Starting the College Conversation Early

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Parents have finished the summer college tours with their teenagers.  Now comes the hard part: figuring out how to pay for college. But Judith Ward, a senior financial planner for T. Rowe Price in Baltimore, urges parents to prepare for this moment well before their child’s high school graduation to help minimize college costs when the time comes.

Squared Away interviewed Ward, whose advice comes from a combination of her professional experience and putting her own two kids through college. They are now 23 and 27, employed, and paying back modest student loan balances.  

Your company’s 2016 survey of parents and children between ages 8 and 14 about paying for college points to a disconnect between what young kids are expecting in terms of paying for college and what their parents are planning on.

Yes, we found in our survey that 62 percent of kids expect their parents to cover most of whatever college they want, but 65 percent of parents say they’ll only be able to contribute some to their college. There’s definitely a disconnect. But it’s easy to rectify – just start talking to your kids about college.

Question: Can parents really talk to their kids about college at 8, 9 or 10? And what do they talk about?

In fairness to the kids who answer these survey questions, they have no idea what the cost of college is. It’s not the enormous number it is to their parents. But start when they’re young by having conversations that are not necessarily about the cost of college. Just start making college part of the conversation and sharing your own stories. That will have them thinking about college and thinking, “I’m going to be expected to go to college.”

If you do this, it makes that financial conversation a lot easier later on. For example, if you have a college 529 account or another college savings account, tell them about it, even when they’re young – then they have this expectation there are going to be more conversations about the money aspect of college.

Finances will become a natural evolution of the college conversation.  Around middle school, you can start sharing how much college costs.  Then as they’re going into high school ages, start sharing more with them about what you can afford for college, what they might have to do, how they might have to chip in, and how they might be impacted. Do it together with your children so they have the same understanding as you do.

Q: All of this early preparation is necessitated by the fact college is so expensive now?

Yes. Not that you’re going to be eliminating the debt. But debt is starting to be part of the fabric of college, and at least you both have an understanding of the debt and how much and who’s going to be taking on the debt. So it’s all a known.

Q: How about your own kids?

I talked about college in the abstract with them all the time. They knew they were expected to go to college. They knew how much we had saved for their college and that they would have to take on some debt. We were also very clear about what costs we would cover and what they would be expected to cover. They knew they would be using money from their bank account. But, we had talked about that expectation as soon as they had a job and income so they were not surprised.

Q: So the conversations should start early – also conversations about saving?

Parents first need to make sure the two of them are on the same page about how they’ll handle the college costs for their kids. It’s important because parents don’t want to wait until your child’s applying to colleges to figure out you’re not even on the same page yourself. That’s very important. Of course, things change along the way, but you should be attacking this together. And if you’re able to save, the younger your child is, the better. One suggestion is that once your kids get out of day care, use the money you were paying for day care to put into a college account.

Q: You encourage parents to enlist their village – grandparents, friends, godmothers – to help? 

You can be open with family members about how you’re expecting [your children] to go to college. The relatives might be asking, “What do the kids want for Christmas?” You can suggest they make a contribution to the college fund, and let’s celebrate that.

If you’re comfortable, share the college funds with the kids too – show them how much is in there, where you’re trying to get to, and where you are in terms of what college might cost. This way, they will know all along you’re going to try to do your best but you’re probably not going to be able to do all of it.   When the kids have that information, they’re more willing to compromise. If you share that, your daughter might say, “Okay, I’ll do community college and then I’ll transfer.” 

Q: Some parents at first insist that their child choose a lower-cost college option. But once the college tours start, the child’s expectations – and the potential costs – start going up. Does the student’s idea of the “dream school” get some parents into trouble?

Yes. What’s difficult about that is we’re getting into the emotional side of the decision. As parents we want to do what’s best for our kids. It’s very hard to say, “I know you got into this dream school on the opposite coast, but it’s not going to work out financially.”  As an adviser, it’s not difficult: college is a buying decision, so try not to be blinded by the emotion.

Q: There must be myriad ways to minimize borrowing. What are some key ways to do so?

What we see the most is a lack of saving. I’ll tell parents, especially middle-America parents who are making a decent salary, it’s either save now or borrow later.

Also, a lot of parents mistake the idea of financial aid as being free money. When a college says it is going to offer a financial aid package, a lot of the grant aid is needs-based. But for a lot of middle-Americans, the package is going to be in the form of loans that you’re going to have to pay back. But they hear financial aid, and they’re thinking free money. They’re not thinking loans are part of the aid package.

Finally, what’s important at colleges is the net price.  There are ways to knock down the total price tag. The student may have merit or other scholarships. Scholarships are a big thing to look for. I’ve also seen kids get college credit before they go to college. The son of a friend of ours got enough credit in high school AP classes to skip a year of college – it’s a lot cheaper that way. The community college is another angle. The kids can also take college courses in the summer before freshman year in college.

Q: A lot of this advice is for parents who are middle- or upper-middle class. What advice do you have for poor families? 

For families to get needs-based aid, it’s the student’s grade point average that matters. Make sure your child is a good student, because they’re probably going to have a lot of opportunity to attend college and get needs-based aid.  If there’s any way to network, start talking to guidance counselors at school or people who can help you through that process and know the ropes and the scholarships and what colleges are looking for, so you can set your kid up to be accepted. What a great thing for a lower-income family to have their children be able to go to college and get most of the cost paid for. And it is possible. But they have to be a good student.

Q: It is crucial to exhaust all federal loan options before moving into private loans. But which federal loans should be tapped first: parent PLUS loans or Stafford loans for students?   

You definitely want to use the federal loans. There are the subsidized Stafford loans – you’ll get these on a needs-basis – where the interest rate is subsidized while the student is in college, and you pay it back later. As for the unsubsidized Stafford loan that any child can get, you want to take advantage of that before taking out PLUS loans with higher interest rates.

Q: What else should parents think about?

Like I said in my article, it is okay for parents to put parameters around the decision and share it with your kids. If they have the context, they’re probably going to be very willing to compromise. I might be lucky this didn’t happen with my kids – but kids often want to go where their friends are going. That’s hard, as a parent, to combat, but if you share with them this is what we’re able to afford and we want you to have a good education, but it’s not in our budget to do it, they will get over it. They’ll have a good experience.

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Joe Ruf

Great interview! I agree with it all. One thing I would add is that it should be explained to the children the importance of getting it done in 4 years. Too many times, I think, there isn’t that urgency (and the schools themselves don’t help…after all, it is a business to them and 5 years is better than 4 years) and the total cost for 5 years is 25% more than 4 years!!!

My children had savings that included Christmas presents, etc. They knew that the plan was 50% from them (I had put $$$ in those accounts too) and 50% from me. They each lived at home for a portion of their college years. Together, we selected schools that met their needs and my budget…those were the ones we visited. Their grades were not good enough for a scholarship and I made too much for financial help…

End results, they both graduated without any debt.

Larry Littlefield

The bottom line is that a couple of generations reacted to falling pay at work by spending more, going into debt and not saving for college. And you had family break-up, divorce, parents with their own new non-parenting agendas.

Discussion of exploding college debt have focused on rising prices and, in the state sector, decreasing taxpayer contributions.

But I believe that falling parent contributions and the reduction in teenage employment, with adults taking the jobs teenagers formerly held, are as important.


Starting the college conversation early is always a good thing. Saving for college education is another wonderful thing for parents to do as early as possible.

How much should you spend on your college degree? This is one of the first personal finance decisions every teenager has to make – this is a very tough decision to make.

I respect all jobs and all professions. Here is the simple question – how much will you be making with your degree when you graduate?

Having the answer to this question would provide a great framework on how much you could spend on college education.

I wrote a post on some of the things to think through when deciding how much you should spend on your college education –

Janet Boyter

Not all teenagers are going to want to go to college. Rather than saying, “you are going to go to college” when they are children, why not help them explore all the options of what they can do with their lives? Two of my children went to college and graduate school. The third child hated school and wasn’t interested in college. He has worked for 10 years with UPS and makes more money than the other two and has more benefits. A lot of business owners also do very well without going to college. It’s definitely not for everyone and you don’t have to be consigned to work at fast food jobs if you don’t go to college.

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