Financial Planning Helps Manage Student Debt
Mar 22, 2012, 10:07 a.m.
In an increasingly competitive global market, education is becoming more important. But many families find the cost of education to be outside their grasp. According to a study commissioned by the US Department of Education, from the 2001-02 to the 2010-11 academic year, the cost of attending a four-year undergraduate in-state school rose by 47.3 percent.
With ever-increasing education expenses, many families are accumulating significant debt, putting students further behind. However, with planning and financial management, students can control their finances. Here are some tips for parents of soon-to-be college students.
Start the conversation. Talk with other parents, teachers and guidance counselors about the cost of education. Make contact with the student financial aid offices of the colleges on your child’s list and get an accurate estimate of the cost of each institute. Most importantly, talk with your child. It is imperative your child learns the budgeting process as they will soon be managing their finances away from home.
Set the budget and stick to it. Once you have a set budget, add wiggle room for other unforeseeable expenses. Make sure you set this budget realistically. Calculating the cost of pens and pencils may seem ludicrous, but if you’re on a tight budget, every expense counts.
Get connected. Tracking your financial spending is easier than ever. From smart phone apps to free financial planning software, you can get an accurate financial report at any time. With research banks to determine which ones offer services to help, you can stay on top of your budget. Also, consider linking your banking account with your child’s, to easily transfer funds online.
Make a plan. When taking on debt, it is important to have a plan for paying it off. Calculate the monthly payments and time it will take your child to pay off the debt. Research salary ranges for the field in which your child plans to pursue a career to understand the debt they can realistically carry. Find more information and calculators to help determine payment schedules and interest rates at www.direct.ed.gov.
Do your research. Before taking out a student loan, look to other options, such as financial aid and scholarships. While some scholarships are awarded on academic merit, others are given based upon both academic performance and community service. Scholarships can be used to attend accredited universities, colleges and vocational schools, as long as they are pursuing their first post-secondary degree or diploma.