Protecting Your Child Against America’s Growing Student Loan Crisis
By now you’ve probably heard about the student loan crisis especially if you’re a parent thinking about your child’s future.
While the cost of a college degree has skyrocketed in recent years, the total amount of student loan debt has also risen dramatically. Borrowers nationwide now owe a total of $1.5 trillion in federal student loan debt.
“That’s a staggering amount of debt,” said South Carolina Treasurer Curtis Loftis. “And what is most troubling of all is that many borrowers and their families don’t fully understand the financial burden that awaits them after graduation.”
In fact, nearly half of the borrowers surveyed in a recent study had no idea what their debt obligations would be once they graduated and only 10% of 18- to 34-year-olds knew what the exact amount of their monthly minimum payment would be.
“This is astonishing given how quickly loans and loan interest can add up over the years,” added Loftis. “It’s no wonder I am constantly asked by parents what they can do now to protect their children’s financial future down the road.”
So what can parents do now to ease their children’s burden or set them up for a stronger financial future when they’re older?
Talk to Your Children
First, parents can start by having conversations with their children even when they are very young.
For example, if college and good grades are expected, make sure to share this with them on a frequent basis so they know their only job is to do their best while they’re in the classroom.
Also, if you expect your children to contribute to their college fund when they’re older – either by working a summer job or through some other means – make sure they understand that as well.
While some parents may be reluctant to discuss money with children, studies show that children whose parents actively discussed financial skills at an early age grow up to be more financially prepared.
Open a Future Scholar 529 College Savings Plan
Next, parents should consider opening a 529 plan such as South Carolina’s Future Scholar plan.
Widely considered the best financial vehicle for saving for college, 529 plans are tax advantaged, which means your money grows tax-free. What’s more, South Carolina residents, or those who file a South Carolina tax return, are also eligible for a dollar-for-dollar tax deduction.
In addition, parents can save however much they want, whenever they want and can even invite others to contribute to the plan – grandparents, friends, neighbors or anyone looking to make a lasting difference in a child or loved one’s life.
Finally, parents should consider starting their savings plan as early as possible.
Unlike other savings goals such as saving for retirement, saving for college can have a much shorter window of time for your money to grow, assuming you only have 18 years within which to save.
“That’s why it’s so important to start as early as you can,” Loftis said. “So you’ll have time for your money to grow and begin working for you.”
For more information or to open a Future Scholar account today, visit www.FutureScholar.com.