yes, you would have started at birth by setting up a 529 plan for your child and saving monthly, a little more each year, and you’d have a substantial sum by the time your child turns eighteen,” Bryan reiterates.  Ultimately, however, don’t let your children think college isn’t in their future because there’s not enough money.  You can definitely work together to make sure their future is all they imagined it to be.