College is expensive, with the average cost of tuition coming in at $28,123 per year, per student at four-year institutions (public and private) for the 2018-19 school year in the U.S. So it shouldn't come as a surprise that Americans collectively owe $1.57 trillion in student loan debt as of the second quarter of 2021. Many borrowers struggle to pay back what they've borrowed for school, with close to 5.7% of aggregate student loan debt either in default or 90-days delinquent.
As a parent or guardian, talking about college costs with your teen is crucial to help reduce the likelihood your children will get in over their heads when it comes to student-loan debt. Here are some tips for talking to teens about college costs.
- Discuss different options for paying for college, such as scholarships, grants, federal loans, and private loans.
- Help students understand total school costs, including tuition, room and board, and fees.
- Help students assess borrowing costs, including how interest and the amount borrowed affect their repayment cost.
Different Ways to Pay for College
Parents and guardians should help teens understand the options they have for securing funds for school. These options include:
- Scholarships and grants: These should be investigated first, as they do not have to be repaid. Scholarships are often based on merit, while grants are often awarded based on financial need. There are many resources to search for scholarships and grants, including college financial aid offices and many online tools.
- Federal student loans: Students who must borrow should exhaust federal student loans first, before taking on other kinds of debt. These are issued by the Department of Education and come with important borrower benefits, including subsidized interest on some loans; affordable fixed interest rates; flexible repayment plans including income-driven options; and loan forgiveness for public service workers.
- Family contributions: Adults can share with their children the amount, if any, they are able to contribute toward college. Parents or guardians can sometimes be entitled to tax breaks if they help with school costs.
- Private student loans: If other options have been exhausted, students can borrow from private lenders. These loans are not subsidized or issued by the government and may have fixed or variable interest rates.
By discussing these different options for paying for kids' college, adults can guide their teens to choosing the funding sources that are most affordable.
Qualifying for Financial Aid
Students who want to qualify for financial aid need to complete the Free Application for Federal Student Aid (FAFSA). This online form asks for information about student and parent/guardian finances. This information is sent to colleges that students choose, and individual colleges use FAFSA details to put together financial aid packages.
Each financial aid offer explains the student's expected cost, as well as the amount of financial aid the college offers. Students can compare different offers from different schools. Parents and guardians can help students complete the FAFSA, as well as evaluate offers from different schools to see which makes the most financial sense.
Individual colleges set their own deadlines for completing the FAFSA—and many schools set the deadline long before the start of the academic year. Students should complete the FAFSA as soon as it is practical. Students applying to multiple schools should make sure it is submitted before the earliest deadline set by any of the institutions.
Costs Once on Campus
Young people who have never lived on their own may not be familiar with all the costs they could incur beyond tuition. When talking to teens about college costs, it's helpful for adults to review tuition along with additional costs students may face once they go to school.
Tuition is usually due before or near the start of the quarter or the start of the semester. This means students may face several separate tuition bills throughout the year. For example, students attending school for two semesters may need to pay fall and spring tuition separately.
Tuition costs vary depending on the type of school students attend. For example, in the 2019 to 2020 school year, here were average tuition costs for different kinds of schools:
- Public four-year university: $9,400
- Private nonprofit four-year university: $36,700
Parents and guardians can help students decide whether paying more for an out-of-state school or private school is worth the added expense.
Room and Board
Room and board refers to basic living expenses such as rent or dorm fees as well as food. The costs can vary depending on whether a student lives on or off campus. Here are the average costs for on-campus housing:
- Four-year public schools: $10,800
- Private four-year schools: $12,200
The decision to live on campus or off campus has financial implications, as well as implications for each student's lifestyle.
Books and Other Supplies
Students may be surprised at how the costs of books and school supplies add up, so adults can help them prepare for these expenses, too. Here's what these annual costs might look like depending on the school a teen chooses:
- Four-year public institutions: $1,300
- Private four-year institutions: $1,200
Fees, Travel, and Miscellaneous Expenses
Students may have other extras they have to pay for as well, the costs of which can vary depending on the lifestyle choices they make, such as how often they travel to and from campus as well as whether they take the bus to and from school or own a car. Some other expenses that students may need to budget for include:
- Commuting to campus
- Phone service
- Travel to and from home or to events such as spring break
- Snacks and dining out
- Social activities
- Greek life (sororities and fraternities)
Students may want to consider getting an on-campus job to help cover the costs of some of these extra expenses, especially if they plan to join expensive clubs or engage in costly hobbies while attending school.
The U.S. government’s Federal Student Aid office provides a wealth of information for students and caregivers both, including a collection of checklists for students of every educational level.
Costs of Student Loans
Students who borrow for school need to understand their repayment obligations once they've left campus. There are several factors adults can help them understand.
Interest is the cost to borrow. The higher the interest rate, the more expensive the loan.
Most federal student loans have a fixed interest rate, which is determined based on loan type. Credit score and income don't affect the rate. Private loans may offer a fixed or variable rate. Variable rate loan rates can change, which means loan costs may increase.
Private loans can be expensive. Students should always choose more affordable federal loans first to reduce borrowing costs, and should shop around and compare the interest rate from different student loan lenders if they must take out private loans.
It's important to borrow the minimum amount needed to cover the costs of education. The more you borrow, the more you must pay back, and the higher your monthly payments will be after graduation. The Consumer Financial Protection Bureau advises students to limit their borrowing to what they expect their first year’s annual salary to be.
Loans with a longer payoff time have smaller monthly payments, but total costs over time are higher. Borrowers with federal student loans can change their repayment as needed, choosing a standard repayment plan or one that stretches out repayments over a longer period. Those who secure private student loans must stick with the loan term they started with unless they refinance.
The Department of Education has a loan simulator tool adults and teens can use to understand how their loan amount and chosen repayment plan will affect repayment costs.
Credit score affects the interest rate students will be offered if they seek private student loans. Students with a lower credit score or no credit history may not be offered loans or may be offered loans at a high rate, which would make them more expensive. Parents or guardians can co-sign private loans to help students qualify for a better rate.
Frequently Asked Questions (FAQs)
When should I talk to my teenager about college?
It's best for students to start planning for college as early as seventh or eighth grade, so parents and guardians should consider talking to their kids in late middle school about how to prepare to earn (and pay for) a college degree.
What is the average cost to put a kid through college?
The average cost to put a child through college depends on the type of school, where the child lives, and the value of grants and other support received. The average net cost of college for a student living on campus and paying in-state tuition at a four-year public school is $77,960 over four years. The average cost of a four-year private education, after grants and other support, is $132,880.