5ARTICLE | February 11, 2025

In this month’s article we’ll discuss what we feel are some of the most crucial financial literacy steps to take as your child prepares to leave for college as well as important information all families should know about the FAFSA.

College is more than a place of formal education. It is also a time for young adults to become fi nancially literate and take responsibility for their fi nances. However, during this transition, parents often still pay for their children’s tuition and living expenses and yet simultaneously lose all authority and control over making fi nancial decisions for their children once they are over the age of 18.

Steps to Take as Your Child Heads Off to College.

• Have a Discussion about Personal Finance and Budgeting.

As your child prepares for college, it is often the perfect time to start (or deepen) your conversations about money. Many personal financial milestones begin at this age. For example, your child might get a credit or debit card for the first time in college. Discuss the basics and make sure they know how to develop a budget and understand how and when to use a debit card and a credit card responsibly. If you plan to have your child cover some of their own expenses, such as entertainment, communicate what you plan to pay for (and not pay for) before they go to college. Be thorough when discussing finance with your child, as they may have misconceptions of how some things work. Helping your child lay a firm foundation with personal financial knowledge before heading to college is a great way to encourage financial independence.

• Have a Power of Attorney on File.

If your children have their own credit cards, bank accounts, student loans or other debt payments, it is important to have a power of attorney on file. This would allow a parent to access their child’s financial records and assist in making financial decisions if the child cannot make or The Essential Financial Checklist for Parents of College-Bound Students communicate decisions, perhaps due to illness. If the child is incapacitated, cannot be located, or needs assistance for any reason, the parent would also be able to gain access to the child’s cell phone or other records, which may be critical in locating or helping the child.

We generally recommend formally establishing a power of attorney on your children’s accounts instead of owning financial accounts jointly with your children. Please consult your tax professional and/or attorney for specifics on how this may impact you.

• Have You Child Sign a Health Care Proxy and/or Medical Directive.

In addition, it is also very important to have your child sign a health care proxy and/or medical directive. Once your child turns 18, you are no longer legally allowed to make decisions for them regarding their medical care, and will not have access to their medical records, absent a legal document or court order. Getting the requisite legal documents in place now allows you to avoid the potential expense, hassle, and time delay of obtaining a court order.

If your child plans to attend college in a state outside your family’s residence state, it is recommended to have the required legal documents in place for both states. Doing so will reduce the possibility of the legal document done in the home state not being recognized in the state in which your child goes to college, or vice versa. Unfortunately, accidents do happen, and these essential documents will ensure that you will be there to help your child through an injury by making critical medical decisions for them when they are unable to do so themselves.

• Consider Liability Exposures.

Finally, consider the liability exposures to your (and your child’s) financial position when you have a college-aged child. Consult with your attorney before purchasing real estate in your name where your child will live by themselves or with other roommates and update your personal liability coverage to ensure adequate coverage against any potential lawsuit.

Most homeowner’s policies will offer some coverage for students away at school. If your child is a full-time student and a dependent in your household, your homeowner’s policy should automatically extend some coverage to a new dorm location. Things get trickier when living off-campus. If your child is housed outside of the school dorm, you need to be sure to list the new location specifically on your homeowner’s policy to protect you and your child (especially if you have co-signed a lease) or obtain a separate renter’s insurance policy for your child. Generally, a homeowner’s policy will also provide up to 10% of your personal property coverage limit to cover your child’s belongings at a college location, subject to the policy deductible. It is important to note the internal policy limits for jewelry, sports equipment, and electronic devices as these are the items most often stolen on college campuses.

While you might be tempted to remove your college-bound child from your auto policy while they are away at school without a vehicle, in order to save on premiums, this is often not the best decision, as the nominal cost savings is not worth the protection you would lose. Keeping your child insured on your personal auto policy will allow your child to drive your cars when returning home, maintain liability coverage as a driver while operating a friend’s vehicle at school, and will protect your child if they are struck by an uninsured motorist while walking or cycling. Additional discounts are available to students who maintain a 3.0-grade point average and/or are over 100 miles away from home, further reducing insurance costs.

What Families Should Know About the FAFSA.

• What is it?

The FAFSA stands for Free Application for Federal Student Aid. It is a form used to apply for federal grants, workstudy, and loans. Many states and colleges use FAFSA data to award their student aid as well.

• When Do I Need to Submit It?

Historically, the FAFSA has been available beginning October 1st each year. However, because of significant changes to the application and the rebuild of the FAFSA processing system, the 2025-26 FAFSA will not be available until December 2024, at the earliest. Many schools offer awards on a rolling basis, so it is important to fill out the FAFSA as soon as possible. FAFSA deadlines for each state and college are available on the college’s website and fafsa.gov/ deadlines.htm.

• Why Should I Complete It?

Some schools will not consider students for merit scholarships until they’ve submitted a FAFSA. Regardless of income, it is most likely in the family’s best interest to complete the FAFSA to open the opportunities for non-need based financial aid.

• How Do I Complete It? 

– The simplest way to start an application is to create an FSA ID that allows the student to complete the process online. Parents and students should have separate FSA IDs to sign the FAFSA electronically.

– Near the beginning of the FAFSA application, there is an option to create a “save key,” which is a temporary password that allows applicants to start their FAFSA form and save it without finishing it. The save key does not need to be kept private like the FSA ID. Save keys are helpful if the parent and student work on the FAFSA from separate locations. `

– There is an option to automatically transfer tax information using the Internal Revenue Service Data Retrieval Tool (IRS DRT). If the IRS DRT is chosen, tax information will not be displayed within the application and instead will show as “Transferred from the IRS.” `

– The student should list all schools they intend to apply to on the FAFSA regardless of acceptance status. Some states may require that a state school be listed first to be considered for aid. Individual state requirements are available on studentaid.gov.

• What Scholarships are Available for Students That Are Not Need-Based?

The primary opportunity for non-need-based scholarships is merit-based, either through a private organization or the specific school the student plans to attend. Additional opportunities for non-need-based aid may be available through religious or community organizations, local businesses, organizations that relate to the student’s field of interest, etc.

In addition to scholarships, depending on the family’s income, there could be opportunities to benefit from certain education-based tax credits, such as the American Opportunity Credit and the Lifetime Learning Credit.