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Don't Graduate College With Student Loans

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A Pricey Future

If you are a parent, even of a newborn child, you are likely concerned about your son or daughter's future. After all, the news is filled with rising tuition costs for online degrees and stories of frightening student loan debt. At the same time, everyone is becoming more aware of the importance and necessity of a college degree. As a parent already thinking about your child's education, getting financial aid advice even many years in advance is crucial. By the time your child reaches college age, you'll be well-prepared to help him or her.

Parents neglect to save for their children's college costs for a variety of reasons. For one, college may seem so far in the future for your child! Keep in mind that those years will go by fast, however. By the time your child is of college age, college costs will likely have tripled or quadrupled. Also keep in mind that it is much cheaper to save money now than to borrow later. Private student loans often carry a high interest rate, so you'll end up paying back much more than your child's education actually costs.

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Don't Rely On Uncle Sam Too Much

Another mistake is expecting to rely on federal financial aid or financial aid offered by your child's future college. Federal financial aid, private scholarships, and other sources of college funding are valuable, but they merely supplement your own financial contribution. Most of your child's college tuition money will come from you, the parents. If you and your child don't have enough savings or income to cover these expenses, you'll have to take out student loans.

Saving money for your child's college education does not have to be overly complicated or a financial hardship for you. Starting a college fund is easy. Even if you are only able to put a small amount into the account each month, your savings will start to grow. You can also encourage your child to begin saving for college later down the road, particularly if he or she gets a job as a teenager. By the time your son or daughter is ready for college, there will be a significant amount of money in his or her college fund.

Saving Early Saves Big

An excellent way to begin saving for your child's education is the 529 plan. This college savings plan is available in the majority of states. If your state doesn't offer this, you can invest out-of-state. The 529 plan allows you to receive tax breaks while you are contributing to the fund, helping to make college saving financially manageable for you so you don't have to take out student loans.

A 529 plan does not require your child to attend college in the state where you have invested. Rather, it offers the flexibility of attending out-of-state colleges. You as the parent and investor will have full control over how your child's funds are allocated, and you will be able to retain possession of the funds should your child decide not to attend college.

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Any Parent Can Save For Their Kids

A big concern for parents, however, is whether saving for your child's education is financially feasible. After all, you likely have more current debts and bills to worry about. Most financial advisors would tell you to pay off debts with high interest, such as credit card debts, before it is worthwhile to begin saving for your child's college. When it comes to distributing your funds, you should seek professional assistance to manage your assets and debts.

As a parent, thinking seriously about providing means of college financial aid to your children is likely a priority for you. It is never too early to start planning and saving money for college so that your children can have a better future.

Some Helpful Links

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HowStuffWorks "How 529 Plans Work"

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Publication 970 (2010), Tax Benefits for Education

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Prepaid College Savings

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Your Comments

  • EasyScholarshipsNow Mar 3, 2012 @ 9:13 pm | delete
    How stuff works is definitely a good site.
  • webkangaroo Feb 29, 2012 @ 5:46 pm | delete
    Nice lens -- but really I don't see how my two teen sons are going to college w/o loans! But this will definitely be food for thought.
  • KarateKatGraphics Feb 13, 2012 @ 10:45 pm | delete
    student loan debt is a travesty -- so many young adults with no job, saddled with enormous debt. our society is failing this age group, and a lot of that is due to needlessly skyrocketing tuitions. colleges need to grow a conscience!
  • Coopstar Jan 31, 2012 @ 11:29 am | delete
    This is a great lens since many people don't realize that taking out loans is not the only way to pay for college, there are so many other good options!
  • KathyT Jan 16, 2012 @ 8:57 am | delete
    I was lucky in that I went to a state college in New Jersey, where tuition was really inexpensive for residents. I literally paid cash as I went - working at a mall nights, and at a Colorado guest ranch in the summer to pay my way. I never took a loan, and did it all on my own. I probably got more out of THAT than the actual education! :) Blessed.
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