If you’re a parent, the financial burden of paying for your child’s college education is likely weighing heavily on your mind. From the moment your child is born, you start to wonder about the best savings account to open and how much you can afford to set aside each month. Will it all be enough by the time your child graduates from high school?
Unfortunately, the rising cost of college is surpassing the earnings of families. Between 2000 and 2018, the average family income in the U.S. increased by just 5%, while the cost of attending a private, nonprofit four-year college rose by a staggering 18% between 2010 and 2020. The recent Supreme Court decision to strike down President Biden’s student loan forgiveness plan further adds to the financial strain faced by families hoping to alleviate the burden of educational debt. Without any relief plans or tuition reduction strategies on the horizon, families must find ways to cover costs within the existing system.
Barring any unexpected windfall or a full-ride scholarship, most families will rely on a combination of savings, earnings, and loans to cover the costs of a college education. There is no magic formula that makes it easily affordable, but by adjusting certain variables, you may be able to develop a plan that works for your family. Here are some key factors to consider in order to keep costs manageable:
1. Start saving as soon as possible: The earlier you begin saving, the more time your money has to grow. Financial advisor Shang Saavedra suggests opening a 529 savings account even before your child is born. Online calculators can help determine the monthly amount you need to set aside to reach your goal. 529 accounts are popular options as the money grows tax-free and can be used for qualified education expenses. Additionally, contributions to a 529 are counted less heavily in determining needs-based financial aid.
2. Explore different savings account options: In addition to 529 accounts, consider child savings accounts (CSAs) if they are available in your community. CSAs often offer matching components from the community, allowing families to save while earning rewards. Taxable brokerage accounts and Roth IRAs are other alternatives, although they come with their own tax considerations. Evaluate the pros and cons of each option to find the best fit for your family’s needs.
3. Consider the financial fit of colleges: When creating a college list, it’s essential to factor in the financial fit of each institution. Use net price calculators provided by colleges to estimate your financial aid package. It may also be worth considering local colleges that would allow your child to live at home and commute, reducing housing and living expenses.
4. Explore alternative pathways to a bachelor’s degree: Starting at a two-year community college and transferring to a four-year program can significantly reduce costs. While community college graduation rates may be lower, dual-enrollment programs can also help students earn college credits and shorten their time in school.
By considering these factors and making informed decisions, you can take steps towards making college more financially manageable for your family. Remember that there is no one-size-fits-all solution, but with careful planning and strategic choices, you can navigate the complexities of college expenses.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
