How to Decide on a College as a Family

If you have a senior high school student in your life you know that right now is when the bulk of college acceptance notifications are sent out.

And that in turn sets off one of the most consequential decisions your family will make. Yes, I said, your family. The decision of which school to attend must be a decision that considers the well-being of the entire family.

As much as I wish we lived in a world where your child could simply choose the school they are most eager to attend, here in the real world, the cost of attending a given college must be part of the conversation.

There is simply no excuse or acceptable rationalization for parents to say yes to a school choice that will be a financial strain.

There are plenty of warning signals for what constitutes a strain. If you intend to scale back or stop contributing to your retirement savings accounts, so you can pay for school, that’s a huge flashing red light warning. If the aid package you are offered relies on the parent taking on big PLUS loans, that’s another troubling sign. Repayment of PLUS loans typically starts immediately. The rate for PLUS loans this year is 8.05%, and there is an origination fee of 4.3%. Again, if taking on loans would mean slowing down on your retirement saving, I give that a hard no.

Besides, your kid should always borrow before you. The current interest rate for a federal undergrad loan is 5.5% this year. That’s a lot better than 8.05%. Granted, there is a dollar limit on what students can borrow each year. For freshman the limit is $5,500, and it rises to $7,500 by senior year. That might sound like a small amount. But that’s great! It prevents your kid from overborrowing. As long as he or she earns a degree, chances are good they will make enough in their early career to be able to handle the repayment.

If all of this means not choosing the “dream” school, and instead opting for the school that is more affordable, I say, “good.” That is not compromising. It is being so very smart. Your kid will still get a great education and social experience. And you all will emerge from the college years in solid financial shape.