Having “the talk” is something most teens and parents avoid. No, we're not talking about that talk. Rather, we mean the money talk.
But a recent study shows a major disconnect between students' expectations and parents' realities. That is, most students (about 65%) assume that their parents will fund whatever college they choose, while most parents (62%) aren't in a position to do so.
Those numbers come from the recent Parents, Kids, and Money survey by T. Rowe Price. So what leads to this disconnect?
Problem: kids cannot conceptualize the cost of college
Another recent survey by MONEY/Barnes & Noble survey discovered that undergraduates are woefully ignorant of the sacrifices their parents were making to pay for their tuition.
In fact, only about a third of the students thought their parents had to cut back on daily expenses to cover college bills — although nearly 60% of parents said they were doing so.
If you’re facing this problem, you might be wondering if there’s a way to get your teen to understand this financial burden.
Solution: make them do the math
When the school your teen is looking at isn't even close to being affordable (for them or you), how do you help them conceptualize the cost of college?
It's simple: you tell them to crunch the numbers.
But before you task them with this real-world assignment, make sure you understand how emotional this initial conversation can be. If you can separate facts from feelings, it will go a lot smoother for both of you.
Here’s how to get started: Ask your child to research three to five schools they’re interested in. Have them make a note of the total cost including tuition, room, board, fees, and other expenses they may have.
Set a meeting in one week to discuss what they found.
During the meeting ask them to explain why they want to go to those colleges. Make sure they are realistic about how their grades and test scores compare to the minimum admissions requirements.
Finally, it’s time to have “the talk.” Your teen should have their research on costs, and you should have a realistic idea of what you can contribute. Then use our NitroScore tool to run the numbers for each school, focusing on how much money your student may have to take out in loans, and how those debts will affect their post-college lifestyle.
This conversation needs to be honest and upfront. Don’t hold back because you’re worried about disappointing your child.
If they are set on going to a school that is outside of your budget, they will need to find other ways to pay for the extra costs. Talk with them about federal student loans, scholarships, grants, and private student loans.
Give them the hard reality check
Avoid telling them that you may be considering a loan to help fund their education. Let them struggle with this decision on their own first. The reality of this may not set in if they think the “bank of mom and dad” is going to pick up the tab.
Hopefully, when you had them look at the numbers themselves, they will be able to create a more realistic expectation about college, and the impact student loan debt can have.
Being able to show your teen the amount of student loan debt they could end up with compared to the amount of money they may earn, helps open their eyes to what’s ahead.