If you thought the tuition check was hard to write, you need to be aware of the other financial traps waiting for your college student. New regulations in banking and health care bring a new batch of potential problems that could add to student debt.
Many students, past and future, fall prey to the obvious pitfalls of ordering too many pizzas, accumulating campus parking tickets, or spending too much on campus activities. These can be worked through by helping your college student establish and live within a budget.
However, nowadays, student identification cards often double as debit card both on and off campus, making it easier to sweep those extra pizzas under the guise of a “meal plan.” Typically, parents fund an account that is linked to the student ID. Students then have the ability to make purchases at the campus bookstore, run dorm laundry machines, and eat at restaurants both on and off campus. Students take on the responsibility of making that account balance last through the semester or year. When using such accounts, be sure your student understands the features of the account like daily spending limit policies or automatic-funding options if the balance becomes to low.
Some schools have partnered with local banks or credit unions and allow students to link their IDs to a student checking account. The student ID then serves as their ATM card. While convenience may be a benefit, students need to be mindful of lost or stolen cards; ATM fees; overdraft protection fees, and teller transaction service fees, which may not be included with a student checking account. Overdraft fees generally start at $35 and can be accompanied by a daily charge if the deficit is not resolved.
In February 2010, the federal government enacted legislation changing how credit card companies can do business with students. If your child is under 21 years old, generally an adult must cosign for the student to get a credit card. While the new laws provide some protection for young adults, it is still up to your student to manage his or her credit wisely. Imagine being 30 years old and still paying off a party you threw when you were in college. Additionally, since students typically have not established a credit history, their interest rates could be higher. Henssler Financial recommends paying off credit cards each month to avoid paying interest.
Parents should also check their health care coverage closely. While the March 2010 health care legislation created provisions for young adults to remain on their parents’ plan until age 26, some plans may not offer the coverage until fall 2011. If your student is attending an out-of-state college, you will want to check your coverage for specifics on out of network benefits. Many company health insurance plans allow you to obtain PPO coverage if your student lives out of state without increasing your premium. Health care plans through the college may not be the perfect solution either as they may carry a high price tag. Student health plans may have high deductibles, limited prescription drug coverage or the exclusion of pre-existing conditions.
You may also consider looking into designating a health-care power of attorney and Health Insurance Portability and Accountability Act (HIPAA) release form as privacy laws prevent health care facilities from sharing information. While your student may be financially dependent on you, they are considered adults. If your student were to have an accident and were unable to speak for himself, a health-care power of attorney would allow your student to designate you or a relative to speak for him. A HIPAA release allows the patient to determine who can receive information on their medical care. While no one plans for accidents to happen, the reality is that college is likely the first time your child is living on his own and often in a different city than you.
Additionally, you may also want to investigate your homeowner’s insurance policy for coverage of possessions in your child’s dorm room; renters’ insurance if your child is living in off-campus housing, and your car insurance coverage, which could be higher or lower depending on the location of the college town.
A college education can run into the tens of thousands of dollars for a four-year public university. By planning ahead, your student can minimize unnecessary debt. For more information regarding college cost planning, please contact Henssler Financial at 770-429-9166 or experts@henssler.com.
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