If you’re a parent, you’ve likely already begun to worry about how you’re going to pay for your kid’s college tuition. But what percentage of parents pay for college? It may be less than you expect.
83% of parents pay for a portion of their child’s college tuition,and the reality is, even a percentage of the total college bill can be tough for most families to pay.
How much exactly should parents be saving? Average yearly tuition and fees have risen to an average of $41,411 for private schools and $11,171 for state residents at public colleges.
Add on living costs, and some students can expect to shell out almost $50,000 for one year of higher education. That means that even parents who only plan to pay for part of the costs of college still must save tens of thousands of dollars to help their kiddos with college.
Saving for Future College Costs
It can seem insurmountable to even think about saving over $40,000 (per year) for college costs on top of all your other financial responsibilities. A common recommendation is to pay off your own student loans before putting significant amounts of money towards college savings. Some parents find that refinancing their own student loans if they haven’t paid them off already allows them to save money—giving them more financial wiggle room to start saving up for future educational expenses.
How can refinancing help you save on your student loans so you can start saving for your kids’ education? Student loan refinancing allows you to trade in all your student loans for one new loan with a potentially lower interest rate and more favorable repayment terms.
What is the benefit of trading in old student loan debt for a new loan? When you refinance your student loans, the refinancing lender looks at your current financial situation, including your credit score, income, and future earning potential (among other factors) to calculate an interest rate that could potentially be lower than what you might be paying to the federal government or a private student loan lender.
Decreasing the interest rate allows you to save money over the life of your loan (provided your term remains the same or is shorter, of course). On top of potentially saving on interest rates, refinancing your student loans can consolidate multiple student loan payments into one monthly payment.
Furthermore, if you’re able to shorten your loan term through student loan refinancing, you could pay off your student loans even faster, further reducing the amount of interest you’d pay over the course of your loan. Those savings can be converted into savings for your kiddo’s future education—hopefully saving them from having to take out too many student loans themselves.
Tips for Saving for College
If you’re among the 56% of American parents who are actively saving for your little one’s future college expenses, it can be difficult to know the best way to save. The good news is that you’ve got plenty of options to help you maximize your savings. In fact, one of the main benefits of saving up for college while your child is still fairly little is that you have time on your side.
If you can sock away even small amounts of money over time, depending on where you put it, you give that money a chance to earn interest or dividends over time—and potentially increase the amount you’ll have to put toward your child’s tuition payments.
Once you’ve decided to start saving up a college fund, you’ll have to choose where exactly you want to save that money. While some parents choose to simply set aside cash in a regular savings account, the relatively low interest rates on most savings accounts mean that your money may not grow much over time.
Instead, many parents consider a government-sponsored savings program in order to net some serious tax benefits, or even to start investing in order to grow money over time.
When it comes to government savings plans, you can choose from a 529 plan , which offers generous tax benefits, or a Coverdell Education Savings Account , which allows you to invest in stocks and bonds to cover educational expenses.
While fewer and fewer parents are ready to take on the full cost of their child’s college education, starting to save today can help you save as much as possible for future educational expenses.
And for the portion of your child’s college education that you can’t finance right now, you may want to look into private student loan options with SoFi. SoFi’s Parent Student Loans offer competitive rates with flexible repayment options — so you don’t have to worry about paying the price of college in full just yet. Plus, there are no fees and the application takes only a few minutes.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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