6 Confidence Boosting Benefits of Budgeting for College
Have you heard the awful news? How could you have missed it?
Every day there’s another news story about the student loan crisis or the increasing cost of college. So many students and families are overwhelmed by the cost of college – and by worries about how to pay for it.
Instead of overwhelmed, wouldn’t it be great to feel in control? To have peace of mind? To be confident in your choices? Well, I have some awesome news for you: those are all benefits of budgeting for college.
Just to be clear, I’m talking about a REAL college budget, one that estimates the true cost of a degree. You’ll find plenty of monthly budgets for college students online. Those are handy, but spending too much on pizza and streaming services isn’t what’s driving the student loan crisis. Monthly student budgets are fine, but they need to fit within an overall college budget.
Most families never create a total budget for college. Perhaps they’re overwhelmed by the idea, or by the college planning and application process in general. Feeling overwhelmed usually means feeling powerless. I don’t want anyone to feel powerless when it comes to paying for college. After all, the entire purpose of The Prudent Professor is to help students and families feel confident about college.
In this post we’ll look at six confidence boosting benefits of budgeting for college. If you’re curious what to include in your budget, be sure to get my free college budget checklist; you can sign up for it at the bottom of the post.
6 Incredible Benefits of a College Budget
Budgeting Benefit #1: Control and Peace of Mind
Creating a budget for college puts you in charge of the process. No, you can’t control whether your child gets into their first-choice school or wins that big scholarship. You can control the most important thing: how much you’ll pay for college.
Forget all the doom and gloom you hear on the news. You really can decide how much you’ll spend on your child’s education, just like you decide how much to spend on a house, a car or any other major purchase. It all comes down to researching costs and making a budget.
When you have a workable college budget, you’ll understand how college fits into your overall financial picture. You’ll know that your child won’t be burdened with crushing debt because you chose an affordable school. The peace of mind that comes with knowing you aren’t risking your or your child’s financial future is one of the primary benefits of budgeting for college.
Budgeting Benefit #2: Clear Priorities
Another important benefit of budgeting for college is that it forces you to prioritize your financial goals.
More than half of parents say funding their child’s education is a top financial priority. In fact, in a recent survey, 53% of parents said helping pay for their child’s college is more important that saving for their own retirement. These parents probably believe that college costs too much to do both, but it doesn’t have to be that way.
To truly help your child, you need to determine how much you can contribute towards college without harming your own financial interests. That means making sure you can keep up with major expenses like mortgage payments. You also need to maintain adequate insurance (especially health insurance) and a decent emergency fund. And yes, you need to continue saving for retirement.
After you know what’s needed to take care of yourself, then you can decide how much to contribute towards college. I know prioritizing yourself sounds selfish, but you won’t be much use to your child if you’re homeless, sick and broke. You must come first here.
Once you have clear financial priorities, planning for college is much easier. You can quickly determine if a college is affordable. But first you must know how much you have to spend on college. Budgeting is the best way to figure that out.
Budgeting Benefit #3: Clear Expectations
A third benefit of budgeting for college is that it creates clear expectations for everyone involved.
When there’s a budget that clearly spells out things like how much parents will pay towards college, everyone knows exactly what to expect. There shouldn’t be any arguing over pricey out-of-state colleges since everyone knows they need to work within the budget.
You’ll have to discuss as a family what to include in the budget. You’ll also need to decide who will pay for what, so there won’t be any haggling about bills in the future. The budget checklist in my free resource library can get the conversation started; to get the password, just fill out the form at the end of this post.
I know creating a budget can be a difficult task, especially if your family has never discussed the cost of college. But having a document that clearly lays out expectations helps everyone. It also gives students an opportunity to start learning and practicing financial responsibility, since a monthly or semester student budget should be included in your budgeting plan.
Budgeting Benefit #4: Easier Decision-Making
Another one of the benefits of budgeting for college is that it makes certain decisions much easier. If you know how much you can pay for college, it’s easy to decide where to apply. Otherwise, slick college marketers will make your life more difficult.
If you’ve not yet been through the college application season with your child, be warned: college marketing is everywhere. You’ll get brochures in your mailbox, recruitment emails in your inbox and ads in your Facebook feed. You’ll see marketing materials from big state schools, tiny liberal arts colleges, public, private and for-profit schools. All these schools have one thing in common: they want to
educate your child get your money.
This marketing blitz is overwhelming and is often the way that students find their dream school. You know the one: the school you’ve never heard of that costs three times more than your house. But your kid thinks it’s perfect, which means the marketers have done their job.
You can counter this marketing onslaught by having a clear financial plan for college; in other words, a budget. By ignoring the colleges that don’t fit in your budget, you can spend time researching quality colleges that do.
This doesn’t mean you can’t or shouldn’t ever apply to colleges a bit outside your budget. If you do apply to a more expensive school, you need to research their financial aid offerings. If you think your child could get enough financial aid to make the school affordable, then go ahead and apply. Speaking of financial aid…
Budgeting Benefit #5: Better Decision-Making
Your child will get a financial aid award letter from each school to which they’re accepted. The financial aid package detailed in the letter may include a mix of tuition waivers, scholarships, grants, loans and work-study. Since the types and total amount of financial aid provided by each school will be different, trying to sort out which is making the best offer can be confusing. This is especially true if you aren’t even sure how much college will cost in the first place.
Having a solid budget will clear up some of the confusion. If you’ve already got a good estimate of how much your child’s education will cost, you’ll know if you’re getting enough financial aid to pay for it. If your child doesn’t get enough financial aid to pay the full cost of college, you’ll have to make up the difference. A budget will quickly let you know whether you’re able to cover the gap.
If the gap between the cost of a college and the financial aid it provides is more than your budget can handle, it’s not the right school. Be sure to look closely at the mix of financial aid too. A college that gives most aid in the form of loans isn’t the best choice, even if it offers the most total aid. You’ll need to learn some basics of the financial aid system, but once you do, you can be confident that you got the best financial aid deal possible.
Budgeting Benefit #6: Avoiding Overborrowing
The final, and perhaps most important, benefit of budgeting for college is to avoid overborrowing.
Overborrowing occurs when students take on more loan debt than is necessary to pay for their degree. These students aren’t doing anything illegal or unethical. They typically just have no idea how much college costs, so they take all the loans they’re offered every year.
About 70% of college students graduate with student loan debt, so you may not be able to completely avoid student loans. If you can’t totally avoid student loans, the best way to stay on top of them is to build borrowing into your budget.
If you have a definite limit on how much you’re willing to borrow for college, you don’t have to worry about burdening you or your child with excess debt. To know your borrowing limit, you first need a budget that estimates both the total cost of college and how much of that you can pay yourself.
A child starting college should be an exciting time, but for some families, excitement is replaced by anxiety. They wonder if they’ve made the right choices about college and worry that maybe they haven’t.
One of the benefits of budgeting for college is feeling confident in your decisions. Budgeting puts you in control of the college application process, so you aren’t at the mercy of college marketers. You can sleep well knowing you’ve chosen the right college, one that won’t leave you or your child saddled with debt. And you can have peace of mind knowing that by taking budgeting for college seriously, you’ve safeguarded your and your child’s financial futures.
How are you planning for college? Have you made a college budget? Have questions about budgeting for college? Let me know if the comments.