You might think it’s impossible to start paying for your children’s college education, especially when you are still paying for your own on top of a laundry list of other expenses.
The good news: It is possible to break the cycle of enormous student loan debt!
Even though your kids’ college years may seem a long way off, this is actually the perfect time to financially prepare. And the sooner the better, since the earlier you start, the less your family’s burden will be later.
Here are six reasons why it’s more important than ever to start planning for future college costs now:
College degree = Better job
A college degree significantly increases your children’s chances for employment and allows them to pursue more advanced career opportunities. According to the New York Times, Americans with a college degree make 98 percent more per an hour on average than those without a degree.
Tuition costs are not likely to decrease
The cost of college tuition has significantly increased in recent years, at an annual rate of 6.5 percent, according to the U.S. Department of Education. US News reports that today’s tuition costs could double by 2030.
Loan payments add up
In 2016, Americans’ student loan debt totaled $1.3 trillion, according to Student Loan Hero. About 70 percent of recent graduates have student loan debt, with many of them exceeding the average of $37,000. As a result, graduates can expect to pay hundreds of dollars toward their student loans every month for years—even decades.
Debt delays important milestones
High levels of student debt may prevent or delay your child from achieving important life milestones. A recent study from American Student Assistance found that because of student loan debt, one in seven recent graduates delayed homeownership; one in three delayed marriage; and one in four could not afford to move out of their parents’ home.
If you start planning early, you will likely pay less in the long run.
Luckily, you can limit your child’s student debt by prepaying for college tuition. Prepaid tuition programs can make it possible for parents to purchase semesters of college at today’s plan rates, minimizing the risk for tuition inflation later. Plus, for many prepaid programs, including the prepaid tuition program offered in Illinois, the younger your child is when you purchase a plan, the less you pay. That means the money you spend today will work harder for you in the future.
You can get peace of mind and enjoy federal and state tax advantages
If you start planning for college today, you’ll feel the sense of relief that comes with helping to set your child up for future success. That’s priceless.
And because you can’t be sure where your child will attend college, many prepaid tuition plans, including the Illinois plan, allow plan holders to apply the value of their plan benefits to most out-of-state or private schools.
Many states, including Illinois, offer both savings and prepaid plans that are “529s.” 529 refers to the IRS tax code provision that allows families significant tax incentives to prepay or save for college:
– Earnings are tax-free when spent on qualified educational expenses
– Gift tax can be avoided
– In Illinois, enjoy an income tax deduction in the year the contribution is made.
By prepaying future costs of college tuition, you’re able to limit — or even eliminate — future student loan debt for your child. That can set them up to pursue their dreams without the lingering burden of unpaid undergraduate debt.
For information on the College Illinois! 529 Prepaid Tuition Program, visit collegeillinois.org. Since its inception in 1998, College Illinois! has provided an affordable option to help make college a reality for more than 30,000 Illinois families. For a limited time, parents can get up to $200 off qualifying accounts!
More information on plan options and benefits, as well as a complete description of terms and conditions is available at http://www.collegeillinois.org.