Dear Liz: I have an 18-year-old daughter who wants to attend a private, out-of-state school. I don't have any money saved for her education and do not make enough to cover the cost of this college. What are my options? She's an A student and is planning to go to medical school.
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.
Keep major credit card accounts open
Dear Liz: My wife and I have opened about 20 credit cards, including retail cards, over the past 12 years or so. We have no balances on any of these accounts. We recently bought a home and don't plan to apply for any new loans in the near future. Should we close all these accounts and take the potential credit hit now, in order to have a much cleaner credit sheet after a few years?
Answer: One of the many persistent myths about credit is that having too many cards is bad for your credit scores. In reality, the leading credit scoring formula, the FICO, doesn't punish you for having "too much" available credit. You can, however, hurt your credit scores by closing accounts.
If you're not going to be in the market for a new loan any time soon, you can certainly close a few retail cards if you no longer use them and don't want the hassle of keeping track of those accounts. But you'll probably want to keep open your major credit card accounts (Visa, MasterCard, Discover, American Express) unless there's a compelling reason to close them, such as an annual fee you don't want to pay.
Carry redacted copy of Medicare card
Dear Liz: Is there an alternative to having my Social Security number as my Medicare number? This seems to fly in the face of all we have been taught as to keeping our financial identifiers secret.
Answer: More than half the states have banned the use of Social Security numbers on health insurance cards, but those laws don't apply to the federal Medicare program. Unless Congress acts to change the federal law, you're stuck with having your Social Security number as your Medicare identifier.
The Privacy Rights Clearinghouse recommends you protect yourself from identity theft by making a copy of your Medicare card and using a black marker to cross out the last four digits of your Social Security number, or cutting out the last digits with scissors. Then you could carry that version of your card, so that if your wallet is stolen the thief doesn't have access to your full number. You would still need to bring your original card the first time you visit any new healthcare provider, but you wouldn't have to carry it with you all the time.
Liz Weston is the author of "The 10 Commandments of Money" and "Your Credit Score." Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or via http://www.asklizweston.com. Distributed by No More Red Inc.