Parents are taking out more loans than ever to help put their kids through college. Here's how parents can find affordable colleges and safeguard their financial future.
There’s a lot of mainstream media coverage about the issue of staggering student debt in the U.S., but those stories often leave out another group that is struggling under this huge burden: the parent. While average undergraduate student borrowing has increased 60 percent since 1990, average undergraduate parent borrowing has tripled, increasing more than 300 percent.
There are countless solutions helping students ameliorate their condition, and even proposed legislation to forgive their bad debt. Meanwhile, parents are left hanging out to dry.
(Source: Department of Education)
While parents have more life experience than most college students, they often aren’t any better at evaluating or understanding the repercussions of borrowing for college or guaranteeing their child’s student loan debt. Unlike buying a house or a car, where there are a lot of publicly available consumer services (like Zillow and Truecar), there’s a dearth for “buying” college. Furthermore, parents don’t have the benefit of repeat transaction experience, since they only go through this once or twice. (Bless those with three or more kids.)
Not only are there a void of services to help parents navigate college finance, but there also aren’t widely used rules of thumb like there are for buying a house or saving for retirement. It’s also possible to quickly convert mortgage and car loans into monthly payments and determine if it’s an amount that is affordable. For college loans, though, parents don’t know how much loan is too much and also, because of grace periods and the fact they will be taking new loans out every year, don’t have a sense for what the aggregate monthly payments will be.
There are some helpful tools out there, such as the College Scorecard, that was introduced by the Obama administration and is maintained by the Department of Education. This website has information on college cost of attendance and earnings data, yet is often a year or two behind current reporting and doesn’t take into account the different cost depending on field of study or other personal considerations. According to The Center for American Progress, families are not aware of the information sources available to them and when they do find it, the information is not presented in a way that is relevant to individual decisions.
The former director of the College Scorecard recently tweeted that 93,000 people accessed the site in April, the peak month for college decisions, which would only equal 2 percent of all college-bound seniors—if they were exclusively seniors and all unique visitors. Not only does that number likely include repeat visitors, it also includes researchers and other users. Based on this, I imagine less than 1 percent of college-bound seniors and their parents used the website to aid their decision.
As the federal government and states continue to decrease funding and private college costs continue their steep rise, parents are becoming more financially responsible for their children’s college education.
College affordability is one of the important issues for parents with college-bound children. One way to help them is to clearly present the data on college costs, post-graduation outcomes, and risk factors that could get in the way of their long-term success. With more parents putting their credit and financial future on the line—in many cases pushing back their own retirement—they’d be wise to change their approach and put an increased focus on affordability when helping their kids decide where to go to college.
Below are a few do’s and don’ts for families beginning their college search:
It’s time to get smart about college: Getting a four-year degree has become too expensive for the college choice to be a solely emotional decision. With data, it is possible and necessary to approach the college decision as an informed consumer, focusing on affordability, academic quality, and student outcomes as top factors in determining value.
To that end, we’re pleased to introduce a new, more comprehensive college advising solution, with financial fit at the forefront and our accurate, predictive Edstimate® cost of attendance. We hope you’ll take the new Edmit for a spin and let us know what you think. You can email me personally at email@example.com. We’ll be releasing new features weekly, so check back often!
Nick Ducoff is co-founder and CEO of Edmit.
Founded by recognized university leaders, Edmit provides personalized insights and advice to help families find colleges that meet their academic goals and are within their financial means. Families that use Edmit make smarter college choices leading to less debt and better earnings outcomes, saving thousands of dollars.