3 tips for having the college money talk

In our work of helping families navigate the college process. it continually shocks me how few have not had the “money talk,” either between the parents and/or between parents and child.

Given the cost of college today, this is highly irresponsible at best, if not downright dangerous. I haven’t heard of many married couples not having some conversation about how much they can afford to spend on homes they are looking at, yet it happens all of the time when it comes to the college purchase.

I understand that talking about finances is hard. And I understand that it is even harder for parents to talk about finances with their children. Who wants to let down their pride and joy, especially when it involves their future?

But an unwillingness to have frank and honest conversations leading up to the college decision only makes matters worse downstream and can saddle both the parents and their pride and joy with unsustainable debt. The disease is almost always more painful than the medicine.

So parents, how do you do it? Here are 3 tips for having the college money talk:


Before talking to your child, figure out the maximum bottom line cost your household can afford for 4 years of college


Talk to your financial advisor, look at your family budget and savings, and make sure both you and your spouse are truly in agreement. Doing the hard work of establishing this number early will take some of the emotion away when the financial aid letters begin arriving.


Use the triangle framework to discuss the college decision process with your child


The goal of the college decision is to find the right fit, which is comprised of 3 equal components:

  • Academic fit
  • Social fit
  • Financial fit


Too many families only look for the academic and social fit, and once their emotional teenager falls in love with a school, they can’t bear to break his or her heart and have to take on unsustainable debt to make it work.

Financial fit is an equal part of the decision, and parents have to explain to their student that some schools, even wonderful name-brand ones, may simply be outside of the family’s budget.


Talk openly about student loan debt and use real-world examples to illustrate


College can be a terrific investment and taking on some debt to make it happen is entirely justifiable. But parents should talk openly with their child about exactly how much debt they are willing to shoulder, and the maximum amount of debt the student should take on.

Our recommendation, and a common rule of thumb, is that a family should figure out the average starting salary in the field the student is planning to go into and not have its total college debt exceed that amount.

Then use actual numbers to illustrate to the student what that lifestyle is like. Most 17 and 18-year-olds have no real concept of the type of numbers adults throw around for college costs and loans, and it may feel too distant or like Monopoly money since they’ve never actually had to live it.

With your guidance, have the student build a real budget with real expenses like rent, food, car, etc. Explain the difference between a salary and actual take-home pay, and include student loan payments at various levels of debt and repayment terms.