Minimizing / Avoiding College Debt After Graduation
Americans are more burdened by student loan debt than ever. As of January 2020, the student loan burden in the US is about $1.6 trillion and rising, mostly because borrowers have been slow in paying down their loans and Among the Class of 2019, 69% of college students took out student loans, and they graduated with an average debt of $29,900. Meanwhile, 14% of their parents took out an average of $37,200 in federal parent PLUS loans. These are scary statistic, but the impact is real and you don’t want your kids to be one of the 45 million borrowers wasting all their learning at college worrying about the loan. This problem will only grow bigger as the next generation start going to college.
One solution for new parents is starting an education fund for your children or a family member with a 529 Savings Plan where you make regular contributions toward college savings plan and to take it a step further, start small by teaching them money management using the different jars. When a child is saving money towards a large purchase such as sports equipment, it may make sense to open a savings account - Savings Jar. This account will earn a small amount of interest and provide a record-keeping system. When they are saving money towards a more long-term goal, such as college, it may make more sense to look at investment accounts – Invest Jar. These accounts will require longer-term commitments, but will yield larger interest rates.
You can open and contribute to a 529 plan, Most of these Savings Plan offers multiple investment options—each carefully built with well-known mutual funds from multiple fund families intended to help provide diversification across stocks, bonds, industry segments, and investment styles. You can choose an age-based option, which automatically adjusts the asset allocation mix as the child nears college age, or you can choose a static portfolio that sticks with a particular investment strategy based on your goals and risk tolerance.
