Parents: Plan for Your Child's College Costs

College students sitting on stepsIt’s impossible to predict whether your child will experience unexpected costs or an emergency during his or her time in college.

But by researching, planning and budgeting for the known and unknown, you’ll be less likely to experience a big financial hit. 

Set Financial Responsibilities for College Costs Beforehand

Before school starts:

  • Sit down with your child and outline all expected college costs — everything from living expenses to entertainment extras.
  • Then, establish what you plan to pay for and what your son or daughter must cover.
  • After establishing the responsibilities, it’s a good idea to set aside all your education funding into a separate account with a little padding in it for emergencies.

Check Insurance Coverage

Anything can happen, so it’s important to make sure your child and his or her property have the appropriate insurance coverage while away at school. This includes:

  • Health
  • Car
  • Renters
  • Technology insurance for cell phones or computers

If you decide to keep your child on your insurance policies because it offers better coverage or rates, decide if you will cover the entire payment or if your child is responsible for his or her share.

If you decide to help your child establish his or her own plan, read the fine print carefully and make sure your teen understands what is and isn’t covered.

Health Insurance
The health care reform law makes it possible to keep your child on your own health insurance plan until he or she is 26 years old versus having him or her use a college-sponsored plan.

If you opt for your child to have his or her own insurance plan, check with the school to inquire what it offers students.

  • Does the college plan provide cheaper rates and doctor visits at its campus clinic?
  • Does it cover your child’s every health care need, such as dentist visits, physicals and wellness exams?

Make sure to compare the premiums and coverage on the college plan to what your child receives on your insurance. Part- and full-time jobs also might offer health insurance for your student.

Car Insurance
If your child brings a car to college he or she will need insurance. People younger than 25 years of age typically face higher insurance rates, so it may be cheaper for your child to remain on your auto policy.

If you decide to keep your child on your policy, remember that your rates could go up if your teen is in an accident or is ticketed for speeding. However, insurance companies also offer perks such as “good student discounts,” which may qualify your student for a lower rate.

Beware the Credit Hook

Certain situations can leave you on the financial hook for your child, including co-signing your son or daughter’s credit card. If you co-sign, you are jointly liable and your own credit might suffer if your child doesn’t pay the bill on time. This is the time to set clear expectations for your son or daughter.

On a Tight Lease

Off-campus housing is another college cost to consider. You’ll acquire a financial stake in your son or daughter’s apartment if the landlord requires you to co-sign the lease. Be aware of your responsibility if a roommate fails to pay rent or leaves or if damage to the property occurs.