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Why it’s not too late to start saving for college

In a foot race, the first few steps off the starting block are often the most crucial. Lose focus, stumble or hesitate, and you might catch up, but rarely will you get ahead. Too often the case is, start late, finish last.

The same can be said for starting out financially in life. The decisions your teenagers, specifically your recent grads, make about paying for college can make or break them money-wise, all the way through to retirement. So what if you don’t have much, or anything, saved? Maybe it’s because you’re still paying off your own student loans, a growing phenomenon in recent decades. Whatever the reason, college is coming down the pike, and it is tempting to think the same thing millions of Americans have been thinking in increasing numbers; the only way to afford college is to take out loans.

Loans seem so easy, taking a relatively short time to apply and sign up for, but they will take years for your child to pay off. This choice will cause them to leave that starting block yards behind, as they will begin their adult lives with a financial burden on their shoulders.

Nationally, the average student graduated with $25,000 in debt in 2011, but many students end up with significantly more than this. Loan defaults rose considerably for those beginning repayment in 2008 (based on students who default within the first three years of repayment), and even the financial extreme, bankruptcy, does not free them from student debt.

Sallie Mae: Affordable Loans – on Your Terms?

First and foremost, if you need to borrow money for college, you cannot afford it. I’m picking on Sallie Mae, but anyone who tries to make loans sound affordable is wrong; the very fact that you need loans means you’re about to do something you can’t afford.

Loans are dangerous for multiple reasons. Interest and the teens’ lack of understanding what it will take to pay off (they will have loan payments plus living expenses after college) for starters, but it goes further than that. E.J. Bast, financial aid counselor at Southwestern Michigan College, says, “The school can’t limit the amount a student is given. We can only counsel them.” So if they meet all the standards for federal aid and can get more money than they actually need for school, they can use the full allotted amount and put it toward things not school-related. This is a slippery slope, as kids can feel like this is “free money.”

So what do you do if you feel the only option would be loans; just keep them home? Unless they are going into a special field where only experience is necessary (and, of course, they have a way to gain that experience), then future employers will be looking for that degree.

There are more options than you might think. Bast offers that they could work full time and go to school part time. This would lengthen the amount of time it takes to graduate, but with the pay-as-you-go approach, it can be a good alternative for some.

Joan Langmeyer, college-career counselor at Niles High School, sees a growing trend of students attending two years of community college and then transferring. “Community colleges offer very good education, but part of the reason students do that is financial,” she says. Attending a community college for one or two years can cut thousands of dollars off the financial load while still moving them in their desired direction.

If your family chooses this path, communication with the colleges is key. Local mom Mary Hartsell and her husband made it a family goal early on to help all three of their children go to college debt-free. All of their kids had jobs in high school and were responsible for saving a portion for college, but they thought ahead in more ways than this. They had their children decide on the colleges they ultimately wanted to go to, and then began calling those colleges to ensure that the class credits would transfer before registering at Southwestern. Not only were the community college courses less expensive, but two of the children were able to graduate in three years, further cutting the costs at their more expensive universities.

Day Late and a Dollar Short

For those of you who don’t want loans but can’t imagine being able to put anything significant toward college now, think again. “It’s never too late to start saving for college. Never ever. Start today,” Langmeyer says.

Bast agrees: “It’s never too late; it’s just that the longer you wait the more sacrifices you’re going to have to give in your daily life.” This applies to both you and your students. If you take a team approach with your children, you will be amazed at what can be done in these next few short months.

For example, fifty to sixty hours of students’ summer weeks at $8.00 an hour gives them about $5,000 before taxes. Cut that in half and you’ve got what they could make the rest of this summer, but then include the next three summers after that. This, coupled with short-term sacrifices like downgrading cable, internet or other luxuries, would make sizable payments to a community college.

Rachel Stout of Niles had a debt-free goal for herself when she attended college. She says of graduating debt-free, “It’s such a blessing; you basically put yourself ten years ahead financially, just working like crazy all the way through.”

Rachel was able to graduate with zero debt thanks to working as many hours as possible during summers and the school year. She also shared an apartment with friends and bought her own groceries, which cut her tuition at Calvin University – about $26,000 at the time – in half.

Along with working as many hours as possible, ask the financial aid department at your child’s school of choice for help. Langmeyer says, “I don’t think it ever hurts to talk with the financial aid department at the university you want to go to. You never know what is out there, what they might say, or what is their flexibility. Ask, ‘how can we work together to make this work?’”

The Young and the Penniless

How about your younger children? You may have one child who has to sacrifice more right now, but your younger children have an advantage. They can start working now a few hours a week and putting money toward college, and they can think about where they want to go and what scholarships might be applicable. Bast recommends, “Don’t wait until their senior year to look for scholarships; look during the sophomore and junior years.”

It all comes back to the concept of team effort. Hartsell says, “We told our kids from the beginning, you work hard, and we’ll do what we can to help you.” It’s up to parents to walk their kids through these decisions, guiding where necessary and helping them see the big picture. Here are some questions to get them thinking:

Would you like the freedom:

• To choose a low-paying job in your field right after college?
• To get married?
• To own a house?
• To have kids?
• For you (or your spouse) to stay home with your kids?
• To save for retirement?
• To give generously to others?

Generally, these are things teenagers do not think about now, but they will be glad later that you brought it up. Hartsell says, “We saw the blessing in our own lives, that when you weren’t paying for the past, you could always save for the future.”

For Stout, the sacrifices before and during college allowed her to get married, buy a house with a down payment, and buy a car with cash her first year out of college. If she had been strapped with student loans, she would have had to wait years for these things. “I’m going on sixteen years out of college, and I believe I would still be paying off my loans,” she says. “There’s never been a time where I wished I had $10,000-$20,000 in debt so I could’ve had a little more fun in college.”