If you want to leave your farm business to your children you may very well hope for them to go off to college to prepare to take over the business. Even if they don’t plan to return to the farm, you may want to help them with their education expenses. But you don’t want to let the kids' college education derail a successful retirement.
Use these six tips to minimize the risk of funding a college education.
1. Have the student do their homework BEFORE school – Seek internships and informational interviews in the intended field of study to confirm that they enjoy the work and find the prospect of a career in this area fulfilling. Do the math on the expected cost of the education and consider potential earnings in the career. Be sure they will have adequate income to pay off any debts.
2. Free money first -- Even if the student thinks he won’t qualify for grants or scholarships, he should submit the Free Application for Federal Student Aid, or FAFSA. Colleges and universities typically require one before they’ll make any awards and the results are often surprising. Many of these funds need not be paid back.
3. Federal student loans second – There are many sources of college funding loans, but the federal student loan program is typically less expensive and offers more advantages. The program allows for an income-based repayment plan and may allow for some loan forgiveness.
4. Don’t let the student get in over his or her head – Never assume that the Federal Student Loan program will only loan the student money they think can be repaid. There is no risk analysis or loan underwriting with this program. The burden is on the student to limit borrowing to management amount.
5. Ask the Tough Questions –
• Do you even need a college degree for the field you seek? In many careers today technical skill and experience can be more valuable than a degree.
• Do you need to go to a four-year institution for all four years? Many student save substantial sums by studying general education requirements at the local community college before transferring to a four-year school to complete their degree.
• Where do you want to live? The cost of housing is the second largest component of college costs after tuition. Modest housing can make a substantial difference in overall college costs.
6. Just Say 'No' – Sometimes the prudent decision is NOT to help a student with college. Remember, you can get lots of college loans, but there is no such thing as a retirement loan. When you are no longer able to work in the farm business, it’s your retirement income plan that makes it possible for the operation to move to the next generation. Don’t compromise the income plan to fund a college education.
If this blog has got you thinking about your own situation, get in touch with my office ([email protected]).
The opinions of Rich Dunn are not necessarily those of Farm Futures or the Penton Farm Progress Group.