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Education Planning: Why You Should Start Now

By Benji Nunn, CFP®, President

Estimated Read Time: 2-3 Minutes

There she goes. She’s walking across the stage.  All you want to think about is her bright future, but you can’t help but beat yourself up a little thinking that you could have done more.  You could have kept her from years of monthly payments and interest paid. You could have done something to minimize that $37,000 of student loan debt.

Student loans are a hot topic in today’s economic discussions around the country.  There are many people who believe this is the next “crisis” that the US will face economically.

Before we dive into the meat of the conversation, I want to bring up some numbers on tuition rates, loan statistics, and the job environment when your child gets out of college.

  1. Tuition rates went up 9% for four-year state universities in 2017
  2. Tuition rates went up by 13% for four-year private universities in 2017
  3. Comparatively, inflation was just under 3%
  4. Total student loan debt is now $1.4 trillion (higher than credit card debt or auto loans)
  5. The average graduate in 2016 accrued over $37,000 in student loans (6% increase)
  6. Unemployment rate for age 24-29: 5.6% (5.5% in 2007)
  7. Underemployed rate for age 24-29: 12.6% (9.6% in 2007)
  8. College graduates are averaging $18.53/hr. (Just 0.7% higher than year 2000)
  9. Less than 30% of college graduates are covered by a pension/retirement plan

These are very startling statistics if you ask me.  I believe that the economy has been partly to blame for these stats, but ease of access to money that has no collateral put up for it has become a problem.  What we want to help you to understand is that you need a plan to navigate the seemingly opaque world of education planning.

With tuition rates going up at an astounding rate, you need a financial planner to help you look forward with excitement for your children about the possibilities of what they can achieve.  You need someone that can help alleviate some of the stress of sending your children to a university.

Some helpful insights to get the ball rolling with education planning:

  1. Start Early.

    Albert Einstein once said, “Compound Interest is the 8th wonder of the world. He who understands it, earns it.  He who doesn’t, pays it.” Open that education account as soon as your child has a social security number, if possible.  When they get money for their 1st birthday don’t buy a toy, invest it.  The toy will be donated to a charity or worse, thrown away while an investment for your child can pay off big time in 17-20 years.

  2. Invest Often.

    A regular contribution into these accounts is a necessary task.  Even if you can only do $25 a month, that would total over $15,000* by the time the child is 18.  When your child gets a monetary gift, put that into the education account for an even bigger pay off.

  3. Enlist a Professional.

    The system the government has in place is very opaque.  You need someone that understands the process and can lead you and your children to a place where you understand what the outcome could look like.  Most families go into college planning and have no idea of what they will look like on the other side.  The class of 2017 didn’t realize they were going to graduate with almost $40,000 of debt on average. A financial advisor can help you to navigate the right education plan for your child.

What we don’t want for you is to feel like you could have done more for your child or grandchild on their graduation day. We want you to feel overjoyed and proud of the individual they have become and worked hard to be.

If you feel like you need someone to sit down and help to give a little direction in the area of financial planning for your loved one’s education, we would love the opportunity to sit down with you put a plan together for you.

*10% annualized return
http://www.epi.org/publication/class-of- 2016/
http://www.cnbc.com/2017/04/10/the-us- college-debt- bubble-is- becoming-dangerous.html