April 2, 2018
I graduated from college in 2006 with $89,000 in student-loan debt. With no family help, I relied on a blend of federal and private loans to earn the journalism degree I desperately wanted. In those days, education debt was characterized as a casual nuisance. Like many of my peers, I signed on the dotted line without fully understanding the terms. The debt that followed consumed my thoughts and, for a long time, nearly half my income. I knew I wanted to have a family someday but wasn't sure I would ever be able to afford children.
I'm far from alone: The average student loan borrower carries $46,597 in debt, according to a NerdWallet survey. A separate survey by Student Loan Hero found that 70 percent of borrowers experience headaches and anxiety because of the stress, and 64.5 percent suffer from insomnia. As daunting as these figures are, the projections are even worse for the younger generation: The cost of a four-year degree from a public university will hover at $205,000 by 2030, according to the U.S. Department of Education. Not surprisingly, a finder.com analysis of Federal Reserve Bank data predicts that our kids will have more student-loan debt than mortgage debt by 2042, and it's a safe assumption that their mental anguish will compound with the accruing interest.
Eight years of aggressive payments reduced my loans to a manageable level, enough to start a family. While it seems that my story ends happily, I'm left with a sense of loss from the anxiety that dominated my 20s and for the career opportunities and life experiences I passed up because I was saddled with loans. When I think of my toddler son one day running the same gantlet, I'm filled with familiar dread. The price of success shouldn't be this high, and I won't let him travel down the same path.
Personal conviction aside, saving for college is expensive, and my husband and I aren't willing to forgo retirement savings along the way. In addition to funding his 529 plan, here are a few ways I'm saving for my son's education:
- Starting early with grants and scholarships. A few years ago I traced my lineage to an ancestor who fought in the Revolutionary War. This find qualified my boy for a membership in the Sons of the American Revolution, an organization that provides financial awards to young members as early as third grade. The search for grants and scholarships should start long before the high school years, according to Mark Kantrowitz, a leading expert in college financing and author of "Secrets to Winning a Scholarship." His book outlines strategies to help students secure as much college aid as possible, noting that awards for younger applicants are often underused. "There are even scholarships available to children in grades K-8, such as awards for community service, art and essay competitions, geography and spelling bees, contests for the best peanut butter and jelly sandwich, math competitions and prizes for the best mibster (a marbles champion)." In addition to Kantrowitz's book, finaid.org, edvisors.com and collegescholarships.org list opportunities for kids younger than 21, and it's never too early to start looking.
- Researching "no loan" universities. University fees are exorbitant, and a few institutions are responding by helping students offset the rising costs. These "no loan" universities have replaced financial aid packages with grant and work-study programs. No-loan programs are more widely available for low-income applicants, but 16 universities provide the option for everyone, regardless of state residency or family income. The College Matchmaker publishes a list of participating no-loan universities. Keep in mind, though, that "no loan" doesn't necessarily mean "no debt," even with the most generous aid package. In the interest of transparency, 30 colleges and universities have partnered with MyinTuition, an online calculator that provides a personalized cost estimate based on institution, need and no-loan policies.
- Investing the difference. About 80 percent of people admit to regularly wasting money, according to an Hloom survey, but it's possible to curb bad habits with a simple trick. If my family is buying a household necessity, such as a dishwasher, we budget $1,000 and search for a model with a significantly lower price tag, then invest the difference in college savings. That strategy has enabled us to cut 10 percent across the board in household spending. A commitment to budgeting can become a satisfying challenge, especially when you calculate your investment's projected earnings using the U.S. Securities and Exchange Commission's compounding interest calculator. If we continue saving $600 a month in a 529 plan with a 6 percent average annual return, the college fund will grow to $169,000 by 2033. There is nothing more motivating than tangible rewards, and I highly recommend adopting a perspective of earning rather than sacrificing when it comes to cutting expenses. The results can add up quickly.
- Using credit card rewards. I have been underusing my credit card rewards for years, and funneling them into college savings is brilliant. Cash back earned from purchases I would make anyway is a painless way to invest in my son's 529 plan, and the math is compelling. Let's say I use my credit card for all my annual purchases — gas, food, clothes, entertainment, etc., amounting to $25,000. The card offers 5 percent cash back in categories assigned quarterly, which means I'll earn $1,250 by year's end. Assuming I continue saving and investing the same amount for 15 years at a 6 percent return, I'll earn another $29,663 for my son's tuition. Depending on your credit score, there are several cards that offer cash-back rewards. Do some comparison shopping, pay your balances in full every month, and avoid cards with annual fees.
- Teaching frugality. Paying for college isn't without risks, according to "More Is More or More Is Less? Parent Financial Investments During College," a 2013 study by Laura Hamilton, a sociology professor at the University of California at Merced. Hamilton found that although students who receive financial help are more likely to graduate, greater parental contributions were linked to lower grades overall. I won't argue with the data. I watched many entitled classmates party through school on their parents' dime, but I also did my fair share of slacking on borrowed cash. But perhaps what's missing from the equation of financial appreciation is financial literacy. The average college student doesn't understand money, and that may lead to it being more easily taken for granted.
For all our planning and saving, it's still possible that my family won't have enough to cover the entire cost of a college education — and that's okay. Just as we'll involve our son in the early scholarship search, we'll teach him about personal finance to help him one day address his remaining college expenses with the ownership and clarity that I didn't possess as a student — a clarity that doesn't include student loans. Maybe that means stretching his college fund by enrolling in a low-cost community college for a year before transferring to a four-year university. Maybe it means working 20 hours a week while juggling a full course load. Maybe it means schlepping to Mom and Dad's on the weekends to do some free laundry.
I can't predict the future of education in this country, and there are many variables that could affect access and affordability. As a mom, all I can do is glean meaning from my experiences and aim higher for my child. As parents, that's all any of us can do.
Sarah Szczypinski is a journalist living in Seattle. Find her on Twitter @SarazSz23.