How to Help Your Teen Prepare Their Finances for College

Preparing for college can start as early as your freshman year of high school. From studying for the SATs and earning good grades in your classes, to playing sports or getting involved in other extracurriculars, high school is a busy time of life for the future college student. However, don’t neglect financial preparations as well. Whether your teen will hold a part-time job in college or be completely supported by you, they still need to learn to manage money, stick to a budget, and more. In this article, we share 5 tips for helping your teen get a financial education before college.

Understand the value of a college degree

First of all, your child should know that college is not just a cool experience or a continuation of high school. It’s a financial investment that you and/or your child (through student loans) make in their future earning power and financial life. As Beth Kobliner writes in Make Your Kid a Money Genius:

“Never before has a college degree been more valuable … On average, college graduates earn around $1 million more over their lifetimes than those who attain only a high school diploma. After you factor in college costs, lost earnings while in school, and inflation, a degree is still worth, on average, about $300,000.”

So, while college can also be a time of personal growth, intellectual exploration, and socializing, your teen should know that it’s about money, too. Understanding the financial value of a college education can help students make better decisions around studying, pursuing internships, and more.

Become a savvy education consumer

If a college degree has never been more valuable, it’s also never been more expensive to get one. Test your knowledge of the following myths about paying for college so you can become savvier about the rules of the game:

• Our family’s income is too high to qualify for financial aid. Don’t skip the Free Application for Federal Student Aid (FAFSA) because you think you make too much money. There is no income limit and, while some aid is need-based, many students receive grant aid even with families earning between $150,000-$250,000 annually. Also, “need-blind admissions” is becoming more popular among private institutions especially. For example, the University of Pennsylvania operates on need-blind admissions and all-grant financial aid for undergraduates. So, it’s always worth seeing how much and what kind of financial aid you can get.
  
• Public schools are always the less expensive option. The posted tuition costs on a private college or university’s website may be higher but, as with the UPenn example above, that doesn’t mean a state school or public university is always the cheaper option. You have to compare financial aid packages before you can make a decision, so don’t skip applications to private schools on your wishlist. 

• Graduating with student loan debt is inevitable. Just because “the average student borrows over $30,000 to pursue a bachelor’s degree” doesn’t mean that your teen has to. They can start saving money from part-time jobs in high school and we’ll talk more about grants and scholarships in the next section.
  
• Community college is the choice of last resort. More and more, two-year colleges are not just for older adult students or high schoolers without the grades to get into a four-year school. With adjunct faculty that teach at a variety of institutions, including community college, your teen can get the same quality education (not to mention save a lot of dough) if they start out at a two-year college. Best of all, with a dual-enrollment program they can transfer to a four-year university after earning their associate’s degree and no one that sees the school name on their bachelor’s degree will ever be the wiser.

Quad Cities Colleges and Universities

When it’s time to visit prospective schools, include a few local options on your list:

• Illinois State University – Illinois’ first public university
• Western Illinois University Quad Cities
• Beloit College – Liberal Arts College in Wisconsin
• Black Hawk College – Quad-Cities Campus and East Campus
• Eastern Iowa Community Colleges
• Augustana College – A leading liberal arts and sciences college in Illinois
• St. Ambrose University – Davenport, Iowa Quad Cities

Beyond FAFSA: Applying for grants and scholarships

Once you’ve narrowed your college search to a short list, it’s time to think about paying for your dream school. While most of the scholarship and grant money you receive will likely come from the school itself, the Internet makes it easy to search for additional money you can use to reduce your student loan burden. Don’t pay for scholarship searches but do spend some time on these websites:

• StudentScholarshipSearch.com
• Fastweb
• CollegeBoard’s BigFuture Scholarship Search
• careeronestop Scholarship Finder
• Scholarships for Military Families
• Illinois Scholarships
• Iowa Scholarships
• Wisconsin Scholarships

Be an informed student loan borrower

If your college student does need to take out loans for some of their educational costs, it’s not the end of the world. Learning about your student loan options and how repayment works will make you an informed borrower, less likely to wake up with a debt hangover after graduation. Here are the key points to understand:

• Private vs. Federal Student Loans: Filling out the FAFSA determines your child’s eligibility for federal student loans, including subsidized and unsubsidized options. While federal student loans come with certain benefits, private student loans can also be a good option in addition to or instead of federal loans. 
• Set a limit: A good rule of thumb is to not borrow more than you expect to earn in your post-college starting salary. While you can’t know for sure, you can research average salaries in your intended field to find a benchmark.
• Try to make interest-only payments: With the exception of federal subsidized loans, your student loans will accrue interest while you’re in school. You don’t have to make any payments, but any unpaid interest will be added to your balance, meaning you’ll owe more after graduation than you originally borrowed.
• Understand repayment: Know what kind of loan repayment term you’ll get after you graduate, as well as your options for consolidating and refinancing your loans. 

Create a budget for college

Ideally, your child should already have a budget and understand the importance of budgeting as a good financial habit. If not, it’s absolutely essential that they learn this skill before they go away to school because it will become necessary for them to take control of their finances in the near future. Set them up with a free spreadsheet for budgeting or budgeting app and teach them how to use it responsibly. Show them how a budget allows you to track spending habits, and how this information can lead to better financial decision-making.

With these fundamentals in place, you’ll need to decide how much of your child’s college living expenses you will cover and how much they need to earn through working in the summer and/or holding a part-time job while in school. This is also a good time to stress the importance of saving money in an emergency fund. 

We are here for you before, during and after college!

SENB Bank has proudly served the Quad Cities and neighboring communities since 1961. To open a new checking or savings account, or to learn more about our student loans, contact us or visit one of our six banking centers serving Illinois, Iowa and Wisconsin.