finances

finances The Price of a Great Education by Donna L. Kain clothes and supplies in advance. Garth Peters, Director of Community Development at the Buckhead Coalition, is the father of two college students, and he had them keep a binder where they recorded of all of their transactions. “They are never too young as far as I’m concerned,” he says. “I encouraged them both to take a personal finance class to understand the basics. As a result, they have both been able to stay out of debt, pay themselves first and allocate money into all of the right areas.” Research, research, research. Lee Hester Rhodes found everything she needed at www.gacollege411.org when her daughter was applying for a student loan. “It explained all the colleges, financing available and scholarship info,” she says. “After completing the Free Application for Federal Student Aid (FAFSA), it lets you list the colleges that you want to contact regarding whether they can assist the student or the parents in financial aid tools and options.” You can also get a list of lenders from your child’s school, or from FinAid (www.finaid.com) or the Education Finance Council (www.efc.org), which lists state-run programs. Scope out scholarships. The trick is to apply to schools where your child’s grades, SAT scores or extracurricular activities make him or her an asset. When a colleague of mine searched www.scholarships.com, she found several essay contests with prizes ranging up to $2,500 — enough to cover books or a computer. Also try to take advantage of high school AP courses. Did you know that a student can enter college as a sophomore and have an instant savings of 25 percent? Push your kids to do this if they can. Encourage them to contribute. “Because my kids work while they are in school, they are eligible for a Roth IRA,” Peters says. “Now both of them contribute to this regularly. I tell them to save 10 to 20 percent of everything they make.” Kids can make a contribution to a Roth IRA of up to $5,000, or 100 percent of their earned income, whichever is less. A child can also have a Roth IRA as long as he or she has earned income from a job. (Just remember that birthday gifts from grandparents or allowances for household chores don’t count.) Build credit without a credit card. As many of us know, card issuers are happy to sign kids up when they set foot on campus, but this does not always mean that they are ready. “I think that kids need to learn how to manage cash before they get credit,” Peters says. “First with a checking account and a debit card. I didn’t co-sign on my kids’ first credit cards … they did that on their own. Now I just reinforce keeping good credit, staying out of debt and saving.” The best way to get credit if you don’t have it is to apply for a secured card at www.credit.com or www. cardtrak.com. With a secured card, you can make a savings deposit equal to your credit limit. Just beware that secured cards generally charge high interest rates plus an annual fee. Steer clear of cards that have these. Set a limit that is realistic. In general, the average student loan debt among graduating seniors is just over $19,000. Sarah Gaither estimates that she owed between $18,000 and $20,000 after she graduated from Young Harris College eight years ago. “I consolidated my two student loans at one fixed rate with a company called ASC Education (www.asc-education.com),” she says. “Now I make monthly payments online, and I expect to have it all paid off within two years. I think that with the right dedication, you won’t have debt for long. If you want a great education, go for it … a good job will follow.” Look at the bigger picture. In the end, it’s tough to put a price on education. Attending college today is an economic decision as well as an educational one, and you and your student will have to balance a lot of factors in order to get the best possible experience. Just remember that education is always a worthwhile investment, so go after the best one you can. Donna L. Kain is president of the Private and Entrepreneurial Banking Division of The Buckhead Community Bank. To reach her, call 404-760-2487 or email dkain@buckheadcommunitybank.com. Donna L. Kain H eading off to college is an exciting time for students, but with all of these new beginnings comes a new set of financial responsibilities, too. From student loans and credit cards to internships and scholarships, there are many areas that you and your student will need to learn about. Fortunately I have found some good strategies for getting a college education that won’t break the bank. Require your kids to participate … early. One parent I know suggests having your child fill out his or her own student loan application. Another requires his kids to create a budget each semester and set limits on books, in the end, it’s tough to put a price on education. Attending college today is an economic decision as well as an educational one. 48 Piedmont Review September/October 2008