I have sent two kids off to college and learned that parenting doesn't end when students graduate from high school. Leaving the nest comes with significant changes, many of which are financial. Parents and students who discuss and plan for anticipated financial decisions will likely be less stressed when the time comes for the student to be away from home.
1. Determine WHO is responsible for each expense
Besides the fees paid directly to the university, college students have many additional expenses. These may include books, school supplies, travel home, meals outside the college meal plan, cell phone bills, medication, laundry, toiletries, car insurance, gas, car maintenance, clothing, and recreation. Students and their parents should project the expenses and decide which party will be responsible for each fee.
2. Determine HOW each expense will be paid
Students should have a clear plan on how they will afford and pay for the indirect college costs they will be responsible for. They should determine whether they will be paying for those costs with wages from summer jobs, work-study, scholarships, or savings.
Parents intending to cover some expenditures indirectly have several options. They might:
give the student access to their credit card (with clear expectations for what it is to be used for)
give them the money before the school year begins
provide them with a monthly allowance, or
reimburse them later.
Whatever the arrangements are, they should be worked out ahead of time so there's no confusion.
No matter who is covering the expenses, students should not only have their own checking account but also:
know how to check their balance, deposit checks, and withdraw money
have memorized their debit card PIN
understand the banking fees
discover where the closest bank branch and ATM are to their college campus, and
be aware that they can avoid ATM fees by getting cash back when making purchases with a debit card
3. Understand the terms of any financial aid, merit aid, or scholarships.
Students receiving financial aid, institutional merit aid, or an outside scholarship should know what the aid covers and understand all the terms. Students may be required to take a minimum course load and/or keep their GPA above a certain threshold. Before studying abroad or taking summer classes, they should find out whether the aid award will be applied to their program.
4. Consider getting a financial power of attorney.
Students leaving for college might want to get a financial power of attorney, which allows their parents to make financial transactions for them after they turn 18. This document may come in handy if the student becomes incapacitated, is out of the country, or simply wants their parents' help dealing with their bank account during stressful times. These documents can be created for free at sites such as this one and then notarized or for a fee at websites such as this one.
5. Determine your insurance needs.
Students' insurance needs will likely change if they are no longer living at home, so now is the time to assess your insurance needs.
Find out whether your family's rental/homeowners insurance will cover the student's belongings while they are away at college and how much it will cost your family to submit a claim if one of the items gets lost, stolen, or damaged. If your deductible is high, you may find it more cost-effective to get a separate dorm insurance policy, especially considering the impact a claim may have on the cost of your policy.
If the student is currently on the parents' auto insurance, will be attending college far from home, and will not be driving while away at college, ask your insurance company whether the student can be placed on a reduced mileage status, which will reduce the premium.
Consider getting tuition insurance, which will protect your investment if the student leaves school without finishing the semester. Find out the college's cancellation policy, understand the terms of private tuition insurance, and weigh the pros and cons before deciding whether the policy is worth it.
Decide whether to use the college's student health insurance or your current insurance. Students who do not intend to use their college's health insurance may need to opt out, as some colleges automatically enroll (and charge) every student for this insurance.
Don't neglect these crucial conversations and decisions. Taking care of these considerations now will help both student and parent have a clear plan and avoid stress and costly mistakes.
Have a question or another tip to suggest? Leave a comment below. And please share this post with anyone you think could benefit from the information.