In the last 10 years, students themselves have gone from paying 30% of college costs, to paying close to 50% of their own college costs. This has resulted in driving up the outstanding student loans in the US from $350 billion to a staggering $1.2 trillion over the past 10 years. The interesting thing is that high paying jobs are certainly no guarantee after college, and 11.1% of all student loans were more than 90 days delinquent in the first quarter of 2015.
Here are three things you can do right now to help your children or grandchildren prepare for the first major investment of their lives:
- Engage the student early on so that they start thinking of college as more of an investment in their future vs. simply another life experience. Otherwise, it could be one heck of an expensive experience for them and for you! Talk to them about what it may be like to pay off $30,000, $50,000 or $100,000 in debt over a 15-20 year time frame. Calculate the monthly payments and help them understand that studying hard to get a scholarship could literally mean saving $500 – $1,000/month for the next 20 or 30 years! Then, pull out some travel catalogs and car magazines. Help them visualize all the amazing life experiences they can buy for $1,000/month. Now, ask them to choose between THAT and the alternative ways of spending time that doesn’t result in scholarships.
- Start budgeting as soon as possible. Click here to view a great college savings calculator on the College Board website. This can help you determine how much you need to start saving each year.
- Talk to me about restructuring some of your debt, cash flow, and home equity while interest rates are still low. You never know what your options are until you have the conversation.
Source: CMPS Institute