Get Smarter About College
Everyone has heard the stories of young adults going into debt to pay for a college degree that won’t get them a job that pays enough to pay off that debt. Or parents who sacrificed retirement security to pay for their children’s higher education. As a new generation of parents plan for their children’s future college education, what are some of the most valuable lessons they can learn from the previous generation’s experience?
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Get Smarter About College
The last decade has been a college funding debacle for students, parents and the nation.
Students have collectively borrowed $1.75 trillion in federal and private loans to fund education costs. The average student balance for the 25-34 age cohort is $32,707, which rises steadily and reaches a peak with individuals aged 62 and older ($49,375).1
Everyone has heard the stories of young adults going into debt to pay for a degree that won’t get them a job that pays enough to pay off that debt. Or, as the data above indicate, parents who sacrificed retirement security to pay for their children’s higher education.
The pandemic really brought the crisis to a head—a crisis deferred when student loan repayments were suspended. With the recent Supreme Court decision that only Congress had the ability to suspend student loan repayments, young college graduates and their parents must now begin paying off student loans.
Lessons Learned From the Last Decade
As a new generation of parents plan for their children’s future higher education, what are some of the most valuable lessons they can learn from the previous generation’s experience?
The first lesson is to start saving for college early, even when the money to do so may be tight. Starting out when a child is born can begin with small amounts, but when their earnings are compounded over a long period, these amounts become meaningful. Start by finding a way to cut spending $50 per month and direct those savings toward a college fund. Open a 529 plan and contribute to it systematically.
Understand that college is not for everyone. When the time comes, make sure your child is interested and motivated about pursuing a college education. Remember, there are many well-paid skill professions—like plumbing, electrician, wind turbine technician or solar photovoltaic installer—that don’t require a college education. Failure to complete college with student loan debt due to disinterest is the worst of all possible scenarios.
Broaden your college search. One reason college costs are so high is the high demand for a small group of name-brand schools (think Ivy League, Duke, etc.). Look for lesser-known schools that provide a great education at a more reasonable price.
Don’t be afraid to have your children work during their college years. Many previous generations had part-time jobs while going to classes, without sacrificing grades or the “college experience.”
Consider enrolling into a community college and transferring to a four-year college for the final two years. The savings in the first two years are significant, and can keep students and parents in better financial health.
Finally, don’t use retirement savings or home equity to pay for college since that may place parents in a tenuous position relative to their future retirement financial security.
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