There’s no doubt that college is expensive. Just ask any parent helping their son or daughter enroll this fall, or even file the FAFSA (Federal Application for Federal Student Aid) in preparation for next year. College affordability is at the heart of the issue, but real potential solutions to the problem can be swept away under the daily soundbites generated around student debt and other disheartening statistics. Using practical teachings from financial literacy promotes sound reasoning through the process to make the college experience an affordable one.
Cheaper to Save Than to Borrow
Parents that recently started a family, and even more recently paid off their student loans are very debt-conscious, perhaps spurring the trend of greater college savings. The “How America Saves for College 2018” report from Sallie Mae shows that 6 out of 10 families are now saving for college. In fact, it is millennial parents taking the lead on goal setting and developing a plan to pay for college, all hallmarks of financial literacy teachings. It’s inferred from these findings that new parents recognize the importance of education but are wary of student loans. Families are taking control of their savings plans to make a smarter and more affordable investment in higher education.
College Financial Calculators
It’s easier now than ever to compare estimates on college costs, student loan repayment, and savings, all helping families look at the big picture first. Before zeroing in on a college choice, it’s wise to take a look at a wide variety of options for perspective. Each college is required to have a Net-Price Calculator on its website. Consider questions like potential financial aid eligibility versus the sticker price of select schools, or if the lowest priced option is really the best fit. These questions are simplified with the use of financial calculators, as reasonable comparisons are grounded in logic, ensuring informed decisions on college choice.
Power of Compound Interest
Long-term savers know one big secret. Over time their money can grow with the power of compound interest. Financial literacy helps families harness the power of compound interest through simple knowledge like demonstrated with the “Rule of 70”, to show how money can double over time. While financial calculators help with the details, the impetus behind saving begins with the motivation to start early, rather than later, to make college more affordable.