Over the past years, high costs of education have soared three-fold. Not only have education expenses crossed average living costs in the US, but they also have risen above costs for medical care and median incomes of families. This is why the total amount of student debt in the United States is more than $1.7 trillion! In addition, inflation in lifestyle has also affected education costs, and thus, higher education costs are an above all-time high. This has, in turn, affected thousands of parents who want to send their kids for higher education.
This can mean relying heavily on education loans and financial assistance from families for many families out there. Some parents even start saving years in advance for covering the myriad of higher education expenses that can occur.
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College Education Costs – An Overview
According to reports from a college pricing survey in the US, in 2020-21, tuition fees for graduate and undergraduate levels rose approximately 1.1% from the previous year. This makes it an average of $10,750 per year. It rose from 2.1% for private educational institutions, which makes it stand at a staggering $38,000 per year. Costs of assignment help in popular subjects like English homework help have also seen a drastic increase.
As you can see, education prices have reached daunting limits, and this is why there is an immediate need for parents to develop effective strategies to fund the higher education of their children. And availing of quality higher education is the best way to ensure they have a successful future ahead.
Thus, parents should be making smart financial decisions and making some pretty good investments that will ultimately help shape their children’s professional development. This is why expert tips, collected from credible investors and financial gurus, are given below that will help you fund your child’s higher education effectively.
5 ways to fund your child’s higher education
Commit as early as possible
The sooner you start planning for your child’s education, the better the strategies you can come up with. Compounding interests and time are your best friends here and are the most critical piece of assets that you can have. The earlier you can start saving up for your child’s education, the less you will need to struggle in the long run. You can also develop better strategies throughout your journey and take advantage of bank interest rates and fixed deposits.
You can also plan out your budget as to how much you can set aside for your child’s college education. Even if you start as low as $50 a month, its still a start that will shorten the process for you in the future. You can also try to increase that amount as and when your income grows.
Tap home equity
One great way to fund your child’s college education is to tap into your home equity. This means you will be taking a home equity loan or even a line of credit and mortgaging your property till you get back enough to repay the debt. Lines of equity have varying interest rates, and you can choose to borrow money when you need it.
This makes it more flexible than a home equity loan, where you borrow the entire amount and then pay your interest on it. However, either way, you will have to deduct the interest on your home equity debt.
It would be best if you tried to keep in mind that failing to repay your loan can put your home at risk. But, at the same time, if the value of real estate drops at that point in time, you can end up losing more than what you paid for your home originally.
Research grants and scholarships
One great way to save up on your child’s college education and way less than the usual fees is to get them eligible for grants, scholarships, and bursaries. This is why you can search for schools that seek unique characteristics in students. For example, you can apply to a college that is looking for academic or athletic expertise, a certain ethnic background, excel at playing musical instruments, or have other qualities that make you stand out.
Colleges that view you as a valuable addition to their institution can provide you with scholarships. You can also try looking for national-level grants awarded to students who are in dire need of financial aid. Availing of grants and scholarships can ease the financial constraints associated with college.
Invest your finances wisely
Saving apart money for college and investing it are entirely different things. When you put your money into a savings or salary account, it helps to keep it liquid and ready to use. However, you won’t be seeing any significant growth in it. This is why it helps to invest your money into stocks. Stocks have the power to increase your investments within an extended period.
However, do not blindly invest your money and just leave it to sit there. Try to review their performance at the end of every financial year and make adjustments as necessary. Cash in bonds and stocks can only help to pay for the first or second year.
This is why you can also invest in a money market fund to set aside some fixed finances for the early starting years. This can help reduce your overall ups and downs in the financial market.
If you want, you can also avail yourself of the services of a financial planner. They can help you make valuable investment decisions, monitor your performance, and make necessary changes.
Have a solid financial plan
Even if you save a few hundred dollars every month and have solid investments going, not planning for your child’s college finances can hit you like a brick in the face. This is why you must estimate the overall cost of your child’s college education, which is a vital step in creating a solid savings plan. You can try to refer to current tuition fees rates, although they will be accurate to a certain degree.
You can also try using an online college cost calculator, giving you a detailed breakdown of the various costs, you may incur.
The next step is to determine where that money will come from. This is where you will have to make critical savings, investment, and borrowing decisions. So, again, it would be best to consider all pathways of availing of financial assistance and analyze the risks associated with each.