Monday, August 18, 2008

Money Monday - another financial aid post

We are three weeks out from the beginning of our fall semester. We are two weeks past the due date for the bills for the fall semester. There are 45% of our students on hold right now because they have not yet satisfied their fall bills. Our phones and the phones of the student accounts office have been literally, not figuratively, ringing off the hook.

So here is the thing. I said this in the first post, and it bears repeating: No one is responsible for paying for your or your child's college education except you. Unusual and unexpected circumstances aside, and by unusual I mean Godzilla sat on your house and ate your savings account, NOT that you are not earning as much on your investments these days and thus cannot possibly be expected to contribute even $1000 to your educational costs, you should have been planning for this day. Between child support to my step kids and day care for my current kid, we have NOTHING left at the end of the month, and yet I am managing to save something in a 529 account for my sons future college education. If he for some inexplicable reason does not go to college, like suddenly there is no reason to get an education because Utopia arrived and no one is ever sick or has to work, I can use it to fund my move to Costa Rica to run a coffee plantation. But I am saving. That is the point.

Let's review. You applied for aid, you got an award letter, then you got a bill. The next thing you do NOT do is call the aid office to inform them of how ludicrious the offer of aid is, that you can't pay this outrageous sum of money because you need to renew the lease on your Lexus. No, the next thing you do is decide how much you can afford to carve out of your monthly income to contribute to those costs. This may entail, and this is a very very VERY controversial statement, I am aware, sacrificing something. Some regular expense in your life you don't really NEED. Like dinner out three nights a week. Or coffee at Starbucks before 2pm. You can go there after 2pm now because to compete with places like Dunkin Donuts they have decided to reduce the price of a regular cup of coffee to something less than the GDP of Zanzibar. You might not be able to get a new car, but will have to drive that current one for 5 years more instead of replacing it after 3. I know not everyone lives extravegant lives, but everyone can make some sort of sacrifice. If you can't then you have other choices. Like borrowing.

Parent loans for undergraduate students, PLUS, are the cheapest and most easily obtained loans out there, for educational purposes. Usually you can borrow up to the cost of attendance less any other aid your student is receiving. You can defer payments on principle while the student is in school. You can deduct the interest you pay on it on your taxes. The interest can never be more than 9%. What could be better in terms of having to borrow?

There are private student loans, where the student is borrower, but they will need a credit worthy cosigner. These loans have variable interest rates, and depending on the credit of the cosigner, can be pretty high. You can defer these while in school as well, but I advise paying the interest so you are not accruing interest the whole time you are in school. The interest rate is based on either Prime Rate or LIBOR, and in both cases fluctuates constantly.

These are just a few of your options. If you have a legitimate hard luck case, of course the aid office wants to hear from you. We are here to facilitate this process as much as we can. But sometimes the situation really boils down to the student cannot afford to attend this school. We are a private college, we cost just under $35000 a year for those who live on campus. Sometimes it is just not the right thing to do, for a student to get that much in debt, no matter how much they want to go here. That is the hard conversation. But I am not the one who should be saying those things to the student. The parents, and 98% of our students have at least one parent involved in this process, should be the ones sharing the details of the situation and helping the student understand the ramification of certain choices. It is not the worst thing in the world to go to a 2 year or 4 year state college either for a year or two, or for your whole education. We want you here, but that isn't necessarily the right choice to make. And I can't solve the problem for everyone.

So mom and dad, be realistic and responsible. Students, understand that no matter how long it has been your dream to to XYZ school, the reality of the situation is that 10 years after you graduate, if you did well, applied yourself both in and out of the classroom, and squeezed every drop of opportunity out of your education as you could, it won't matter what emblem is on your sweatshirt or bumper sticker. What will matter a lot longer is if you are in debt for the next 20 - 30 years because of your educational choices.

Go forth and choose wisely.


Audubon Ron said...

Great post. This was funny and you are right. My wife and I paid off ALL here student loans. It was like, $30 grand or some such crazy amount. For some reason I didn't mind that as much as the $8,000 in credit card debt I got as a consquence of merging assets and debt. We got NO debt now, not one penny, not even a mortgage. I got a pension and monster 401K. I know, you want to marry cuz I also have silver haired temples. Yes, I look like a sugar daddy and no, you can't marry me. I'm already married.

mkosboth said...

As am I, but a girl can have her fantasies!

patty said...

Holla, sister. My state education, both undergrad AND grad, served me well indeed. There's no shame in going to a state school.

And hey, Ron, how'd you kill that mortgage?

Susie said...

Really interesting and important and well written, if not a little depressing for those of us with kidlets. Thanks for sharing it.