A four-year program at a public university can cost more than $25,000 to complete. At a private university, it’s more than double that amount for the same four-year program. If there are no strings to stretch, perhaps your child could settle for a two-year program for just a little more than $17,500.
Education in America is expensive. Parents can get a life policy from a mutual life insurance company that includes living benefits. But these funds take time to mature. And what happens if you have two or three children to send to college? If you’re a parent worried about your child’s or children’s college education, you might find the following discussion useful:
America and Its Student Loans
One of the more exciting plans proposed by a candidate in the national democratic primary is to cancel all student loans by some 42 million Americans. That’s a bold plan by Senator Elizabeth Warren. That will be indeed a relief to parents, graduating students, or even students who have already graduated.
On average, 69% of the 2018 class had loans close to $30,000. From that group, some parents got additional credits worth $35,600. It’s quite scary, but if college time for the kids is still a long way away, there might be a few steps to avoid the loan trap.
Getting Ahead on Your Child’s College Fund
Even if you save, by the time they’re 18 and ready for college, the value of that savings will probably cover 50% of the total cost of education. That said, saving shouldn’t be taken out of the equation entirely.
- Understand what you need to pay. The federal government offers student aid. You can view this as a “partial scholarship.” The government’s contribution varies according to each family’s economic means. There is an application and screening process. Following the application and approval process, you will then know what your Expected Family Contribution or EFC for your child’s college education.
- Pay in advance. It’s hard to catch up with inflation if you’re saving a few hundred dollars a month. Some colleges allow you to pre-pay for your child’s college tuition, long before he gets to the right age. This locks in the tuition rate at the level you started paying for it. This is also handled differently by each state, so check what the programs are in your country. You might get a tax incentive too.
- 529. Derived from a section on the IRS code, the 529 Plan is a savings plan that also offers tax incentives. This means tax payments on the earnings can be deferred. Parents set aside $2,500 per year. The amount saved upon withdrawal must be earmarked for education expenses only, e.g., tuition, books, or computer expenses.
- Home equity loan. This is where you can get creative. Getting this loan is a more attractive alternative than racking up student loan debts. It’s better because you can also get tax incentives.
- Take advantage of the extras. You will get bonuses, commissions, tax deductions, and windfall. Set these aside to help fund your child’s college education.
You will also be surprised by how much you can raise by doing a yard sale. Save those baby strollers and those sports gear from high school. It’s not easy, but you can make the effortless hard by considering the ideas above.