Strategies for Parents Saving for College: Balancing Aspirations and Realities
As the cost of higher education continues to soar, parents face the daunting question: How much should they be saving for their child’s college education, and what’s the best way to save? With many families grappling with this issue, insights from financial experts and personal experiences provide valuable guidance.
Caleb Queern’s Inquiry
Austin resident Caleb Queern, a parent of a young child, encapsulates the concerns of many parents. He wonders not only about the amount to be saved for his child’s future college expenses but also about the most effective saving strategies. These concerns reflect a broader anxiety among parents as the financial landscape for college education evolves.
Expert Advice from Ron Lieber
For a deeper understanding, insights from Ron Lieber, author of “The Price You Pay For College” and a columnist for The New York Times, offer valuable perspectives. Lieber’s expertise, particularly on merit aid, sheds light on the complexities of college financing.
529 College Savings Plans: A Viable Option?
Lieber points out the benefits of 529 college savings plans. These plans offer tax advantages, such as potential state tax breaks on contributions and federal tax-free growth. The earlier parents start saving, the more time the money has to grow, leveraging the power of compounding interest.
Balancing Retirement and College Savings
A crucial dilemma for many parents is whether to prioritize their retirement savings or their child’s college fund. The traditional adage suggests prioritizing retirement since one can borrow for education but not for retirement. However, this isn’t entirely accurate, as options like reverse mortgages exist. Lieber suggests a balanced approach, considering both the child’s educational needs and the parents’ retirement security.
Realistic Approaches to College Saving
Instead of aiming to save the full cost of expensive private universities, Lieber advises a more pragmatic approach. This might involve saving a fraction of the cost of a state university, coupled with the student contributing through part-time work. Such a strategy balances providing a quality education with maintaining financial stability.
The Role of Parent PLUS Loans
When discussing loans, particularly parent PLUS loans, Lieber advises caution. These loans can be expensive, and parents should be wary of borrowing too much. Instead, a combination of savings, student contributions, and moderate parental borrowing can finance a quality education without overburdening the family financially.
Choosing Between Elite and Flagship State Universities
The decision between elite private colleges and flagship state universities involves weighing quantitative returns against qualitative experiences. Lieber encourages parents and students to consider the broader value of the education, including mentorship, friendships, and the overall college experience.
Crafting a Sustainable Educational Future: Balancing Dreams with Financial Realism
Navigating the complexities of financing a college education requires a balance of saving, smart borrowing, and realistic goal-setting. Parents need to consider not just the financial aspects but also the emotional and practical implications of their choices. This approach ensures that their child receives a quality education while maintaining the family’s financial health.
For more detailed insights and guidance on saving for college, you can refer to the articles on WQLN, KNPR, and KCRW.
