02-27-2017 07:40 AM
Content provided courtesy of USAA.
By Chad Storlie
The Consumer Financial Protection Bureau (CSFB) just released a sobering new statistic surrounding college debt. Most of us believe we know what it is already. Let me take a guess, "The Millennial generation is once again selecting colleges and universities that are too expensive and financing their education choices with student debt." Am I right? I am NOT right. The CSFB reports that it is parent and grandparents that are the fastest growing segment of those taking on new and higher amounts of college debt. A high level of student debt in the high-income earning years and on a fixed income during retirement are not secrets to a happy retirement.
Parents and Grandparents are starting to be seen as another go to group like banks, college financial aid offices, and scholarships to finance student higher education studies. What is so disturbing about this trend is that where a traditional college student has 30-40 years to payback a loan before retirement, a parent or a grandparent may only have 5 to 10 years to pay off a student loan in addition to existing financial commitments (mortgage, car, etc.) and higher health care expenses. There is no financial calculator available that makes it a good decision for Parents and Grandparents to take on student loan debt when they are close or in retirement.
Here are a selection of ways how Parents and Grandparents can help enable their child or a grandchild to have a successful college experience.
- Help In College Planning for Parents & Grandparents - Is College Good For You Right Now? A basic step that often goes unappreciated and underappreciated is making sure that the child, grandchild, or you (if you are considering going to or back to college) is ready to complete college. This has to be an open and considerate discussion because young people often feel a pressure to go to college even if they do not feel a strong desire or an interest in going to college right now. The best financial fact is that college students with college debt, but no college degree are actually worse off financially than high school graduates are. College is a great step in almost any career, but only if you complete college and if you complete college with a low level of debt. Talking through the prospective student’s career goals, history of completing academic commitments, and their ideas of what a successful work environment looks like for them. If they cannot clearly articulate the answers to these ideas then the discussion may need to turn to joining the military, starting work in a trade or craft that does not require education, or some other path such as government service to find a career of interest.
- Help In College Planning for Parents & Grandparents - Discuss Why You Are Going To A Specific College. If a student is interested in going to college, they usually have an idea in mind that it MUST be a specific college that IS THE ONLY ONE that will work for their career or college choice. Many times, this college is one they have either grown up around, have a large number of friends that are planning to attend, or have heard about frequently in the news. The point of this discussion is to discover why they want to go to a specific school and to get them to begin to open their mind to the possibility of other school locations. This is critical because higher education institutions have wide ranges of outcomes and college admissions is so competitive that a student must have multiple options in order to gain admissions to one of their top schools.
- Help In College Planning for Parents & Grandparents - Help Select a School With Strong Career Outcomes. Most students can state what they want to achieve from a college outcome. Most will want little student debt, a strong likelihood of graduation, reasonable tuition, and a high post-graduation income. This is a great way to start the discussion of which colleges with the end in mind. When you start a college discussion with I want to graduate with less than $10K in debt from a school with an 80% graduation rate located in Ohio or Kentucky, this is a list that becomes very manageable to observe the results. Once you start looking at colleges and universities from the perspective of the outcomes produced rather than your belief in the brand value of the school, then you start to quickly see which schools produce good results for students. Helping students see a college from the career value the college produces is a great step towards making an informed college choice.
- Help In College Planning for Parents & Grandparents - Offer Limited, Direct Financial Support In Form of a Gift. Parents and grandparents want to help a student succeed in college. That is great and they should want to help. The best way to help is to offer limited financial support in the form of a gift. Agreeing to buy books for a semester, buy a student their meal card for a semester, or help with a flight home for Christmas are all meaningful, have a financial impact, and financially limited ways to help. The vast majority of these can be accomplished without taking on college debt, which is the key. These ideas provide definite assistance to a college student and do not put you in a long-term financial commitment that will negatively impact retirement.
- Help In College Planning for Parents & Grandparents - Apply This Advice to Yourself If Considering How To Advance Your Career. Frequently, we can get overexcited ourselves when going back to school for an undergraduate degree or a graduate degree. Looking at the cost of an education, how much your salary will increase with the degree, looking at education financing options, and looking at the total length of time to complete a degree can be personally sobering calculations when determining if returning to school is the right choice. It is not unheard of to have a degree take a decade or longer to pay back. When you consider going back to school to help your own career, a certification or a training class in a new computer skill might payback faster than a new degree.
Helping a child or a grandchild determine what their best path in higher education will be is a rewarding task. That reward comes from helping determine if they can complete college. Finding a college with a great career outcome at a reasonable cost, and offering limited financial support that will not endanger your retirement. Finally, apply this advice to yourself when considering a degree before returning to school. Higher education must be completed successfully in a timely manner with limited debt in order to help a career succeed.