Everyone screws up when it comes to money.
It doesn’t make you stupid—just normal, says Jill Schlesinger, a financial planner, CBS News analyst and author of the new book The Dumb Things Smart People Do with Their Money.
One of those dumb things is over-borrowing for college, something Schlesinger says is an increasingly dangerous pitfall for middle and upper-middle class families for a variety of reasons. Parents want to do everything they can to give their kids the best opportunities in life, and some may feel they haven’t done a good job if they can’t give their student the college experience they want, she says. Meanwhile, college costs have climbed faster than family income, while most new jobs demand some level of postsecondary training.
“When you bring all those factors into one stirred pot, you get a very explosive and emotional situation,” she says.
Schlesinger has been giving financial advice for nearly 30 years, and she’s layered those personal experiences with data on tuition, student debt, and the job market to help you learn from the financial mistakes others have made when it comes to sending their kids to college.
MONEY talked with Schlesinger about her chapter on paying for college and condensed her best advice into the tips below. She says it’s imperative that parents are honest with themselves about what they can afford, protect their kids from borrowing too much—and avoid these three major errors.
Mistake #1: Jeopardizing Your Own Financial Future
When you’re tempted to overextend yourself to send your student to their pricey dream school, keep in mind that you’re not doing them any favors by putting the family on rocky financial footing.
Too many parents count on playing catch up with retirement contributions after they pay for college, Schlesinger says. Some even plan to delay their retirement by several years, only to find themselves with no plan B when their salary is cut or they’re laid off.
It’s mind-blowing, Schlesinger says, that the fastest growing segment of the population with students loans is people who are in their 60s and older.
“I know you want to do right by your kids, but remember: If you screw up your own retirement, the burden is going to fall on them,” she says.
Mistake #2: Equating Price or Brand Name with Quality
Some of the more extreme voices in personal finance push students to avoid debt at any cost—relying on scary, outlier stories of graduates with six-figure debt burdens who can’t find jobs.
Schlesinger doesn’t. She highlights research, both in her book and in an interview, that shows college pays off for most graduates, even if they have to borrow to afford it. Men with a bachelor’s degree claim nearly $900,000 more in median lifetime earnings than high school graduates, and women with bachelor’s degrees earn about $630,000 more, says Schlesinger, citing data from the Social Security Administration.
Still, Schlesinger is adamant you shouldn’t borrow more simply to attend an expensive college or a college with a recognizable name. Instead, you’ve got to weigh the costs and benefits of a college with your family’s financial situation and your student’s career goals, she says.
That’s because a college’s wage premium depends most on what you study and what career fields you ultimately go into. The size of the payoff, in some cases, also depends on your family’s economic situation, Schlesinger says.
MONEY’s college data show, for example, that students who studied business at Texas A&M University-College Station and the University of Texas at Austin report salaries that are on par with graduates of Baylor and Southern Methodist universities—even though the latter two are well-known private universities where MONEY estimates a degree will cost on average $50,000 more. In New Jersey, the public Ramapo College of New Jersey—less well known than the flagship Rutgers University or prestigious College of New Jersey—has a better graduation rate and a lower average student debt load than nearly 50 private colleges in the surrounding states with more expensive average prices, according to MONEY’s rankings.
Schlesinger is concerned about the middle- and upper-middle class families who are generally outside the cutoffs for need-based financial aid, but aren’t wealthy enough to bear the full price of college. Too many of those parents, she says, aren’t analyzing costs and returns. Instead they’re scrimping to send their students to more expensive private colleges, just based off the assumption they’re better than an in-state public college.
“You really do need to start seeing the college decision for what it is: a hard-edged business decision, one of the biggest and most important that you and your family will ever make,” Schlesinger writes.
Mistake #3: Waiting Too Long to Plan
Plan for college like you would plan a vacation. That doesn’t mean you should endorse a school based on its proximity to the beach. But you should figure out what you can afford well before you choose a destination, just like you would when planning a family trip.
Once you’ve got an idea of what you can afford, you have to communicate that to your children. Do not, Schlesinger stresses, wait until the spring of your student’s senior year of high school as they’re reviewing acceptance and financial aid letters. Instead, tell your kids during their freshman year of high school how much you plan to contribute to their college expenses.
It may feel awkward to talk about financial constraints, but just be honest, she says.
“You say, ‘This is what we feel comfortable doing, and as a result, this is the kind of school we think is going to be most appropriate,’” she says.
If your student wants to go to a more expensive school, then you can work together to research the options for scholarships or other strategies to make it affordable. But you shouldn’t simply allow your child to borrow excessive private loans to attend a more expensive school. And you absolutely shouldn’t feel you need to borrow or dip into your savings to bridge the gap between what you can afford and the price of where your child wants to attend.
“I’m really worried that we have a whole cohort of parents who, with the best intentions, are putting themselves in an insecure position when it comes to retirement,” she says.