Study This: Freshmen Finances

Students Going Solo
Parental advice and guidance can only take a student so far, especially when a  student isn’t getting any financial help from parents to pay for school. In that case, kids have to rely on themselves to make sure tuition is covered, and that starts with a visit to a college’s financial aid office. Forstrom says that visit should take place as early as the first prospective campus trip during the junior year of high school.

“The financial aid process is difficult to navigate so I recommend prospective students always go to the financial aid office on their school tour because some are better than others. You want a financial aid counselor who goes step by step through your choices. A good financial aid office should be part of the school selection process if financing is a concern because you want a good resource for information.”

Students and parents should also have a serious discussion about whether any money can be contributed towards tuition. Uran says many parents who say they can’t pitch in still have some wiggle room in their wallets that they didn’t realize. “Parents should think about all the expenses they paid for during their child’s senior year of high school like food, clothes, yearbooks, prom, car insurance. Once their child is at college they won’t be paying those day-to-day expenses anymore, so if they simply shift the dollars they were using to pay for those things, that’s hundreds of dollars available to help a student out without changing the parents’ lifestyle.”

Second only to parents is the federal government. Amy Carroll, a student loan specialist at Bremer Bank, says Stafford loans top the list. “Students should first obtain the Federal Stafford loan, which still has the best fixed interest rate and repayment options available to students.” Next up are Federal Parent PLUS loans, which—obviously—require a parent to obtain the loan on behalf of the student. “It has a fixed interest rate and remains the parent’s loan for the life of the loan,” says Carroll, that  means parents have to trust that their son or daughter will step up and make the payments upon graduation, lest they be left with the balance. The last and “least desirable” option that Carroll lists is the alternative educational loan, which is available through most student loan lenders. Their undesirability stems from tougher interest rates that mean the amount of the loan can increase rapidly. Kyle Markland, president and CEO of Affinity Plus Federal Credit Union, adds that parents can save their children from excessive interest by getting inventive and using their own equity to nab lower-interest loans. “Parents may look into nontraditional lending options by using the equity they have in their homes to finance college, and that interest is then tax deductible,” he says. “You also probably get a better interest rate than what a student could get on their own through a private lender.”

Overall it can be a lot of information to ingest, from credit card APRs and FAFSA forms to just remembering to pay rent. Professor Meschke points out that plenty of aspects of life come down to budgeting—even the dreaded ‘freshman fifteen’ can be considered bad caloric budgeting—and finances should be no different. “Sometimes this kind of information is like telling people to stop eating junk food. You can come up with a laundry list of reasons why it will be good for you, but the really difficult thing is implementation.”