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Discussing college finances early pays dividends, study says

Posted by  October 29, 2013 08:30 AM

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Even as more are saving for higher education, 40 percent of Massachusetts families with college-bound children have not had critical discussions about the total cost of college, according to a report released today.

While teenagers may understand that tuition is expensive, considering the other costs of attending college can feel overwhelming. But having those conversations with parents pays dividends, according to a study by Fidelity Investments and the Massachusetts Educational Financing Authority (MEFA).

Though it may be difficult for parents to bring up financial conversations, the report said, 66 percent of families who have taken the time to talk to their teenagers aged 15 and over have made adjustments to their college plans.

“Parents have a natural partner when it comes to college planning – their children. Through a collaborative approach, families can discuss the impact college-related decisions may have on their child’s financial future,” Thomas Graf, MEFA's executive director, said in a press release.

“The earlier families establish college savings goals, the more time they will have to adjust strategies," Graf said. "As children mature, this involvement will help them be better prepared for financial decisions they will face after graduation.”

The report defines the “total cost of college” as more than the costs of tuition, room and board -- it factors in expenses related to selecting schools, choosing a major, and financing options.

It study found that 39 percent of parents who had these conversations explored additional funding (scholarships), 24 percent chose to send their kids to a cheaper school and 14 percent chose to rely more heavily on financial aid to pay college fees.

The study found that college savings can play a rule in reducing potential student loan debt – at present, 82 percent of parents with college-going kids anticipate that they will graduate owing an average $31,100 in debt.

According to the report, 33 percent of parents contributing to a 529 college savings plan have increased their regular contributions since opening the account, up from 23 percent last year.

A checklist to help parents broach the subject with their children was also included, and suggests the following conversation topics:

  • Understanding the total amount families need to save

  • Deciding how to involve the children in the saving process

  • Evaluating how school choice may influence costs and potential post-graduation student debt

  • Learning about the financial aid process

  • Calculating a reasonable loan amount

In addition, MEFA and Fidelity offer guidance on how to manage college savings.

"As we think about the conversations and conversation starters, the idea varies by how old the child is," said Keith Bernhardt, vice president of college savings at Fidelity. "What we've seen is that parents can be talking with kids even at 10 years old - the idea that college does cost money. Set the idea of having a savings plan and a goal that it's good to put money aside."

Bernhardt also noted how the role children play in saving for college should evolve as they get older, and that involving them in the process teaches financial responsibility and literacy in addition to helping grow college funds.

Bernhardt recommended that parents not wait too long to start this conversation - don't wait until the students are in 12th grade and about to send off their applications to tell them that certain schools are out of the budget.

"It's a very emotional and stressful time to pop that type of information, Bernhardt said." It can lead to friction and less than ideal decisions."

Shandana Mufti can be reached at

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