Navigating College Costs Post-Scholarship: A Guide to Financial Preparedness

Many families wonder when they will know the actual amount they must pay for college after receiving their scholarship. The truth is that clarity often comes late in the senior year of high school, around the first of April, when financial aid awards letters start arriving. By May 1, most students are required to make a decision, which leaves little time for proper planning.

The Importance of Planning from the Start

Many families panic and turn to loans at the last moment, often due to insufficient preparation. In my experience, the process of choosing schools should begin with affordability. Consider reading the book “Right College, Right Price,” which provides invaluable guidance on making the best financial decisions.

You can use https://fafsa.ed.gov/ to get a preliminary idea of the financial aid available. It's crucial to develop a financial plan that covers the entire duration of the degree, not just the first year. This plan should include a "safe acceptance" school and a "safe financial" plan. The latter is essential for contingencies in financial aid, such as a 2 2 plan, where students spend two years at a community college before transferring to a four-year institution.

Financial Planning and Poor Planning in College Education

Developing a comprehensive financial plan can be meticulous work, but it's worth every effort. Many parents and students don't adequately plan, which contributes to the staggering $1.3 trillion in student loan debt and the high number of loans in default or delinquency. In the business world, poor planning is often referred to as PPP—Poor Planning Pays Poorly. Economic data show that in today's job market, a marketable major is crucial, as half of all current college graduates end up underemployed or unemployed. Additionally, with over 40% of high school graduates enrolling in four-year colleges, bachelor's degrees are considered a dime a dozen.

An Observational Anecdote

A few years ago, my daughter had two sons who were about to graduate from high school. She had been working on their college plans for 18 months. During the financial aid planning session just before their May graduation, we heard from a financial aid planning officer from a nearby college. Her presentation focused on the various loans available, which, in my opinion, was not true financial planning.

Afterwards, my daughter, who is a social butterfly, chatted with a dozen of her friends about the session. We learned that these parents had not given much thought to financial planning until the financial aid awards letters were about to be released. Their shotgun approach to college planning is a stark reminder of the critical nature of financial preparedness.

Choosing the right post-secondary education is often the second biggest financial decision parents will make, after purchasing a home. It's no wonder there is a student loan crisis in our country, as the lack of proper planning in educational choices can lead to a dire financial situation for both the students and their families.

Conclusion

Proper planning and preparation are key to navigating the complex landscape of college costs. By starting early, using resources like FAFSA, and developing comprehensive financial plans, families can avoid the stress and debt associated with poor planning. Investing time and effort into financial planning can lead to a more secure future for both students and their families.