8 Ways Parents Can Help Teens Avoid Student Loans

by Katherine O'Brien, MA CCPS
Founder, Celtic College Consultants

Teenagers typically see the world as nothing but possibility.  While this is true, those possibilities always have costs and trade-offs which are often overlooked by teens.  Being strategic about which colleges your student applies to can help him or her avoid taking out student loans.

1.     Start estimating your EFC and net prices during freshman year.  I regularly meet parents who are shocked and dismayed at their EFC (Expected Family Contribution) when the FAFSA is filed during their child’s senior year.  Never before had they any idea how much college was going to cost.  Yikes!  Spend some time net price calculators, then show your teen how to do the same.  This has the side benefit of incentivizing him or her when s/he can see the net cost shift based on improved GPA and/or test scores.

2.     Discuss money and the financial side of college early.  When you put off having that conversation, you are missing the opportunity you have to set expectations.  Your child needs to know that the choice of which college to attend will have the single biggest impact on his or her future financial state.  Explain to them that they need to make wise choices financially, and that brand name colleges, like everything else, aren’t necessarily the best choices.  Also take the time to help them understand that what is best for their best friend(s) may not be best for them.

3.     Do NOT procrastinate about filing the FAFSA (Free Application for Federal Student Aid)!  It opens October 1 and needs to be filed during your child’s senior year for his or her freshman year (and re-filed every year after that for each subsequent year of college).  Filing this form will make your child eligible for federal loans and grants, as well as (as determined by each state and college) a great deal of additional need (and sometimes merit) aid.  Much financial aid is awarded in a more or less first come, first served basis.  Put yourself at the front of the line!

4.     As a woman of faith, I can solemnly assure you that “Hope and Pray” is NOT a good college application strategy.  While it’s exciting to try to get accepted at highly selective or reach schools, this dream can become a financial nightmare, for both your child and yourself.  The temptation to stretch yourself too thin in order to make the “dream school” a reality (despite it being unaffordable for you!) is great.  It’s better to insist that the college list (list of schools s/he will apply to) ONLY include schools that you expect to be affordable, based on actual research and realistic expectations.

5.     Out of state costs for public universities can be as much as DOUBLE what they are for in state students.  This works well for the universities, especially in states like California and Illinois where budget cuts have been significant.  However, paying double for something similar to your in-state universities is ridiculous.  (Honors colleges are a completely different case.)

6.     Many assume that all scholarships are great and will make a significant difference when paying for college.  Many private scholarships are for $1,000 or less and last only one year.  They also are counted as resources and reduce need based financial aid eligibility dollar for dollar.  Selecting colleges with generous scholarship programs your student would be eligible for will make a much greater difference to the financial bottom line.

7.     Choosing colleges because they are highly ranked doesn’t guarantee that your student will have a good experience or the educational opportunities you hope for.  The criteria to be highly ranked often differs from a given family’s idea of what make a good college.

8.     Parents are the best educators for teens in matters of money.  Your regular interaction enables you to mentor how to comparison shop, save up for a special purchase, develop and use a budget, and borrow money.  Educating them about the realities of debt can significantly help teens avoid a nightmare of debt and set financial boundaries during the college search process.  If you ask a bank, which derives most of its income from lending money, to teach your child about how to manage their money, you can reasonably expect them to be taught how to be good consumer and borrower.

For more information on Katherine O'Brien's college consulting services and the program she uses to save students hundreds of thousands of dollars on college, see www.CelticCollegeConsultants.com