When decisions need to be made about which school to attend, the reality of how to thoughtfully spend down funds in your 529 account sets in.
And very real decisions – with very real trade‑offs – need to be made.
This is where parents sometimes freeze. Understandably, no one wants to crush a child’s dream with a dollar sign. At the same time, ignoring total cost and its impact on the future is not a feasible option. A good conversation with your teen can help them to see how choices today can shape their (and your) financial freedom tomorrow.
Here’s a roadmap to consider:
1. Make sure you know exactly how much each school will cost after financial aid packages are factored in each year.
2. Circle back to any of the most desired schools to disclose any significant changes in your family’s financial circumstances and/or to see if there’s a possibility of any further aid.
3. Once you’re clear on cost and all available funds, calmly share and review the numbers with your child. Review: How much is in the 529 account? What can it, and any other available resources, realistically cover? How much would be left to cover each year? Framing this as “here’s the budget we ‘get’ to work with” keeps the tone collaborative. You’re inviting your child into the planning process, rather than handing down a verdict without review and discussion of the facts.
4. Talk openly about borrowing to cover any gaps. Determine how much would need to be borrowed and who would be responsible for repaying the debt. Estimate the monthly payments and what impact they could have on future lifestyle for ten or more years following graduation. Consider how student loan repayment will impact your child’s ability to live independently, travel with friends, purchase a car or home, afford to work in a role or field they truly enjoy, and/or start a family of their own.
5. Consider return on investment to connect costs with outcomes. While estimating future earnings isn’t a precise science, given that courses of study and career aspirations may change along the way, it can give your child a sense of how much money they may be earning on their currently desired path. Explore: How quickly do graduates in their intended major find employment, and what do they typically earn each year? Will additional degrees be needed to reach full career potential? Are students from a particular school paid more than others?
6. Discuss trade-offs. Attempting to fund a school that’s a financial stretch can mean that you and/or your child will be faced with financial constraints in the future. That’s one of many potential trade-offs. Additionally, the ability to cover costs for a potential graduate degree, for younger siblings’ education, or for your own advanced learning may be limited, as may be your or a partner’s ability to retire at an age you were hoping to do so. Having your child work throughout college, live at home for one or more years while attending college, or start at a lower-cost institution and eventually transfer to their school of choice may be trade-offs worth considering – as may be a gap year to save up for the college of their dreams.
There may also be a trade-off between prestige and long-term financial flexibility. A more notable or highly ranked school can feel like the “perfect” choice in the moment, but a lower-cost option may offer your child greater freedom after graduation—to begin adult life with less financial pressure. Similarly, working during college can feel like a good trade-off to help reduce borrowing, but it may also limit the time and energy your child has available for academics, campus involvement, internships, and more.
The goal is to identify and explore trade-offs and choose ones that best support your child and family’s future.
7. Reflect on values. Connect financial implications to your and your child’s individual and shared values. Ask: What matters most to us? For instance, if maximum flexibility is priority while in school and/or after graduation, then a lower-cost option may be the best bet as it can allow your child to pursue volunteer opportunities, unpaid internships, study abroad programs, and other opportunities which wouldn’t be feasible while attending a much higher-priced school and while needing to work throughout the year to help cover costs.
When values are clear, the decision becomes less about choosing between schools and more about choosing the path that aligns with the kind of life your child hopes to build.
8. Keep the conversation going. The “final choice” conversation may not be one and done and may need to be revisited several times until final decisions are made.
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