Making Wise Decisions About Educational Funding And Student Loan Debt

As a financial advisor that focuses on serving a Generation X clientele (including many people with graduate degrees!), one of the hot button issues that I run into is: “How do I save for my children’s education in light of spiraling education costs?” While I believe there are some cataclysmic changes coming to higher education in the coming years, here are some tips to keep in mind as you put money away and guide your children in their educational decision making:

Instead of trying to keep student loan debt to a certain percentage of their expected salary, I believe students are best served by looking at the competitive outlook for their career field as well as the required training and then making a decision as to how much debt to take on. Also, take a look at what’s the norm in the industry you want to work in. In health related fields you have to have the degree to be even considered, while in business the degree is less important than who you know, a proven skillset, and what job experience you have.

A lower student debt load will allow greater freedom in choosing where you live and what job you take. One of the important things to Gen X/Y (and even more so for Millennials) is to be passionate about what they do and who they do it for. I had a former client who racked up $120,000 in law school debt (she went to one of the many law schools in Washington D.C.) and the only job she could find was doing plaintiff’s personal injury work (more affectionately known as ‘ambulance chasing’). She hated doing it but had to have something that paid well in order to meet her student loan obligations in addition to other costs of living.

Once you’re in school, the college wants to keep you there and will try to soften the blow of tuition increases. Speaking more broadly, private schools have been increasing tuition in a smooth, steady fashion while public colleges have had fewer, more dramatic tuition increases since a lot of their tuition is dependent on how much money they get from their state legislatures. State schools try to keep current students out of those increases to keep them enrolled.

Understand that scholarships and grants are recruitment tools and that a student has the most power to negotiate before matriculating. If a school really wants you, they’ll sweeten the aid package. Speaking from personal experience as someone who lost a scholarship after their first year of law school, I’d do everything possible to make sure that the grant/scholarship is for the whole course of study and there are few, if any, contingencies that need to be met to keep the award.

Students are becoming much more sensitive to college costs – everyone’s heard stories about the person who has $80k in student loan debt and flips burgers at McDonalds. A lot of students entering college have older siblings or friends who have given them good counsel to avoid the debt as it will really handcuff you down the road. Yes, students (and their parents!) are definitely becoming more price conscious – looking at total cost to attend after factoring in aid and scholarships.

About the author

Brian Frederick, JD, CFP®

Brian Frederick is a financial planner who focuses his practice on being a trusted advisor to successful Generation X professionals, helping them align their financial affairs with the lives they want for themselves and their families. He believes that financial advice should be provided by someone who isn’t compensated by sales commissions and that the advice be holistic in nature - not just looking at your investment portfolio or selling you an insurance policy. He’s also discovered that most practitioners who meet these requirements primarily serve clients who are ‘older’ and ‘richer’.
Brian has been interested in money and financial matters since watching Richie Rich cartoons as a young boy. Over the years, his understanding of building wealth has become more realistic – first by going to the public library with his father, a retired university economics professor, to read investment periodicals; and then later by his riding his small Roth IRA up during Internet Bubble, only to have it come crashing down when the bubble burst.
Brian started his career by working as a commissioned stockbroker – something he describes as being a used-car salesman when he really wanted to be a mechanic. He then moved into several customer-facing credit and collection roles before ultimately becoming a non-commissioned financial advisor. For the five years prior to starting Stillwater, Brian worked for the investment and financial advice division of auto insurance giant USAA.
Brian is a Phi Beta Kappa graduate of the University of Nebraska – Lincoln. He also graduated from the University of Nebraska Law College where he was awarded an academic scholarship. He has been a CERTIFIED FINANCIAL PLANNER™ professional (CFP®) since 2006; is a Chartered Financial Consultant (ChFC), having completed extensive education in professional financial planning; has earned the Chartered Life Underwriter (CLU) which is the highest-level designation available in the life insurance profession; and is a Certified Wealth Strategist ® (CWS®) which focuses on the practical advice related to the thirteen common issues that high net worth individuals face. He is an inactive member of the Nebraska and Arizona bar associations.
Brian lives in Scottsdale, Arizona with his wife and two young sons. Outside of work and family, his passions include Kansas City Royals baseball, driving his Corvette, and cooking barbeque on his Big Green Egg.

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