Answer: You need to have the conversation you probably should have initiated a few years ago, before she started the college application process. She must understand that what she wants and what you can afford to provide for her may be two very different things.

Start by applying for financial aid at the colleges that have accepted her (let’s hope she applied to more than one). The “estimated family contribution” calculator at FinAid.org can give you a rough idea of what you’ll be expected to pay, but the actual package you’re offered can vary somewhat depending on how much the school wants your daughter to attend. You may want to invest in some books to help you understand the process, such as the Princeton Review’s “Paying for College Without Going Broke, 2012 Edition” and education expert Lynn O’Shaughnessy’s workbook, “Shrinking the Cost of College,” available at thecollegesolution.com.

Once you have the financial aid offers you can see which schools may be within your grasp and which are too expensive. Some schools encourage students and their parents to borrow heavily to attend, but that can lead to financial disaster — particularly since she has so many years of schooling ahead. Your daughter should try to limit her borrowing for her undergraduate education to what’s available through the federal student loan program (typically $33,000, total) and avoid private student loans, which have fewer consumer protections.

You as a parent can borrow through the federal PLUS program, but it’s easy to go overboard. The PLUS program will lend you up to the full cost of your daughter’s education, but the loan payments could be overwhelming and could prevent you from retiring. Student loan debt is almost impossible to discharge in bankruptcy, so you should be cautious about taking it on.

Your daughter should be able to cobble together an affordable education if she’s flexible about where she gets her undergraduate degree. Beyond that, she should know that the military and the National Health Service Corps pay for medical school in exchange for several years of service.

Answer: The “free money” you know is out there may not be the answer to your problems.

Yes, there are scholarships your boy might get to help pay for his education. But if he receives any financial aid from the university, those scholarships may reduce the amount he gets in grants — another form of financial aid that doesn’t have to be paid back.

If, on the other hand, he doesn’t get any grants, the scholarships could reduce the amount of loans he’d otherwise need to take out. He can start his search for scholarships at FastWeb.com.

You definitely should apply for financial aid from the university, if you haven’t already. (FinAid.org’s estimated family contribution calculator can give you a rough idea of how much you’ll be expected to chip in, although the school’s actual package may differ somewhat.)

Then take a hard look at what this education is going to cost you. You may not be able to afford it. If you would have to stint on your retirement, or your son would have to borrow more than the federal student loan limits ($5,500 for his freshman year), you probably need to look for other alternatives.

One option is for your son to live at home and attend a two-year college to get some of his requirements out of the way. Another is an in-state school, or one with a golf team that wants him badly enough to offer a better merit-based package of aid. FinAid.org offers resources and ideas for getting an affordable education, as does college expert Lynn O’Shaughnessy’s workbook, “Shrinking the Cost of College,” available on her website, TheCollegeSolution.com.

What you don’t want to do is bankrupt yourself, or consign yourself or your son to huge student loan debts. No education is worth a lifetime of debt, particularly when other options are available (and you have two other kids to educate).

Answer: Mortgages are secured by a piece of property that can be sold if the borrower fails to pay. Student loans are essentially unsecured, although collectors can pursue borrowers until they die since there is no statute of limitations on this debt.

The 6.8% rate on federal Stafford loans may seem high in this low-rate environment, but historically it’s a pretty good rate for an unsecured student loan. What’s more, the rate is fixed — unlike rates on private student loans, which are variable and can rise to 18% or more.

Your son probably won’t be able to find a lower rate unless you become his banker. If you’re financially able, you could pay off the loans and then charge him 4% or so to repay you.

Otherwise, he should focus on paying off his private student loans as quickly as possible, because of the risk that the rates will climb higher. To free up more cash, he should consider consolidating his federal loans to get a longer payback period — 15 or 30 years instead of the standard 10 years — and thus a lower monthly payment. If his income is low and the amount he owes is substantial, he also should investigate the income-based repayment option on his federal loans, which could further lower his required monthly payment.

Answer: Don’t go back to school to “try” for a degree. Go to get one. A college education is economically useless if you don’t get that sheepskin.

The financial aid education site FinAid.org is a great resource. You’ll find an “estimated family contribution” calculator that will predict how much you’ll be expected to pay for your education and how much financial aid you can expect. You also can learn about federal student loans, which are available to just about everyone and which have reasonable, fixed rates and numerous consumer protections, including income-based repayment plans. Try to avoid private student loans, which have variable rates and few of those protections.

I’ll be talking about:

• Why college is a must
• Why so many students drop out and how to avoid it
• Higher costs, deeper debts: What you need to know about student loans
• Finding a career that pays
• Managing your money in college and afterward

Dinner and my talk will begin at 6 p.m. at the Wichita Marriott.  At 7:30, a Financial Planning Workshop will be hosted for students and parents.

You must register to attend by clicking HERE.

Questions? Contact Gretchen Holthaus at gretchen.holthaus@wichita.edu.

The program is hosted by the College Access Challenge Grant through Wichita State’s Office for Faculty Development and Student Success.

Please share this with anyone you know who might be able to attend. Today’s families need all the help they can get ensuring their kids get educated to survive in this new economy.

This year’s college graduates face a particularly daunting array of financial challenges: Hefty student loan debt. A tough job market. Complicated financial options, from Roth IRAs to consolidating student loans.

It’s overwhelming, but not insurmountable. These seven mistakes and their solutions, adapted from my book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back (generationearn.com), are designed to help college grads bypass common hiccups and take control of their financial lives.

1. Taking on too much debt – or not enough. Too much debt can weigh down recent grads, forcing them to spend more money on interest and fees than on fun and other goals. The new credit card regulations make it harder for anyone under the age of 21 without their own income to take out cards of their own, which could make post-graduation overspending even more tempting and as intoxicating as frat parties are to college freshmen.

At the same time, the recent recession has led many young people take the debt-is-bad message too literally. Avoiding loans altogether, however, can hurt college grads. Sometimes, student loans for graduate school or a mortgage are good investments. Being responsible for credit accounts also allows 20-somethings to build their credit history, which is required if one day they want to take out a mortgage, auto loan, or other type of loan.

The solution: Build your credit history slowly and steadily, by opening up accounts in your own name and then paying them off on time.

2. Becoming victim to rapid lifestyle inflation. You’re a recent college grad, so that means you probably need a new car, new apartment, new sofa, and a new… Wait a minute. Not only do you not need all those things, but you probably won’t appreciate them much, either. A little theory called the “hedonic treadmill” explains why. We adapt all too quickly to improvements in our lifestyle. That 60-inch television that you drooled over at Best Buy will soon start blending in with the rest of your furniture, along with your top-of-the-line coffee maker and pillow-top mattress.

The solution: Instead of using your first paycheck to make your new digs look like a sitcom set, spread out your purchases over time. Maybe you need a bed right away, but that embroidered duvet cover from Pottery Barn can wait.

3. Falling into bad money habits. Bi-weekly $20 happy hours, daily $15 lunches, and nightly take-out are just a few of the bad habits that eat into new grads’ bank accounts. While the occasional lapse isn’t a problem, repeatedly wasting money on a weekly basis for years will cost you big-time.

The solution: Learn to cook, by enlisting the help of friends, family members, or your favorite celebrity chef (via the Food Network). The habit can save you hundreds, if not thousands, of dollars a year, and turn your home into a popular destination for friends. It’s a skill that lasts a lifetime.

4. Waiting to save and invest. Sure, you don’t feel like you have an “extra” money yet, and you’re still getting used to seeing your name on a paycheck. But that makes it the perfect time to start saving at least one-quarter of your income [link] for your future goals, including retirement. The first priority is to establish an emergency savings account with at least three months of expenses that can get you through any unexpected bumps, from unemployment to a car accident. Then, start saving for retirement. If your employer offers any type of 401(k) matching program, take advantage of it – passing it up is like saying no to a pay increase. Then, open an after-tax savings account for your other goals, from traveling to homeownership.

The solution: If saving any money seems daunting, then start by funneling a modest 2 percent of your income into a high-yield saving account or money market fund. Then, slowly raise that percentage. Once you have your three-month emergency fund stored away, then consider investing a portion of your longer-term savings in low-fee index funds and other more aggressive investment vehicles.

5.  Failing to negotiate for a higher salary. Even in this economy, employers expect some haggling over salary and benefits. In fact, doing so is a sign of professionalism shows that you, a recent college grad, understand how the working world works. A simple request after expressing enthusiasm and appreciation for the job offer can eventually lead to hundreds of thousands of dollars more in lifetime earnings. (Linda Babcock of Carnegie Mellon University calculates that not negotiating your first job offer can result in a loss of up to $1.5 million in lifetime earnings.)

The solution: Practice your job offer conversation in advance of receiving any potential offers so you’re ready to land a better deal and research your field ahead of time so you know what to expect. If the salary really is fixed, then consider focusing on other benefits, which can be worth as much as a third of the salary but job seekers often overlook. What are the health care benefits? Retirement account perks? Vacation days? Work-at-home flexibility? Decide what’s important to you and get ready for some professional haggling; it usually just takes one round of back-and-forth.

6. Thinking you’re done studying. Sure, you have your degree, but unless you attended one of the few schools that teach personal finance, you probably know relatively little about how to build wealth. That makes the post-graduation period the ideal time to take matters into your own hands.

The solution: Look for ways to learn more about smart personal finance strategies, and it doesn’t have to be boring. Dozens of blogs, websites, and books make learning about money fun, and many local community colleges and universities offer personal finance courses for local professionals. You might also want to consider forming a money club with friends, where you meet up once a month to talk about your money questions, goals, and research.

7) Getting buried in paperwork. There’s no avoiding the fact that being an adult comes with some secretarial duties. Suddenly, you have pay stubs, health insurance forms, tax documents, and credit card statements to keep organized. It’s easy to let them build up until you just want to shred the pile and toss it in the trash.

The solution: Take advantage of modern technology by going paperless whenever possible. Online accounts are easier to manage (and, bonus, better for the environment). New websites such as shoeboxed.com keep your receipts organized online, which is especially helpful at tax time. Mint.com makes it easy to track your spending and establish a budget.

The bottom line: Add “getting on top of your finances” to the list of things to do after graduation day – and try to make it as fun at least as fun as cleaning out your dorm room.

Answer: Please rethink this plan, because your family probably cannot afford this education.

Federal student loans would allow your son to borrow, at most, about a third of this school’s cost. If he were to borrow the rest of the money, he would have to turn to private student loans, which have variable rates and none of the consumer protections embedded in federal student loans. Private student loans are like using credit cards to pay for college — except unlike credit card debt, student loan debt can’t be discharged in bankruptcy.

The other alternative would be for you to borrow the difference between his federal student loans and the cost of his education using PLUS loans. These are federal education loans for parents and graduate students. As with federal student loans, the rates for PLUS loans are fixed, although they’re somewhat higher — 7.9%, compared with 6.8% for unsubsidized Stafford student loans.

But using PLUS loans means taking on a lot of debt at a time in your life when you should be concentrating on saving for your own retirement. If making the payments would interfere with your ability to contribute sufficiently to your retirement funds, you shouldn’t even consider borrowing the money.

Even if you already have a well-funded retirement plan, you should think twice. Your son may be able to get a better, more affordable education from a public college — particularly if he starts at a two-year community college nearby, allowing him to live at home more cheaply, and then transfers to a four-year school.

For-profit colleges can be expensive, and loans made to students who attend four-year for-profit colleges have twice the default rates of loans made to other college students. Figures provided by the U.S. Department of Education show that of loans that entered repayment in 1995, 30% of those made to students attending four-year for-profit colleges were in default 15 years later, compared with 15.1% for four-year public colleges and 13.6% for four-year private nonprofit schools.

That high default rate should give you pause, even if you were paying cash for this education, because it indicates that many graduates either aren’t finishing their educations or aren’t finding jobs that pay well enough to repay their loans.

Critics complain that for-profit schools often over-promise and under-deliver when it comes to training students for existing jobs. The for-profit schools attribute high default rates to the demographics of their students, who are more likely to be lower income and from minority groups than other college attendees.

You may feel guilty for shorting your son when it came to saving for college. But please don’t compound the problem by blessing an education that could leave him, and you, with unaffordable debt.

A lot has been written about students who take on crushing debt to go to college. I’ve written some of those stories. But the far bigger story is this huge population that doesn’t go into debt for school, and who wind up far worse off for it.

Here are the facts:

• The percentage of 25- to 34-year-olds in the U.S. with at least a two-year degree is just 40%, while only 30% have four-year degrees.
• The premium for a sheepskin has risen over the past few decades. In this age group, college graduates with at least a four-year degree earn 60% more than high school graduates. At the end of the 1970s, college grads earned just 25% more.
• Earning power for those without college degrees has dropped sharply in recent decades. A male with only a high school degree, for example, earns 31% less in inflation-adjusted terms than his counterpart two decades ago.
• Unemployment for those with a college education is about half that for those with just a high school degree. The disparity in unemployment rates grew wider during the recent recession.

So opting not to get a degree means substantially less income and greater job insecurity. And this penalty will just get worse in coming decades as more manufacturing jobs get shipped overseas. That’s why Pop over at Pop Economics recently wrote, “For the love of God, go to college,” the phrase I quote in my headline, in his post “2011’s job market: The separation of the haves and have nots.”

One of the factors in our low degree attainment rate is potential students’ concern about taking on debt.

But the median cumulative debt among graduating bachelor’s degree recipients at 4-year undergraduate schools was $19,999 in 2007-08, according to Mark Kantrowitz at FinAid.org, who analyzed the latest National Postsecondary Student Aid Study. Median means half had more debt, half had less. One quarter borrowed $30,526 or more, and one tenth borrowed $44,668 or more.

As the authors of the new book “Not Quite Adults” point out, the median debt load is about equivalent to what you’d borrow to buy a new car. Yet many—too many—balk at this investment.

I quoted the authors, who scoured a decade’s worth of recent longitudinal and panel studies of people in their 20s for the book, in a recent column “Is the Ivy League a waste of money,” and what they have to say is worth repeating:

“Debt is not the main reason young adults are failing to launch,” they wrote. “In fact, not taking on debt is sinking the futures of many young adults. Fearful of the burden of college loans, they are underinvesting in themselves at this critical time, letting their immediate worries compromise their long-term security. . . . Not taking on college debt in this knowledge economy is a costly decision.”

photo credit: Lensaku

So you just graduated into the worst recession since the Great Depression with a boatload of debt and no job.

My question is: why are you still here?

There will never be a better time in your life to travel the world than right now. You’ve got months until your first loan payment is due, the world is on sale thanks to the downturn, and you’re young enough that hostels, third-class railway cars and street vendor food don’t scare you.

So go.

Got no money? Get a crap job for a couple of months, stock shelves or flip burgers or whatever, and then go. Pick regions where your money goes farther–South America, Indonesia, India. You may well be able to live for far less than you can at home, while expanding your horizons, meeting new people and having the adventure of a lifetime.

Then go. Just go.

You have the rest of your life to get ahead, climb the ladder, pay the bills, work the overtime. You have this special time, right now, to wander the earth while you’re young, curious and healthy. Your mind is open to new experiences and new people. It’s time to make the memories and friendships that may last the rest of your life.

So. Just. Go.