Does Your College Student Need Financial First Aid?
4 ways parents can help college students maintain financial health
Posted Feb 06, 2016
There is good news and bad news in the college finance world.
First, the good news. Wages for recent graduates are at their highest in a decade with median yearly earnings of $43,000, according to a January 30th Wall Street Journal article. Even better, recent graduates have an unemployment rate of only 4.9% compared with 7% five years earlier
Now, the bad news. College student debt tops 1.2 trillion dollars. Two thirds of students graduate with debt averaging $26,600. College student debt is a major campaign issue in the current presidential race, partly fueling the popularity among millennials of Senator Bernie Sanders, who promises college free of charge.
Finances are second only to academics as a major stressor for college students, with 33.5% of students reporting finances as being traumatic or very difficult to handle, according to results from the 2015 American College Health Association survey.
As a college counseling center psychiatrist, I see how financial concerns weigh heavily on students. Not only are they worrying about paying for school or maintaining a high enough GPA to keep a scholarship, they’re also overwhelmed by the cost of their medications or an unexpected ER visit. Students, like all other adults, have been impacted by the rising cost of health care.
As parents, you are intricately involved in your child’s financial life. You will likely complete the FAFSA form (Application for Federal Student Aid) every year so your child can receive a scholarship or financial aid, and chances are you’re helping pay for college.
You have the leading role in helping your child deal with financial stress and developing good financial habits. Here are some guidelines.
1. Keep debt low. Make sure your child borrows as little money as possible to attend college. Start by choosing schools your family can afford; community colleges and state universities offer a great education for one third the cost of private colleges. If your child does apply to private colleges, include some schools that are less competitive where she is more likely to get a scholarship.
2. Check college financial statements and bills. Ensure you have the ability to view college billing online. You may or may not have access to this information, as FERPA (Family Educational Rights and Privacy Act) limits your ability to look at your child’s school records involving grades and finances. Colleges handle this access in different ways. My daughter signed a waiver so I can see her financial records, and my son was able to add me as a payer to his account. I have found and corrected billing errors, like a charge for student health insurance even though my child is on our family plan.
2. Monitor credit cards and bank statements. Many banks will allow you to set up a college student checking and savings account that you can view and access online. Knowing your child’s spending habits is crucial to financial health.
Unexplained large withdrawals could mean your child is getting carried away with decorating her freshman dorm room, or is being too generous with her friends, or has had her card stolen. Ask, in a loving way, what is going on?
Teach your child how to budget. You can do this by transferring a set amount of money into her account every month. Likewise, you can set a spending limit on your child’s credit card if you are the primary cardholder. If she needs additional money, encourage her to get a part time job.
3. Help out with medical bills and health insurance. Medication costs are skyrocketing and all too often insurance won't cover these charges. So if your child cannot afford a medication or medical treatment, help as much as you can afford. If she needs psychotherapy only partially covered by health insurance, pay for it. Many students don’t want to ask for assistance, but I always encourage them to turn to their parents when their health is on the line.
Make sure your child has health insurance. Add your child to your own insurance plan, or purchase the university plan. Remember, if your child is taking a semester off, she may not have coverage. Even with the Affordable Care Act, I’ve had patients go without insurance; try to do everything you can to keep your child covered.
4. Be consistent with your financial support. If you promise to provide money, keep that promise. Set aside a college fund for your child. If events get in the way of financial support – divorce, job loss, home foreclosure – give your child plenty of notice so she can plan for increased work hours or more financial aid.
There might be times you should not keep the promise of paying college expenses. Your child may be better off leaving school for a variety of reasons. If he continues to have poor grades with no improvement, he may not be mature enough to handle the demands of school. Working for a few years may give him time to develop motivation and coping skills to handle school.
If your child is having emotional difficulties that lead to suicidal thinking or behaviors, she could benefit from additional support by attending a school closer to home or even living at home. If your child is using drugs or alcohol in a destructive way and will not get help, you should talk with a counselor to see if continuing to pay for school is enabling behaviors that could lead to greater harm. Dealing with drug abuse is a complicated problem, which I will discuss in my next article.
Teach your child good financial habits in college and they’ll have financial wellness for life.
©2016 Marcia Morris, All Rights Reserved
If you’re interested in reading about a particular topic regarding college wellness and your child’s mental health, please email me at firstname.lastname@example.org.