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Avoid These Financial Missteps When Sending Children Off to College

July 16, 2023
Sending a child to college is often one of the largest expenses a parent will face. The financial strain can often be made worse due to some common, ostensibly minor errors.

In this article, Cheryl Winokur Munk from The Wall Street Journal details several financial mistakes to avoid when sending your kids to college.


Avoid These Financial Missteps When Sending Children Off to College

Sending children to college can be among a parent’s most expensive financial endeavors. But thanks to seemingly small mistakes, the financial burden can be even greater than parents expect.

The stakes are high when you consider that families spent $25,313, on average, on college expenses in the 2021-22 academic year, according to a Sallie Mae report. While there are major mistakes to avoid such as not seeking financial aid or applying for scholarships, small oversights can be equally, if not more, costly.

Here are several financial missteps that parents can avoid with planning:

+ Underestimating out-of-pocket expenses

Costs related to food, transportation, books and supplies, and social activities can add up quickly during the college years, potentially leading to thousands of dollars in unanticipated expenses for families who fail to budget for them, financial planners say.

For starters, many families underestimate the cost of food and groceries, says Deri Freeman, a certified financial planner with Prudential in Vienna, Va. This is especially true these days, as food prices this year are expected to rise 6%, according to the Agriculture Department’s Economic Research Service.

The cost of a campus meal plan varies, depending on the institution and the type of plan selected, but they often range between $3,000 and $7,000 a year, based on a sample of plans offered by several colleges and universities. But even students on meal plans tend to convenience shop, order takeout and eat out frequently, which can lead to hundreds of dollars in additional spending a month if a student isn’t careful.

One option for managing costs is to start with the cheapest meal plan possible and adjust it later, if necessary, says Kelli Send, co-founder and principal of Francis LLC, a financial- and retirement-planning firm in Brookfield, Wis. It’s also a good idea for parents to set limits on out-of-pocket food spending.

Travel and transportation is another area that families sometimes gloss over, planners say. Students attending public four-year out-of-state universities could expect to spend $1,250 on transportation during the 2022-23 academic year, according to a College Board report on trends in college pricing and student aid. Families need to set a realistic budget for transportation to and from school, especially if the student lives far away, Send says.

Having a car also can lead to additional expenses for students, such as fees for parking spots and permits.

Books and classroom supplies also can add up quickly. College Board puts the average budget for these items in the most recent academic year at $1,240. But it might be advisable for families to pad the budget a bit in case more expensive items like computers get damaged or stolen.

Send says she advises clients to look for online deals; one family she knows was able to save $850 by buying their student’s books online. Other ways to potentially save on books include buying older editions, renting textbooks, sharing and exploring free or digital options, according to Nitro, a division of Sallie Mae that helps students navigate paying for college.

+ Not setting clear expectations for the student

It is important for parents to set realistic expectations about what types of expenses they are willing to cover and set reasonable limits, financial planners say. They should also be clear about what expenses the student will be responsible for, whether it’s contributing a certain portion of the tuition or funding their own social activities, such as participating in Greek life, which can run thousands of dollars annually.

“Sometimes parents are so excited about having their kid going on the next journey that these types of conversations get lost,” Send says.

Kelley Wolfington, senior wealth strategist at SEI Private Wealth Management in Oaks, Pa., recommends families create a “college contract” so expectations are clear. The contract might set out, for example, the family’s agreed-upon budget for the student, divided into parental and student responsibilities. If the expectation is that the student is going to work and contribute a particular amount, that should be in the contract.

It’s also good practice for students to track their expenses using a simple spreadsheet or app such as and share it with the parent monthly, so they can discuss and amend if necessary for future months, says Kristin Fishbaugh, senior wealth adviser at Mariner Wealth Advisors in Cincinnati.

+ Giving the student unfettered access to a credit card

College students may not be able to qualify for a credit card on their own, at least initially. So many parents add their student as an authorized user on an existing card, or they open a new card with the child as an authorized user, which can make it easier to track spending.

But this can turn into a liability if the student—enjoying the newfound freedom from Mom and Dad—starts spending carelessly and the parent isn’t keeping careful watch.

Parents should speak to their children about their expectations for using a shared card, planners say. Many cards offer email or text spending alerts so parents can see how the card is being used in real-time as opposed to having to wait for a statement.

“I’ve seen the most conflict arise when there’s not a conversation and there’s some surprise charge that the parent found out about when the statement came,” Freeman says. “You don’t want to be caught off-guard.”

+ Not having access to the student’s account

Even though parents often pay the college bills, they typically can’t view their student’s tuition statements or grades unless their child grants them access. That’s because after age 18, parental access to this type of information is no longer a given. Schools have different procedures for granting parental access, so this should be on the family’s to-do list the summer before classes begin.

Parents need to see the big picture so they can ensure the bills are paid on time, scholarship and loan money is accounted for, and there are no unexpected charges that could have an impact on the student’s ability to remain enrolled and register for classes on time, Wolfington says.

Some students are reluctant to have parents peeking in on their college communications, so a trust factor might need to be established. In a typical scenario, a student might be happy that a parent has access to tuition-bill information, but not if the parent uses his or her access to appear to micromanage the student’s day-to-day progress in classes.

Still, parents are likely to want access to their child’s grades if they are footing the bill—and to avoid financial surprises. For example, many scholarships are merit-based and contingent upon a student maintaining a certain grade-point average. Parents also should be aware if their student is dropping classes or failing to take a full course load, as this can lead to added expenses for summer classes or an additional year or more of college.

+ Withdrawing money from a retirement account to pay for college

It can be tempting for parents to dip into traditional IRAs and 401(k) funds to pay for college, since that’s often the biggest—or the only—source of savings parents have, says Fishbaugh.

Some parents may think it’s a good choice—and might even consider a 401(k) loan—but there can be drawbacks to touching retirement funds.

Cash withdrawals (and 401(k) loans if not paid back on time) add to parents’ taxable income, which could push them into a higher tax bracket. It also increases what is known as their expected family contribution, used to calculate financial aid, Fishbaugh says. In addition, tapping retirement funds means that parents might be giving up investment gains on that money.

Before tapping retirement funds, parents might want to first research additional scholarship opportunities, federal parent loans, private loans, a home-equity loan or line of credit or even a Roth IRA, paying careful attention to the withdrawal rules, Fishbaugh says.

Even with these alternative sources of funding, there can be implications for financial aid, so families should thoroughly research the options before deciding, she says. The Free Application for Federal Student Aid, or Fafsa, looks back two years to determine family income for the coming school year, so there may be ways around some of those aid implications with proper timing, planners say.

+ Not obtaining a durable financial power of attorney

If all goes well, parents might never have to intervene in their student’s financial affairs. But there can be instances when a parent may need the authority to perform financial functions such as paying for off-campus rent or a credit-card bill, if the student has his or her own card. Otherwise, late fees could mount and there could be an impact on credit scores. This could be true if the student is in a serious accident while at school or on a semester abroad, or develops a medical or physical disability, for example.

Having a durable power of attorney can avoid the expense and headache of needing to involve the judicial system for permission to act on the child’s behalf at a time when things are already inherently stressful, Fishbaugh says.

There are different kinds of financial powers of attorney, and laws vary by state, but families can speak to an attorney about what works best for their situation.



Cheryl Winokur Munk
The Wall Street Journal

R. Kikuo Johnson


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