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As higher education costs continue to rise, many parents are understandably concerned about how they can finance their child’s college education. However, it is possible to make higher education affordable with careful planning and smart saving strategies.
It will take self-discipline, sacrifice, and lots of love for your child.
Let’s explore some simple ways to save and finance your child’s college education.
Start saving early
One of the most important things you can do to finance your child’s college education is to start saving early. The earlier you start, the more time your savings will have to grow. But it’s never too late to start. The key is to start saving because having some savings is better than no savings.
In the US, parents can use several savings vehicles, including 529 college savings plans, Coverdell Education Savings Accounts (ESAs), and custodial accounts. 529 plans are a popular option, as they offer tax advantages and are specifically designed for college savings.
Take advantage of tax-advantaged accounts.
As mentioned above, 529 plans and ESAs offer tax advantages that can help you save more for college. In addition, you can take advantage of tax credits such as the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). These credits can help reduce your tax bill and make college more affordable.
Consider community college or online courses.
While many students dream of attending a prestigious four-year college or university, the reality is that these institutions can be costly. Consider starting your child off at a community college or taking online courses that are much more affordable. Many community colleges have articulation agreements with four-year institutions, meaning your child can transfer credits and complete their degree at a lower cost.
Encourage your child to apply for scholarships.
Scholarships are a great way to help finance your child’s education, and many different types of scholarships are available. Encourage your child to apply for as many scholarships as possible, including local scholarships, scholarships from professional organizations, and national scholarships.
Consider student loans as a last resort.
According to data from the Institute for College Access and Success (TICAS), the average debt for college graduates in the United States was $28,950 in 2020.
It’s important to note that these figures represent the average debt of all college graduates. Individual debt levels can vary greatly depending on factors such as the type of college attended, the cost of living in the student’s area, and the student’s financial circumstances.
While student loans can be a valuable tool for financing college, they should be considered a last resort. Student loans can be difficult to repay, especially if your child graduates with a lot of debt and struggles to find a high-paying job. If your child does need to take out student loans, encourage them to borrow only what they need and to choose loans with the lowest interest rates.
Average Student Loan Debt
- $1.75 trillion in total student loan debt (including federal and private loans)
- $28,950 owed per borrower on average
- About 92% of all student debt are federal student loans; the remaining amount is private student loans
- 55% of students from public four-year institutions had student loans
- 57% of students from private nonprofit four-year institutions took on education debt
Sources: Federal Reserve, The Institute for College Access and Success, College Board, MeasureOne
These strategies can help your child achieve their educational goals without breaking the bank.
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