A college education has long been part of the American dream - the aspirational belief that all people should have the opportunity to become successful and the ability to climb the economic ladder if they work hard.
Achieving that dream through higher education does come with a price tag. But, the long-term earning potential of having a college degree may make it all worthwhile.
On average in 2018, the median earnings of people ages 25 to 34 with a bachelor's degree were 57 percent higher than the median earnings for people in the same age group with a high school diploma.
So, how do you ensure the future is bright for your child?
It's all about the preparation.
Read on to view current higher education costs, learn how to calculate future higher education costs and find ways to save for college.
Current and future higher education costs
According to a recent College Board report, the cost of college has increased by 16 to 18 percent (inflation-adjusted) over the last decade.
Here is a breakdown of the average cost of tuition, fees, books, supplies, room and board, transportation and other expenses during the 2020-2021 academic year. (Please note: These costs vary significantly across different states and schools.)
- Public two-year college (in-district): $18,550
- Public four-year college or university:
- In-state: $26,820
- Out-of-state: $43,280
- Private, nonprofit four-year college or university: $54,880
To calculate your child's future higher education costs, the College Board offers a handy College Cost Calculator.
It is never too early or too late to save for your child's future. Consider these tips:
- Start a college savings plan. There are several types
college savings plans
to choose from that can grow your savings over time. Make sure to
each investment option closely.
WaFd Bank offers the Coverdell Education Savings Account, allowing you to make after-tax contributions of up to $2,000 annually per child. When the funds are withdrawn, they are tax free.
- Set a budget. Try to create a budget that allows you to regularly save a certain amount of money for your child's education. As your earnings increase over time, consider upping your contributions.
Ways to save if college is near
If college is around the corner, consider these tips for reducing your child's higher education costs or covering any shortfalls if you haven't saved enough money for tuition, fees and expenses.
- Apply for scholarships. A scholarship is a financial gift that does not need to be paid back. Finding and applying for scholarships may seem like a daunting task. Check out these resources through the office of Federal Student Aid to get started.
- Fill out financial aid forms. The U.S. Department of Education offers the Free Application for Federal Student Aid (FAFSA) - a single form used to request federal grants (free money), work-study (earned money) and loans (borrowed money). Filling out the form does not mean your child will accept any loans. Instead, it gives you a clearer picture of your options. Before your child accepts a financial aid offer, make sure they understand the conditions they must meet to stay eligible. In some cases, grants could turn into loans if those conditions are not met.
- Compare different types of student loans. There are a variety of student loan programs, including private loans, loans from your state or local college, and federal student loans. Read the fine print carefully to determine the best financial option since you or your child will have to repay the money with interest.
- Have your child contribute. By working during college, your child can help cover their expenses to take some of the load off your shoulders or reduce their future debt if they are taking out student loans.
- Borrow some of your home's equity. A home equity line of credit (HELOC) uses your home's equity - the difference between what you owe on your home and what your home is currently worth - to help you pay for expenses like your child's education. Learn more about how to qualify for a HELOC and the benefits of choosing WaFd Bank for your HELOC.
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