Halloween may be over, but there's one financial nightmare that haunts most parents - how to pay for college.
You can't turn on the news lately without seeing something on the student loan crisis that is gripping our country. Tuition costs have soared and Americans currently have $1 trillion in outstanding student loan debt. The average undergraduate leaves school with about $30,000 of debt. Those numbers are truly the stuff of nightmares.
So how do you, as a parent, prepare yourself and your child to tackle this seemingly impossible financial problem?
You can't turn on the news lately without seeing something on the student loan crisis that is gripping our country. Tuition costs have soared and Americans currently have $1 trillion in outstanding student loan debt. The average undergraduate leaves school with about $30,000 of debt. Those numbers are truly the stuff of nightmares.
So how do you, as a parent, prepare yourself and your child to tackle this seemingly impossible financial problem?
- Start early. Planning for education expenses should begin as early in your child's life as possible. Start saving, whether it's through an old-fashioned savings account or through a 529 Plan.
- Research your 529 Plan options. Your employer may offer you the option of participating in a Plan through regular paycheck contributions. If you don't have that option through work, meet with a qualified financial planner who can help you decide if a 529 Plan is right for you.
- Look at all the options. The statistics on 4 year graduation rates aren't encouraging. Recent data suggest only 41% of kids graduates in 4 years. This is where the community college option becomes invaluable. Many community colleges have agreements with 4-year universities to make transferring easier, and the greatly reduced tuition at community colleges could mean big savings while your child completes the first two years of general education requirements. This is the route I took and every month when I go to make my student loan payment, I am grateful I made that decision.
- Consolidate those loans. If your child ends up financing their education through student loans, be sure they research this option carefully. Consolidating loans can mean locking in a fixed interest rate but it may also mean paying more in interest due to a longer payback period (up to 30 years in some cases). Check out this great resource that can help you navigate this important consideration when it comes to student loan repayment.
- A job that helps with loan repayment. There is a new trend afoot in corporate America- an employee benefit that helps pay down student loan debt. Only about 3% of US employers currently offers this benefit, but it is seen by many as the next big thing in terms of benefits that will help attract top talent to a company. When your child is searching for that first post-school job, this is something they should investigate. A recent storyin the Washington Post reveals that Pricewaterhouse Cooper is the latest large employer to offer this perk. They will be offering employees as much as $1,200 per year (for up to 6 years) to go towards their loans. There are, of course, tax implications because this is counted as income, but it can at least offer some relief to those who leave school burdened by a heavy debt load.
- Research, research, research. The best way to approach this issue is to arm you and your child with as much information as possible. Did you know that there are public service employee and teacher loan forgivenessprograms? Depending on your child's chosen field of employment, there could be a corresponding student loan program to help them manage their debt.
