Here’s the college scenario as you probably imagined it: 

  • You’d visit your child’s chosen college one last time this spring — just to make sure he loves it.
  • You’d visit with the financial aid office and the cost piece would click into place. 
  • Your kid would be happy, you’d be satisfied. He’d be all ready to make a final decision. 

But things may not be working like that at all. To add insult to injury, the account you’d stuffed money into (since he was in diapers!) may have tanked.

Well-meaning people may have said to your kiddo, “Go to community college! Go to a trade school! Do it online! Work your way through school!”

Sure, your child could attend a less-expensive institution — there are thousands of cheaper options. But a cheaper option might not be a good fit for your child. As you’re well aware, there’s more to choosing a college than just money.

Here’s what to do if the stock market has wreaked havoc on those college invest accounts and your kid is firm in his desire to attend a school that’s, well, not cheap.

First, Here’s What’s Going On

What’s one thing investors hate? 

Uncertainty. Even if you’re not wild about economics, you can see how consumer fears can hamper the economy: 

  • Consumers are nervous about spending money so they don’t spend as much. 
  • Businesses freeze. They do whatever they can to keep operating without as many customers.
  • Unemployment increases. 
  • Many investors sell stocks and flock to lower-risk investments.
  • The value of your portfolio goes down.

COVID-19’s impact on the economy and market has taken a breathtaking toll. In fact, the entire occurrence’s been dubbed a “black swan.” There’s no predictive modeling for an illness — most of the people in the finance industry aren’t epidemiologists. So what will happen next?

Consider What May Happen 

The consensus among experts is that the economy will recover quickly from this crisis. They say we’ve cruised into the fastest bear market in history and the stock market will bounce back quickly. 

However, what about jobs? During the Great Recession, according to the Bureau of Labor Statistics, unemployment totaled:

  • Five percent in December 2007
  • 9.5 percent in June 2009
  • 10 percent in October 2009 

It took 10 years to dig out of these employment levels. It could happen this time around, too. Do you think your job’s unsafe? Could a job loss further hamper your child’s ability to attend college?

Not great things to think about. Sigh.

Analyze Your Investments

Many, many college savings plans (like 529s) automatically move from an all-equities aggressive allocation to a more conservative bond allocation as your child grows older.  

Plain English: This simply means that as your son or daughter approaches college age, risk automatically reduces.

This is how retirement savings should work, too. For example, in the early years of your career, an all-equities portfolio is appropriate, but as you grow older, more bonds (or similarly less-risky investments) should be added to your asset mix. (Check your retirement savings’ asset allocation. Ask your plan administrator if you’re not sure if your account is where it should be.)

Let’s say you invested in an all-stock portfolio and dubbed that “Junior’s College Savings.” If it’s too heavily invested in high-risk funds, don’t beat yourself up. It’s easy to lose track of it over time or listen to some bad financial advice. At any rate, you may feel more comfortable moving that money to something more low risk.

  1. If your child is going into college next year, it’s not a terrible idea to move a year’s worth of tuition into a cash-based investment, like a money market fund.
  2. Talk to your financial advisor and make sure your child’s account is in an appropriate portfolio option.

Know that Your Child’s Not Out of Options

Want to know one beautiful difference between paying for college and floating your own retirement? 

Someone who hasn’t saved a penny may not be able to retire, whereas there are always ways to fund a college education.

Even if your savings have tanked or you’re facing a job loss, your child still has options. Let’s chat about them.

1. Reach Out to Colleges About the Financial Aid Award

Colleges get it: COVID-19 means a whole slew of families may have challenges paying for college.  

Reach out to the college your son or daughter wants to attend. Be sure you’ve gotten a financial aid award from that school. Ask the following questions.

Are there other scholarship opportunities available?

Scholarships in all forms and sizes are widely available, which you may have discovered when you received your child’s financial aid offer. Many are small — between $500 and $2,000 — but they can add up. Ask the financial aid office whether there are additional scholarships your son or daughter can still apply for. The school may be happy to let your child apply for a business scholarship or last-minute theatre scholarship. All you have to do is ask.

Can my child get work-study? Or get more work-study?

Work-study is a federally-funded program that allows your child to earn money through an on-campus job.

Your son or daughter may not have been awarded work-study at all, and this is the time to ask whether it’s available.

Ask if more work-study can be added if it’s already plugged into the financial aid award.

How can student loans help? What are my options?

Loans get a bad rap. They really can be a lifesaver. If they’re done right (in the context of a well-conceived financial plan!) they don’t have to create an insurmountable financial burden after graduation.

In other words, carefully analyze how loans can be pieced into the mix after scholarships, grants and your own financial contributions are exhausted. Ask the college’s financial aid office about your federal and private loan options.

Was my FAFSA information correct?

It’s easy to make a misstep on the FAFSA. Work with the financial aid office to double-check. Did you (whoops!) include your 401(k) retirement? Was your expected family contribution (EFC) inflated due to a one-time income? (EFC is an indicative number that colleges use to determine how much financial aid you’re eligible for.)

The financial aid office at your child’s future school should be able to help you fix errors on your FAFSA.

2. Let Colleges Know You Have Different Circumstances 

Have you experienced a job loss or a significant reduction in income? The college needs to hear about it. There are other situations that could qualify as special circumstances:

  • You support multiple households. (For example, you may live apart from your spouse or you may support elderly family members.)
  • One-time income
  • Funeral, medical or dental expenses
  • Your own education debt

Make sure the college knows about drastic changes in your college savings accounts. Check with the college financial aid office to find out whether you’re eligible to fill out its special circumstance form.

3. Delay Using Funds if Necessary

You may feel as if it’s best to wait a year or consider alternatives to give your investments time to build back up. For some kids, working for a year or waiting a little longer is a good idea. For others, it’s not a good idea at all. Some kids need the structure of an academic environment right after high school.

What’s best for your kiddo? A healthy family discussion could be in order. Here are some ideas to springboard a discussion:

  • Your child could go to his desired college part-time and work part-time to help pay for it.
  • He or she could take a gap year. Almost all schools will allow you to defer enrollment. Deferring enrollment would put time on your side in hopes that investment returns would be more positive in a year’s time.

These options might not be ideal. If you all decide that your child’s best bet is to go to the school he originally chose, remind yourself that your child may be attending college for four years — or more!

There are other years you can apply the money you’ve saved once the markets have bounced back. 

Focus on the Positives

Sure, your child could always attend a less expensive community college for two years and then transfer those credits to a four-year college to earn the degree. But you know he’d be more successful at the liberal arts college or university he wants to attend. There’s some security in knowing you’re making a good decision for your child.

Remember, there’s a lot to be okay with now. The coronavirus epidemic isn’t hitting at the end of July — it’s still April! That still means that there’s time to recover and let things get back to normal before August or September.

Many schools are optimistic that a regular return to the school year will happen by fall. 

Finally, remember that your child is going to his first choice institution, and that deserves some congratulations. Again, some things are more important than “getting a good deal” on a college.

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