College Savings Confusion
By: Madeleine Freind
College has never been more important, but paying for it gets harder every day. In fact, tuition costs have grown at twice the rate of inflation over the past 15 years, and the average student graduates with twice the debt he or she did just 10 years ago.
Today, 82% of parents feel that the cost of college is getting out of reach. It's becoming a stay awake issue for nearly all of us.
Lisa, mother of two young children, says what many parents feel: "I think about it and don't know how I'm ever going to do it. It's so overwhelming to realize how much it's going to cost."
Many parents worry, as Lisa does, about where the college dollars will come from. Some parents are confused on how to begin, while others allow old savings myths to ease their fears. Four of the biggest college savings misconceptions are:
- My child will earn a scholarship or receive financial aid to cover tuition.
Financial aid comes increasingly in the form of loans, not grants. Less than 40% of dependent children receive grants. Those that do, receive $3,000, on average (against public university costs of $11,000). Even with grants and loans, families must typically cover between 40 and 50 percent of the cost.
- I'll start saving next year, there's plenty of time.
Starting early pays off. Seize the day! Get creative about tucking away college cash. Clip coupons for a month and keep track of the savings, putting aside the money you save after each trip to the grocery store. Get the family in on the act by saving loose change in a designated jar.
- Borrowing money, taking a loan against our house, or dipping into my retirement account is a smart way to cover all of my child's college expenses.
Because college is so important, those loans are a good investment in your kids, but saving for college is better than borrowing for college. Every dollar you borrow for college can rob over $4 from your retirement.
- My child will work his or her way through school.
Consider the impact a school-year job might have on your child's achievement. More than half of full-time students have school-year jobs. Those that do, work 25 hours a week, on average. (It's one reason more and more students are taking five and six years to graduate.) Starting early can allow your child to work fewer hours.
College is critical these days to launching your child successfully into the world. The College Board reports that today's high school seniors who earn a college degree will earn over $1 million more, on average, than their classmates who don't go to college.
It's no myth that college costs are escalating dramatically. So don't put off beginning a savings plan for your child. Start by scheduling some time when the kids are asleep and you're not exhausted to go over your current financial situation.
Determine where you might cut costs in order to set aside a specific amount of money each month. Open a dedicated college savings account for your child.
Sign up for Upromise, a revolutionary college savings accelerator that can help you save thousands of dollars for college. Through Upromise, America's most trusted companies will contribute a portion of your everyday spending into a college savings account for your children. Your family and friends can join too and add to your savings. Check it out at Upromise and sign up for free.
It's no myth that you will have peace of mind by doing today what you've been putting off for ages. Begin saving for your child's college tuition now.