Why Your Teen Needs a Financial Safety School

What’s on your and your teens’ college planning checklist? Hopefully, you’ve visited a few schools, looked at scholarship options, and have the list narrowed down between your top picks and a safety school. But what about a financial safety school? Tuition costs keep going up, and student loans can be financially crippling, no matter if you or your child are responsible for making payments. Choosing a financial safety school is a great way to teach life skills, encourage open dialogue about family finances, and help your teen start their young adulthood off on the right foot.

What is a Financial Safety School?

A financial safety school, like an academic safety school, is a college option that your teen is virtually guaranteed to be accepted into. Additionally, it should be one that either you or your teen (depending on your arrangement) can pay for comfortably.

Why Not Go for Gold?

As of March 2023, the average student loan debt for federal loans was $37,720 (according to the Department of Education). That’s more than double what it was in 2007. Interest rates are 5.5% for undergraduates, 7.05% for graduate students, and 8.05% for parents and graduate students using direct PLUS loans– and those are just the rates for federal loans. Private loans can have double or even triple the interest rates. While that ivy league or private school may have a long list of pros, is it worth having to take out a second mortgage on your house? What about the impact on your teen’s future credit score, ability to purchase a home, or retirement contributions? There certainly isn’t anything wrong with choosing the best and most prestigious school, but stacking up ALL of the pros and cons, including the price tag, can help your family make an informed decision.

Big Picture Lessons

Choosing a financial safety school can help with more than just your expenses. Involving your teen in a frank discussion about costs, how student loans work, and repayment options teaches valuable life lessons that will benefit them long after graduation day. Along with helping them cultivate budgeting skills, they’ll have the chance to learn how to do a cost-benefit analysis, which can help them with multiple life choices down the road (is that half-a-million-dollar house really worth the mortgage to me right now?). No matter which school they choose, stopping to carefully consider every factor before making a decision will help them be more invested in their choice and take ownership of their education.

Talk to your teens about expectations for paying for college, whether you want to assist with tuition costs up to a certain dollar amount or percentage, and if your financial assistance is dependent on grades or not, etc. You can also explain student loans, repayment, and forgiveness options, like the options listed here: https://www.forbes.com/advisor/student-loans/student-loan-forgiveness-programs/. Open discussion helps them step into adult decisions, minimize friction down the road, and helps you be clear about how much you’re financially able to contribute to their secondary education.

Good Options for Financial Safety Schools

There are a few college choices that are naturally more cost-effective and a few ways to make a more expensive school less of a financial strain. In-state tuition is typically much cheaper for students and can provide you and your teen with the chance to save money by living at home or participating in local summer internships. Merit scholarships can help lower tuition costs, and private schools typically offer better scholarships than public colleges, making a private school possibly more cost-effective after factoring in all the expenses. Out-of-state public colleges also often offer 4-year merit scholarships to boost outreach.

If your teen has their heart set on that reach school, consider saving money by looking for a community college that has an articulation agreement with their dream option. This streamlines the transfer process, so your teen can easily take general credits at a lower tuition cost before transferring. You can also look for dual enrollment programs that allow your teen to take college courses while they’re still in high school. These state-sponsored programs can help your child graduate high school with both their diploma and an associate’s degree, often free of charge besides supplies, which significantly cuts down on the costs that would be spent at a traditional college. Not all schools accept these transfer credits, so research your options first.

Set up for Success

Heading off to college is a big step for teens and is just the first of many important life choices; choosing a financial safety school is a great way to kickstart their financial independence and success before they head out the door. Teach your kids how to be smart about money while they’re still under your roof– it’s a lesson that will be just as useful as that degree.