Knowing, avoiding the sticker shock of higher ed
With student debt rising at twice the rate of inflation, it's more important than ever for parents and students to understand their options about paying for college.
Posted — Updated
With student debt rising at twice the rate of inflation, it's more important than ever for parents and students to understand their options about paying for college.
It’s never too late to start saving for college.
No matter when you begin, the more you save will reduce the amount needed to borrow for college. This, in turn, saves even more money, because a smaller balance means less interest owed when paying back the loan.
- Save regularly. Making savings part of your monthly finances will make it easier to keep doing it and not risk tapering off. Saving $100 per month for 18 years with a 4 percent interest rate could help your student have over $31,000 to put towards higher education.
- Consider opening a savings plan. A {{a href="external_link-15768537" rel="nofollow"}}529 college savings plan{{/a}} provides a tax-free incentive when funds are utilized on approved expenses at college institutions.
- Factor in more than tuition. Textbooks alone average about $1,100 per year. Keep in mind living expenses, transportation and other possible financial needs of your student when saving for college.
Needing to borrow in order to cover the full cost of attending college is something most families go through when sending students to school. Fortunately, it’s getting easier to research and compare options when it comes to financial aid and cost of attendance.
Federal or private loans are the two choices when it comes to student loans.
For most, federal loans are the more attractive option. The interest rate is fixed, meaning no surprises after graduation and easier budgeting, and these loans often do not charge interest while the student is still in school.
Private loans are offered by banks and their interest rates are usually not fixed, meaning payments can increase, sometimes dramatically, over the years.
Sandy Wheat, executive director of the N.C. Council on Economic Education, points out the importance of thinking of the outcome of borrowing for school before it happens.
"It is extremely important to consider the end profession before taking on student debt," Wheat said. "It wouldn’t make a lot of sense to have $100,000 in student loans from a private university for one to become an elementary school teacher. Consider the expected salary and insure that loan repayment will not become burdensome with that salary."
Wheat goes on to discuss other avenues than the traditional four year school, saying, "Students would do well to consider more cost-effective educational avenues such as completing the first two years at a community college near their home. This will significantly decrease the amount of loans needed."
{{a href="external_link-15768538" rel="nofollow"}}Know Before You Owe{{/a}} is a Consumer Financial Protection Bureau project aimed at helping families know as much as possible about their financial options at schools throughout the country.
{{a href="external_link-15768539" rel="nofollow"}}A financial aid shopping list{{/a}} was compiled that allows universities to provide standardized information to families. Utilizing this tool isn’t a requirement to ensure the best financial outcome when paying for college, but the title gives great advice: the sooner you know what you need to know about saving and paying for college, the easier it will be.
Copyright 2023 by Capitol Broadcasting Company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
