It’s no secret that America has a student debt crisis. According to the Institute for College Access & Success, 65% of seniors who graduated from college in 2017 had student loan debt, owing, on average, $28,650. Naturally, this has parents worried. 85% are concerned that student loan debt will hinder their child’s ability to purchase a home, car or other important items.
According to parenting expert Janice Robinson-Celeste, if you can afford to help your child pay for college, then you should do so, because it helps give them a fresh start.
FUNDING AN EDUCATION 101:
1. Maximize your savings
Start saving “right when the child is born,” says Robinson-Celeste. Open a high-interest savings account with an attractive interest rate, and consider a certificate of deposit (CD), which can pay an even higher rate for locking your money in for a predetermined amount of time − usually one to five years.
2. Let family members help
529 plans let you invest in a variety of mutual funds and save for an education tax free, as long as the money is used for qualified expenses, such as tuition, textbooks and supplies. The other benefit? Anyone can contribute, including grandparents and friends. “Instead of big extravagant birthday gifts, get relatives to contribute,” suggests Ande Frazier, CEO of myWorth, a financial education site. “It’s another way to bring money in.”
3. Start scholarship planning early
It’s possible to get an entire college degree paid for by scholarships, even if you’re not an academic wiz or sports phenom. Organizations like to give money to well-rounded students, so encourage your children to get involved in their community and participate in extracurricular activities. Keep detailed track of what your child is doing, and any achievements or awards they receive, as that will help with the application process later on. “Five or six scholarships can pay for a good chunk of college,” says Frazier.
4. Put some of your “kid’s skin” in the game
According to Robinson-Celeste, requiring kids to pay for their own education can make their experience more meaningful, but they don’t have to be on the hook for all of it. Tuition usually accounts for half the cost of school, while books, room and board, and other expenses account for the rest. Consider covering some of these costs. “At minimum, pay for books,” she says. “They can add up to thousands of dollars over a degree.”
Ultimately, thinking about education savings early is key, even if you don’t know where your child may go or if they’ll enroll in post-secondary education at all. The sooner you put money away, and the more you can help, the less debt your child will need to take on.
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