College Savings – Think Ahead
More than 20 million young Americans are headed off to college this month. According to the 2015 Sallie Mae How America Pays for College report, a national study of college students and parents, families spent on average $24,164 for college in the academic year 2014-2015 -a 16 percent increase from the year before. This is the first significant increase in this study in the past five years. The average tuition fee for attending a private college or university is more than $45,000 for the 2015/2016 academic year and if room and board are added that’s another $15,000.
So is the high cost of a four-year degree worthwhile? According to the Wall Street Journal, the job market for graduates is red hot right now. Labor market research shows that the lower the U.S. jobless rate at graduation, the better their chances of finding a job. And they’ll earn significantly higher wages compared with those who finish school amid higher unemployment.
Paying for college is one of the biggest financial commitments a family has to plan for and the more you think ahead the better off you and your child will be. There are several ways to pay for a college education:
- Student Loans: 40 million students in the US have opted to pay for their education with a student loan. As the cost of college has increased, so too have the total of the loans. Most students now carry four loans, up from less than three in 2008. Projected cost increases mean that taking student loans 10 or 15 years from now will saddle a child with enormous debt.
- College Savings: Less than half (48%) of families are saving for college and the average college savings balance has decreased. It’s dropped 25 percent from $13,408 in 2014 to $10,040 in 2015, the lowest level in three years. Only two in five families have a plan to pay for all years of college before their child enrolls.
- Help from family members and grandparents: A 529 plan can offer tax benefits now and help pay for college costs when the child is ready. Speak to a financial planning advisor and find out about the various types of 529 college plans available.
The cost of a college education is fast becoming a contender for the largest investment a family will make. Thinking ahead and saving for college can give a child a financial head start – they have a better chance of finding a job, they’ll earn more than someone who did not go to college and they’ll have no crippling student loan debt.
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