With graduation season underway, many families with high schoolers are thinking about where their children will attend college. Locally or across the country? At a state university or a private college? Small school or enormous institution. But as important as these questions are, they don't directly address the financial aspects of higher education.
As a parent of young children, I shudder to think of what college will cost in 12 years when our oldest will be a freshman. Fortunately, I have some time to prepare. Unfortunately, as a new study shows, many parents are in the dark about financing a college education.
Parents Aren't Savvy About Student Loans
According to the Credit Union National Association, the majority of parents are fairly clueless about student loans. What stands out about the study -- an online poll of 717 parents of children aged 17 and 18 who are seriously considering college -- is that it spans all geographic regions and income levels. Highlights:
59 percent of parents aren't able to guess the average interest rates of the student loans their kids will take out; 53 percent don't know how long it will take to pay off these loans; and 25 percent don't know what the expected debt of their children will be when they graduate.
68 percent believe their children will need to take on federal student loans; 40 percent believe private loans will be needed; and 48 percent don't know how many loans their children will need.
86 percent believe their children will be able to land a fairly high-paying job once they graduate.
Speaking as a parent, I know the idea of preparing your children for college can be overwhelming. However, being in the dark about financing college costs will do nothing to serve the next generation. Unfortunately there are no courses on student loans at most colleges. These tips may set your mind at ease.
Simple Steps to Prepare Your Child for College
Work while in college. I know this may not be ideal, but this can be a great way to defray some college costs.
Start at a community college. –This is the route I took for my bachelor's degree, and it allowed me to get the first two years under my belt at a fraction of the cost. If this isn't an option, staying local so your children can live at home is another great option. Better yet, if your children are uncertain of what they wants to major in, then consider taking a year or semester off to work, save money and think about careers.
Think outside the box. There are many unusual ways to lower costs. For instance, some states offer free tuition to state schools for students who get a certain score on standardized tests and have a certain GPA. The point is to chase down opportunities.
Our Responsibility as Parents
I believe preparing children for college is our responsibility as parents -- just like teaching children about money. This requires us to think like consumers and find what is going to bring the best value to our children. Meaning, while that prestigious private university or degree in something they can't make a career in might be enticing, ultimately it may not be in their best interest. That is not to say that they can't pursue something they love, but there needs to be a balance.
%VIRTUAL-article-sponsoredlinks%You and your children need to investigate the true financial picture of the college degree. Far too many parents overlook the saving for retirement vs. saving for college issue and end up paying for college at the expense of their retirement.
Don't rely on the schools to educate your children about student loans. Educate yourself so you can help your child make a decision that's going to serve him or her the best. Help your children walk through these decisions so they can make an informed decision.
Paying for college, in most cases, is going to be overwhelmingly expensive. While there may be no way around that in some cases, there most certainly is the rest of the time. You can help your children avoid potentially costly mistakes. Ignorance is not the answer. Pursue informed decisions instead.
John Schmoll is the founder of Frugal Rules, a finance blog that regularly discusses investing, budgeting, and frugal living. He is a father, husband and veteran of the financial services industry who's passionate about helping people find freedom through frugality. He also writes about wise ways to manage your money at WiseDollar.org.