August is here, and in just a few weeks, the class of 2017 will begin their final year of high school. For my daughter Kaye, this happened last year, and she was thrilled. Me? Not so much. It seemed to be one “last” after another. I know, I should have been looking forward to all the upcoming “firsts”, but what mom can get through senior year without a few tears.

For many seniors, the first few months of the school year are stressful. Not only do you have to keep up with school work and activities, but you also have to submit college applications, and pick a school. Now, before your senior gets too deep in the process, is a good time to have a talk with him or her about how you’ll pay for college. Since so many kids will take out student loans to pay for school, it’s important that they are clear about what they are in for before they commit.

According to an annual survey conducted by Sallie Mae, the student loan provider, only about half of Americans have saved any money for their kid’s education. Among those who had saved for college, in 2015, the average amount set aside by families with teenagers was $14,790. This will certainly be a help, but it won’t go very far. The following chart compares savings with the average annual cost of  four year college tuition, fees, room and board based on data from the College Board. The average savings won’t fully cover a single year.

Given this data, it’s no wonder the average college graduate in 2016, who had taken out student loans, left school with over $37,000 in debt. With loans like this, the standard monthly payment would be around $370 using current federal student loan interest rates. This is important information when thinking about where to go to school and how to pay for it.

Say that your daughter is a stellar student, and she is offered a scholarship to attend a small private school. The cost to attend will only be $25,000, instead of the $42,000 list price. Given that the in state school will cost $20,000, that seems like a good deal. However, if you can’t fully pay for her education, the extra $20,000 for four years at the private school will add $200 to her monthly student loan payment. If she knows this ahead of time, she might make a different choice.

Here are five things to discuss with your student before she begins applying to colleges.

• Tell your student how much you will be able to pay. This includes what you have saved and what you are willing to commit to out of your income.
• Outline options for raising the extra money. In addition to student loans and scholarships, your student may be able to raise some money through part-time or full-time work. Taking a gap year to work and save up for school is a reasonable approach.
• Help your student understand the implications of their choices. Student loans may be hard to avoid, but they can certainly be minimized if you understand your trade-offs. You can calculate the monthly payments given different loan amounts on the Federal Student Aid web site.
• Provide context for the information. Estimate the kind of monthly salary your student might earn given her career interests. Payscale’s College Salary Report is a good place to start. It wouldn’t hurt to also talk about average living expenses. Career Trends has a cost of living calculator. Don’t forget to show the impact of taxes. How much of her take home pay will be left after student loan payments?
• Consider starting school at a community college. The average cost per year at public two year colleges is only $3,435 assuming your student can stay at home while she attends.

Parent’s everywhere fret about the cost of college and how they will afford it. If college is around the corner for your family and you haven’t saved enough, speak frankly with your son or daughter about their role in paying for their own education. Young people need to make choices about their education with all of the information available.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net