With college decision time fast approaching, your son or daughter may be more focused on how cool the dorms are at their college of choice rather than how the price of tuition, books, and room and board could affect their future finances.
True, cost isn’t the only factor to consider in choosing a college. However, it’s an important one because of the longer-term impact it could have on life after graduation. Is your student willing to take on extra debt to go to the pricier college across the country — or does going to a school that’s closer to home with a better financial aid package make sense?
Here are three financial questions to ask before deciding on a college so your family can be confident about the choice you’re making.
- WILL GOING TO AN EXPENSIVE SCHOOL REALLY MEAN A HIGHER SALARY?
For many students and parents, going to a prestigious school is important — but usually that fancy name comes with a fancy price tag. Will paying for the pedigree really translate to a higher salary?
The answer isn’t straightforward. Teachers, for example, make about the same salary no matter where their degree came from. However, people who work on Wall Street may be more likely to leverage an Ivy League degree (and the college’s alumni network) to land a better job and starting salary.
Some studies argue that the payoff from public universities is greater than private or Ivy League schools, while others argue that undergrad prestige matters. That’s why it’s important to do your research. Salary site PayScale does an annual college salary report, and the Department of Education’s College Scorecard site includes the median salary 10 years after graduation of students who received financial aid.
- HOW MUCH WILL STUDENT LOANS COST AFTER GRADUATION?
Student loans will be a reality for many college students. And that’s ok — they’re getting a valuable education that will help increase their earnings over a lifetime. But it’s still important to crunch some numbers going in so that your student knows what he or she will be dealing with once that degree is in hand.
Use a calculator like this one to estimate a loan’s monthly payment after graduation by plugging in an estimated loan balance and interest rate. For example, a $50,000 loan at 6 percent interest over a 10-year term will cost $555.10 per month after graduation.
The College Board also has a student loan comparison calculator that lets you compare the costs of both private and public loans that you may be thinking of taking out.
How do the numbers add up? Does the total amount borrowed and do the monthly payments seem manageable, or will they feel like a burden? If your student will be pinching pennies — or relying on you for support — to make the loan payments, then that pricier school may not be worth the cost.
- WHAT WILL YOUR LIVING COSTS ADD UP TO?
Tuition, books, and room and board are the predictable costs you can add up. What’s not as easy to predict: late night pizza runs, participating in campus life and how much plane tickets home will run.
Although financial aid packages will help account for some of these living costs, your child’s circumstances could mean their number is higher. For instance, if your child’s college of choice is across the country, travel may eat up more of their budget than they realize. If they go to school in a big city versus a small town, their day-to-day costs will be higher.
How will your student help cover these? With a campus job? Summer savings? It’s important to figure out what type of budget your student can realistically adhere to depending on what their sources of income will be.
HELPING YOUR CHILD MAKE THE RIGHT CHOICE
If you and your student are concerned about the financial impact of the schools you’re interested in, then a compromise may be in order. That might include choosing a school that’s closer to home or going to a local community college first before transferring to the bigger university to finish their degree. Or, if your student really has their heart set on someplace specific, then it’s important to talk through early what all your child’s income and financial aid options are along with a budget to keep their costs manageable.
Ultimately, finding the right college is about more than just money. But knowing you’re asking the right financial questions first can help you and your child feel more confident that you’re setting them up for future success.