Saving For College
Most parents want their children to go to college. At the same time, most parents now identify paying for college as their biggest financial concern. As a parent, you have a legitimate cause for concern. Over the past decade, college costs have risen faster than inflation and faster than family income. More and more, the burden of paying for a college education is falling on the family. This is affecting their decisions about whether to send their child to college and where to have their child enroll.
Now, you may be saying to yourself But wait a minute. Isn't financial aid available to help cover college costs? And isn't the amount of available financial aid going up each year? Won't I be able to get my fair share?
Yes, it is true that student financial aid is available, and it is being awarded in record amounts. Over $100 billion in financial aid is awarded each year from need-based and merit-based grant and scholarship programs that are funded at the federal, state, and local levels. However, most of the increase in recent years has come in the form of new loan programs and expanded borrowing capacity. In fact, student loan debt now averages more than $17,000 for four-year graduates, and parents are borrowing more and more each year to cover college costs. This not only places a financial burden on young college graduates, it also makes it more difficult for parents to afford to pay for a second, third, or fourth child to go to college.
One way you can reduce the amount you and your child will need to borrow is to save as much as you can before they enroll in college. Saving for college is an often overlooked strategy for covering college costs. Most families do not begin saving any money for college until the student is in seventh grade, and the amount they are able to save averages just $11,000. This tuition nest egg is usually gone in a year or two, and the family must then turn to borrowing. By starting much earlier, even when the student is in elementary school, parents can significantly reduce their future borrowing or provide their child with additional options with regard to their choice of school.
There are many reasons why parents don't save for college. Let's explore a few of them to see if we can correct some misconceptions and give you some new options:
Parents Help Continued...
"An investment in knowledge always pays the best interest. ~Benjamin Franklin"
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