Parents of college-bound students are facing the reality of higher than expected college costs as they prepare to send their child off to school. Even with financial aid, the average amount that students and their parents are responsible for is nearly $35,000 per year. This can be a significant burden for families who are not prepared to cover the costs. As a result, parents need to explore different options for financing their child’s education.
One option that parents may consider is encouraging their child to take out federal Stafford loans to help cover the costs. These loans offer favorable interest rates and income-driven repayment plans, making them a good financing tool for students. While it may be difficult for parents to see their children take on debt, they can plan ahead to help them pay it off after graduation. It is important to explore all options and find the best solution for financing education costs.
In addition to federal loans, parents and students may also consider private student loans or parental loans, such as the federal Direct PLUS loan. However, these options come with high fees and interest rates, making them less favorable than federal loans. Parents may also consider tapping into their 401(k) or using a home equity line of credit as short-term cash flow options. Each option has its pros and cons, so it’s important to carefully consider the risks and benefits before making a decision.
Redirecting current spending and savings is another way to help close the funding gap for college costs. Parents can evaluate the costs of having their college-bound student at home and redirect that money toward college expenses. Temporarily cutting back on discretionary spending and pausing or reducing retirement contributions can also free up additional funds for education costs. It’s important to consider the long-term implications of these decisions and ensure that parents are financially secure first before focusing on college expenses.
Ultimately, preparing for the costs of college should start early on, ideally when the child is a sophomore in high school. This allows parents to set realistic expectations and plan for the financial investment that college requires. By exploring different options for financing education, parents can make informed decisions and ensure that their child’s college experience is as affordable as possible. Additionally, exploring state tuition aid programs and subsidized loan rates can help make college more affordable for families.