Getting good grades, taking admissions tests, researching colleges, and completing applications are all part of the experience of applying to college. But there is one step that students and families sometimes overlook: discussing how they plan to pay for college.

Why a “college money talk” is important

It’s important to get on the same page with your parents about what paying for college will look like for you and your family—and, if possible, to do so before you start applying to colleges.

You don’t want to waste time applying to (and falling in love with) colleges that are well beyond your family’s budget or will require you to take out more in loans than you can afford. Even if you think your family can pay for all your college expenses, it’s still a good idea to talk with them about their financial picture and their expectations, so there are no unpleasant surprises or disagreements when you receive your acceptances.

Rick Clark, director of undergraduate admissions at Georgia Tech, is familiar with what can happen when families don’t communicate about finances early in the admissions process. In Georgia Tech’s admissions blog, he writes about the “Awkward April Aid Appointment,” in which admitted students and their parents, unhappy with the college’s financial aid award, come to him to discuss their options. “The conversation that should have happened privately and months (possibly years) before is playing out in front of an admission dean,” he writes. As the admitted student sits in the corner wearing the Georgia Tech hoodie, Clark has on many occasions observed that the parents are “either burning through tissues, exchanging passive aggressive quips between each other, or launching purely aggressive ultimatums at the dean.”

Having the “money talk” with your parents can help you work together as a family to find college funding solutions that work for everyone. “Your parents want the best for you,” says Brock Jolly, founder of The College Funding Coach, a network of financial experts specializing in helping families plan for college. “The more you collaborate with them,” he believes, “the more potential options you’ll have in front of you.”

Where will money for college come from? Some questions to ask

According to Gerna Benz, a college funding consultant with Bay Area College Planners, the college money discussion should come down to a few key questions:

• How much can my parents afford and are willing to contribute to the cost of college each year?
• How much do my parents expect me to contribute to the cost of my college education?
• Do my parents expect me to take out student loans?

According to Benz, “The goal is to come up with a sound fiduciary plan for what the parents are able to contribute as well as what the student will be responsible for.”

After asking these questions, you might discover that your parents are able to cover the full cost of your undergraduate education. Or, they might have set aside enough to cover a portion of the college bill and expect you to work and/or take out student loans to cover the rest. Or, they might expect you to cover all your college expenses on your own.

Ways to initiate the conversation

You’ll want to find a time to have the money talk when your parents are not busy or distracted, so try to set up a time in advance.

If your parents went to college themselves, Jolly suggests getting them to start talking about their own college experience. “Ask your parents how they chose a school and how they paid for it.”

You might also begin by asking your parents if they have created a college savings account, and if so, how much money they have set aside for you.

Find out if there are strings attached

Clark advises students to ask their parents if there are any “conditions, limitations and expectations” surrounding their financial contribution. Understanding any limitations early “will prevent your feeling ‘gut punched’ in April of senior year when financial aid packages show up,” he writes.

For example, your parents might have invested money in a state-run prepaid college plan designed to cover costs of in-state schools. Or, they may be willing to pay all your college costs but only if you go to a particular college or live at home. Now is the time to discuss these and any other conditions your parents may have.

Understand the cost of college

After you have an idea of your parents’ ability and willingness to help pay for college and any conditions, limitations and expectations that might be attached, the next step is to begin to figure out what college might ultimately cost for you each year.

• Review costs at different schools. Start by looking up the Cost of Attendance (COA) for each college you’re considering using CollegeData’s college profiles, or on the college’s website. It’s important to understand all the costs associated with a college education. While tuition is a large part of the cost, there are other costs including books and supplies, transportation, housing and meals, and miscellaneous expenses.
• Consider all four years of college. “What college costs today is generally not what it’s going to cost for four years,” explains Jolly. “Costs can go up an average of 5% to 6% per year.” Some colleges offer a “tuition freeze”, which keeps tuition the same for all four years, but this doesn’t necessarily freeze all college costs. According to Jolly, ”Your meal plan goes up, your dorm fees go up, and you need to factor that in.”
• Understand the FAFSA. “The most important lesson I've taught for the past 15 years is for all families to know their number,” said Benz. By "number" Benz is referring to what is now called the Student Aid Index or SAI, formerly the Expected Family Contribution or EFC. The SAI is a number colleges use to determine a student's eligibility for financial aid, based on the information that student provides in the Free Application for Federal Student Aid (FAFSA).
• Look at your potential Net Price. Net Price Calculators can also help you and your family get an idea of what a year of college might cost after factoring in your EFC and the average financial aid award provided by the college. According to Benz, “Once the family knows their cost at XYZ college, they can then have a discussion with the financial aid office to determine what, if any, tuition discounts the student and family is eligible for. They can do this exercise prior to the student's senior year in high school.”

Consider the impact of student loans

Loans might be a necessary part of your family’s college financing plan. However, you don’t want to borrow more than you can afford to pay back in loan payments each month. “What’s important to consider is the long-term impact of these loans,” says Jolly. “If you’re looking at borrowing an additional $25,000 to attend a particular school—that’s going to be an additional $100,000 over four years."

One way to estimate the impact of student loans is with a student loan calculator. The Department of Education's Loan Simulator helps you calculate your federal student loan payments and choose the best loan repayment options to meet your goals.

You might be eligible for one of the loan forgiveness programs sponsored by the federal government. However, Jolly recommends investigating these programs before you factor them into your plans. “On paper these programs sound great but there are a lot of hoops you need to jump through to do it right.” For example, you might need to work in a certain area of the country, work in specific professions, or work in a profession for 10 years before loans are forgiven.

Be empathetic and flexible

College is expensive and it’s important to keep in mind the impact paying for college may have on your family. “Try to look at paying for college through your parents’ lens,” advises Jolly. “Understand that your parents might want to retire one day and perhaps also put your siblings through college.” He also advises students to be open to alternatives. “If you’re going to be an English major, do you need to go to a costly private school? Could you go to an in-state public school for undergrad and then go to that more expensive and prestigious college for grad school on a fellowship?”

Financing college is one of the first adult decisions you’ll be part of. If you work with your parents to figure out how to pay for college, you’ll be able to focus your college search on schools that are not only a great academic and social fit, but a good financial fit as well.