Your College Finance Plan (CFP) needs strategies for you and you student to implement before, during, and after college. Let’s look at the “During College” phase.
Research at a major university indicates that, looking back, almost 4 out of every 10 seniors conclude part or all of their student loans weren’t essential for their educations. Therefore, some of these strategies focus on personal money management so students can spend and borrow less of the interest-bearing educational debt that, over time, increases college costs. These include:
- Spending Plan: You know mapping out income and expenses is critical to staying financially fit. But mentor your student on doing a “spending plan,” not a “budget.” To many, budget is like diet — a dirty word.
- Smart Spending: You should coach your student to control his spending — e.g. by leaving his car at home, forgoing expensive purchases, and limiting spring break expenses. You can also help by providing him with products that’ll reduce the cost of his daily purchases.
- Repay Student Loans While Enrolled: Going into debt for a college degree is worthwhile, but your student should never borrow more than necessary. It may be possible to limit his indebtedness by repaying some of his federal loan dollars within 120 days of disbursement, or by prepaying his accumulating interest while still enrolled.
- Educational Tax Benefits: These can help you and your student reduce federal income taxes. The savings can be plowed back into funding his education and lessening his need to borrow.
Also, the faster your student gets her degree, the less cost and debt she’ll incur. Still, the latest national data show that only 39.8% of undergraduates earn their bachelor’s degrees within 4 years. Here are some strategies that’ll help your student graduate on-time, if not before:
- Keep Applying for Grants and Scholarships: Complete the FAFSA every year and never stop pursuing scholarships. More grants and scholarships can help your student borrow less and speed her time-to-degree by funding a heavier course load.
- Use Summer Effectively: Your student can earn money for the upcoming academic year, complete lower-cost but transferable courses at a community college, or both.
- Work Part-Time While Enrolled: By working, even during her first year, your student can earn a higher GPA and reduce her chances of dropping out, provided she does not work too much. And her earnings can help limit her borrowing.
Look here for why you need a CFP. You can find summaries of strategies for your plan’s “Before College” phase here. And next Wednesday there’ll be samples of “After College” strategies for your CFP here.
Beginning October 16, check this website every Wednesday for a more detailed account of a strategy you may want to use in your CFP’s before, during, or after college phase.