We have a crisis in the America and it is getting worse. For at least the past decade families have been spending substantially more money on a college education than they can actually afford. I call this the “silent crisis”. This is because the crisis is caused by a lack of communication. Many parents and students do not discuss how much they can actually afford to pay for college. This crisis is exacerbated because families do not discuss with other families the cost of college and how they plan on paying for college. Therefore, families choose the best “fit” college for their student and worry about how to pay for it later.
This is causing families to take on a great deal of debt to pay for a college education. Parents are having to delay their plans for retirement, and students are delaying everything from marriage, home ownership, starting a family, to starting a business of their own. To make this worse between 35 to 40 million Americans have dropped out of college without receive a degree. I’m sure many of these families have taken out loans for this. Nationally, about 70% of U.S. high-school graduates enroll in higher education, but only 37% of those have graduated eight years later.
Because of the student debt loads, 79% of parents still provide financial help to their adult children. Parents spend $500 billion annually on their adult children, ages 18 to 34. This includes help with food and groceries, cell phones, car expenses, rent, and student loans. In the meantime, many adult children are also hoping to tap their parents for graduate school, weddings, and down payments for a home. Add to this that thirty-one percent of early adults also live with their parents today.
How do we solve this Crisis? Have families prepare a College Budget before they apply for college. They will then know the sources they will use to pay for college and the amount of debt each family member has agreed to take on. Based on this budget they will know which colleges they can afford. This hopefully will lead them to look at all the college options including attending a community college first before transferring to a four-year college.
I have given financial aid presentations to many high schools in the San Francisco/Bay Area. I always end my presentation discussing the importance of having families prepare a college budget together. I’ve noticed over the last few years high school counselors are realizing the importance of having this included in my presentation.
As a country we need to start encouraging families to discuss their college budget before the student’s senior year.