Beyond Linens and Textbooks: Prepping for College
In a matter of weeks a whole lot of households will be short one member-perhaps for the very first time. Alien abduction? Nah. The start of college. By now the parents of these new students are probably rather sick of this long process. It started with a list of schools, progressed to campus visits (with lots of miles involved) moved on to the FAFSA forms and ended-hopefully- with multiple acceptance letters and that final decision. Since then it’s been high school graduation, making the first tuition payments and, of course, figuring out and buying all the things to take. Finally, it’s dealing with the realization that your little boy or girl is moving out. There’s a lot to this college stuff.
So, the last thing you’re probably interested in is some newsletter article telling you there might be more to do. Sorry- I’m often paid to deliver news that people don’t want to hear. So I’m here to add a couple of things to your “To Do” list that might be a little out of the ordinary, but from a financial standpoint, can be important.
1. Take an Inventory: There are a lot of things moving out of your house and off to some dorm room or apartment in another town or state. The electronics alone might be worth thousands. If something happens to any of this “stuff,” you’ll want to be able to prove it existed and to identify it. Make a video of all the things that are going away. Write down serial numbers and model numbers of any electronic equipment. Activate or install tracking software on these items; so if they do go missing, you might be able to track them down.
2. Make Sure Your Student’s Possessions Are Insured: Give your homeowner’s insurance agent a call and find out what is and isn’t covered by your policy for items away at college. You may be told that the dorm is an extension of your home for the student. But dig a little deeper for the details. Are there criteria that need to be met for coverage? For example, some policies say they cover the possessions if the student is a full-time student (as defined by the school). But what if he/she drops a class and is a credit hour short of full-time? Are there coverage limits (and are you going to like them)? Is the coverage the same for an off-campus apartment as it is for a dorm room? Some policies may say coverage ends if the student is not at that location for say 60 days. If they leave stuff behind and come home for the summer it may be more than that. Ask if a renter’s policy might be appropriate. Those policies are cheap and don’t have a lot of limitations. They also come with their own liability coverage, in case Junior does something “not smart” and gets sued.
3. The Legal Side of Things: Most students going off to college are at least 18- the age of majority in NC. That means that some of the parental rights you have had as they’ve grown up may not be there anymore. The law may see them as adults and independent of you even if you’re footing the bills. A few things you may want to ask your child to do before leaving are:
a. Sign a Healthcare Power of Attorney: If they get hurt at school you want to make sure there are no barriers to you being able to make healthcare decisions for them. You may be granted them anyway, but an over-zealous or over-cautious healthcare system might present some roadblocks. This will help avoid that.
b. A HIPPA Release Form. HIPPA (Health Insurance Portability and Accountability Act) has a big focus on health information privacy and significantly restricts access to medical information to anyone who is not an ‘Authorized Recipient.” You will want access to this information if your child is hurt and is receiving medical care. You will want to be able to discuss the situation with the doctor involved. A HIPPA release form signed by your child will give you that access.
c. Do You Want to See His Grades? All the way through high school you have had the right to see his grades, discuss them with the school, and even dispute errors. But the rules change once they go to college. The Family Education Rights and Privacy Act says that those rights transfer to the student once he enters post-secondary education. Schools do have some flexibility in whether they release information, but in many cases they aren’t compelled to do so. The first thing to do is ask the college what their policy is. But even if it is to release information, you may want to ask them for a copy of their FERPA release form and have your child complete it. I’m sure you’re like me in believing that if you’re paying the bills, you should be able to see the results.
4. Teach Them to Use a Checking Account: They may never even write a check at school, but it’s a good bet they’ll be using as ATM card and a debit card on that account. Educate them about how those work. ATM transactions may or may not have fees-depending upon what machine they use. A lost debit card can be like open access to their checking account. Teach them how to balance their checkbook. I know-it’s all online. But there is something tangible about writing down what you spend that doesn’t translate online. Giving thought to spending is a great habit to develop and one that will serve them well down the road.
5. What About Emergencies? What if their car breaks down? What if they have an unexpected, but legitimate, large bill to deal with? The checking account may not do the trick. So what do you do? Maybe an emergency card is in order. I emphasize the “emergency” part. I don’t think they should be routinely charging on a card. It’s too detached from the actual spending of money. But a credit card is almost a necessity in today’s world. It used to be credit card companies gave away t-shirts to any student who signed up for their card-right on campus. But those days are gone! Federal law says that a student must show the ability to pay for the card himself or must have a co-signer. So what are some options?
a. Prepaid Card: It works almost like a debit card. It has a balance and when it’s spent, it’s gone. It’s great for limiting the potential damage to your bank account. One downside is that it does nothing for your student’s credit score.
b. Secured Card: At first it sounds like a prepaid card, but it’s not. It’s often used for poor people with poor or no credit. A certain amount of money, say $500 is deposited with the card company as collateral. What gets charged on the card doesn’t get deducted from this. That needs to be paid just like any other credit card bill. The collateral helps limit the company’s risk and makes them more willing to issue the card. These cards do usually show up on the student’s credit report and so can help with establishing a history.
c. Authorized User (AU): Simply put, you put them on your card. The upside is it’s easy to do. But do a little homework with your card company first. See if you can set the credit limit for that card. Also make sure you know how to “unauthorize” them if you need to (realize that if they can’t qualify for a card on their own at that point, the whole balance may be due then). The AU is not obligated to pay the bill, so you’re completely on the hook. Lastly, the card may or may not show up on their credit report, but it’s worth checking into seeing if the company will do so. There’s one potential downside to the student in this arrangement. If you have trouble paying the bill, it may negatively impact their credit history, too.
So there you have it. The things a financial planner would worry about when sending a kid to college. Yeah, we’re an odd bunch, but that’s the way it is.
I wish your student the best of luck in this new adventure. It will be an amazing one, I’m sure. Good luck to you the parent who is going to experience just as many changes.
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