Families are struggling to pay for the ever increasing costs of higher education. The increasing college costs and the loans they take for financing their child’s education gets them worried about their own retirement. Parents are feeling more and more burdened by the constantly increasing tuition costs and it’s starting to affect their life financially and personally. Getting a college degree is very much part of an American dream and parents seem very much supportive of this idea but they are also worried about the costs and how to pay for it.
A Survey Report
According to a recent survey a majority of 54% parents thought that their retirement would be in jeopardy due to increasing student loans. The same survey suggested that almost 94% of the parents felt their child’s higher education debt was a burden upon their financial lives and out of them nearly 45% clearly stated that they didn’t have a plan for rescue.
Some former financial advisors suggest that financial planning is a vital step that needs to be taken well before you start applying for any loans or for any monetary aid; may be even when your child is a junior or a senior in high school. Proper planning in this regard would be helpful and parents who managed to plan effectively are more likely to succeed.
Otherwise one would end up paying more and it will definitely take more time. Parents need to explore sources of grants and scholarships before taking out any loans but that too is possible when your child has good academic history. For that children need to be motivated so that they achieve good grades making their education almost free.
Retirement vs. Academics
Parents should avoid a heavy loan that they would be unable to pay within 10 years or till the time of their retirement, whichever comes earlier. They also need to be encouraged to save, because it’s cheaper to save than borrow. When one saves it’s the interest that he earns whereas borrowing results in interest as an expense. Set your priorities; specifically as parents you need to focus on your retirement first. They need to realize that kids can borrow to go to college but retired individuals are unable to loan their retirement. Although it sounds a bit conservative but that in fact is the reality. A new Discover Student Loans survey (DFS) shows a dip in the plan of no. of parents to help their child pay for college from 81% last year to 77%. Out of those, 85% of parents also think that getting loans will hinder the future prospects of their child’s ability to buy a car or home for instance. But there is still a positive side of the picture as 96% of those parents still see the value behind college education.
The Numbers Game
The numbers speak for themselves as eighty percent of college grads earn more as compared to the ones merely having a high school diploma. The rate of unemployment for a high school graduate is 8.1% as compared to 3.7% for college degree holders. According to the College Board, the average four year public university is $ 18,391 in state and $31,701 out of state which is a 2.9% rise over the past year. Despite the increasing tuition prices, the ratio of number of parents who said cost is not a factor when choosing schools increased 3% to 48% this year from 2013. In addition, 44% say that they would be inclined to limit the college choices based on prices and 9% were unsure, both figures were lower from the prior year.
It’s very hard to strike a balance between being economically smart and letting kids, who have aspirations and goals, pursue their dreams. The financial implication of attending a certain college needs an understanding from parents and for that it is advised strongly to sit down and plan early in the process. There is an increasing trend among parents who are shifting the tuition bill to their children with 15% saying their child should pay the entire cost of college, 3% increase from 2012.In addition, 32% parents think majority of school costs should be paid by their child which was 27% in 2012. When it comes to the likeliness of parents helping their child in repaying loans, 52% parents agree and 28% of them say it’s somewhat likely that the loans will be repaid by them.
There are schools that provide financial assistance but for that, early research is the way to move forward. It is generally seen that families tend to rely on the word of mouth of friends, family and the lack of energy and will begin to explore college attendance options themselves, is comparatively rare. One has to search for the right economic options – in some cases a private loan can be less expensive than a federal loan. The better you do, the better you will be equipped to make smarter decisions for your family.
More reading: 8 Ways to Save Money on Your Child’s College Expenses
Photo Credit: Flickr via Creative Commons
Do you have a plan for paying for your child’s college expenses?