The amount of student loan debt among baby boomers has increased significantly over the past decade, and it’s critical that parents understand the requirements and risks when it comes to helping finance their child’s college education.
Boston, MA (PRWEB) June 06, 2017
Financing a college education is a daunting task that can be stressful for students and parents alike. Given the high costs associated with many colleges and universities, it’s never too early for parents to start thinking about the savings and financing process.
“While a college degree is a major milestone that can yield lifelong economic and social benefits, it can also be expensive. That’s why parents and students should start planning – and saving – in advance,” said Steve Trumble President and CEO of American Consumer Credit Counseling, based in Newton, MA. “The amount of student loan debt among baby boomers has increased significantly over the past decade, and it’s critical that parents understand the requirements and risks when it comes to helping finance their child’s college education.”
According to a recent study by the University of Southern California and the University of South Carolina, the average parent borrows $21,000 in student loans for their child’s education. Thirteen percent of parents say they are paying off college loans on behalf of their children. High-income parents repay an estimated $30,000 in debt on their child’s behalf.
The 2014 report by the U.S. Government Accountability Office found that a quarter of the $400 billion middle-aged adults have in college debt is from loans borrowed to pay for their child’s education. Between 2005 and 2015, the amount of student loan debt held by Americans between the ages of 60 and 64 has increased by 800 percent from $4.85 to $38.35 billion, according to the Federal Reserve Bank of New York. And Americans between the ages of 55 and 59 have experienced a nearly 500 hundred percent increase, from $13.0 billion to $65.47 billion.
With student loan counseling programs, students and parents can get help exploring all of their options when it comes to their student loan options. ACCC offers five tips every parent should know when it comes to their child and student loans.
1. Avoid taking out student loans on behalf of your children. While it is understandable that parents want to help their children finance college, avoid taking out student loans for them whenever ever possible. The interest rates for parents are often much higher than what children would receive when taking out their own student loans. The terms can also be less flexible. If you want to help your children pay for school, then consider other alternatives that carry less financial risk.
2. Help your child take advantage of scholarships. There are thousands of scholarships available to students of all backgrounds, skillsets, and talents. Make sure your children are researching and taking advantage of all the different opportunities out there. In addition to resources at individual high schools, there is a wealth of online scholarship finders and directories that can be utilized.
3. Understand the difference between federal and private loans. A federal loan, which is either subsidized or unsubsidized, is based on the student’s financial need and comes with a fixed interest rate. A private loan is not funded or subsidized by the federal government. Instead, they are funded by banks, credit unions, or other types of lenders. Private loans are more expensive than Federal loans, and interest rates can often change. Eligibility depends on the student’s credit score, which is why most lenders require a cosigner.
4. Know the 529 savings options in your state. A 529 plan is one option for families to save for college. A 529 plan is an investment plan operated by a state or educational institution, with tax advantages and other incentives to make it easier to save for college for a designated beneficiary. Similar 529 college savings plans allow parents to save for a child's education tax-free through an array of investment options. Plans vary by state, so be sure to research the rules and options in your state.
5. Don’t forget about retirement. It is important that parents do not focus all of their efforts on their child’s tuition and forget to also save for retirement. Although parents may be crunching numbers come college time, it is important that they don’t put a hold on their retirement funds. If parents are not saving enough for themselves, they will become a financial burden for their children in the long run.
ACCC is a 501(c)3 organization that provides free credit counseling, bankruptcy counseling, and housing counseling to consumers nationwide in need of financial literacy education and money management. For more information, contact ACCC:
- For credit counseling, call 800-769-3571
- For bankruptcy counseling, call 866-826-6924
- For housing counseling, call 866-826-7180
- Or visit us online at http://www.ConsumerCredit.com
About American Consumer Credit Counseling
American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt counseling, bankruptcy counseling, housing counseling, student loan counseling and financial education. Each month, ACCC invites consumers to participate in a poll focused on personal finance issues. The results are conveyed in the form of infographics that act as tools to educate the community on everyday consumer debt issues and problems. By learning more about financial management topics such as credit and debt management, consumers are empowered to make the best possible financial decisions to reach debt relief. As one of the nation’s leading providers of personal finance education and credit counseling services, ACCC’s certified credit advisors work with consumers to help determine the best possible debt solutions for them. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). To participate in this month’s poll, visit ConsumerCredit.com and for more financial management resources visit http://debthelp.consumercredit.com/.