The long-term earning potential of having a college degree might make paying student loans worthwhile. On average, people ages 25 to 34 with a bachelor's degree earned about 50% more than those in the same age group with a high school diploma. With rising tuition costs and the prevalence of for-profit colleges, planning and preparation are essential to ensure you (or your kids) don't end up in a mountain of debt.
Higher Education Costs
While university costs vary quite a bit by state and institution, in general, attending college in your home state can save you. In-state tuition and fees at public universities can save you thousands, sometimes tens of thousands, of dollars compared to out-of-state tuition and fees. As the cost of college continues to rise, it's important to shop around and compare pricing not just for tuition but for the average cost of fees, books, supplies, room and board, transportation, and other costs during the academic year at each college. Below are the average prices of college in 2023 for public 4-year institutions:
- Average tuition country-wide for in-state students: $9,349 annual tuition
- Average tuition country-wide for out-of-state students: $27,023 yearly tuition
- Room and board: $11,686 annually
You can find estimates for the various costs on individual college websites, as expenses vary quite a bit between colleges. To calculate your future higher education costs, the College Board offers resources to help you do the math.
College Options: Private, Public, Community, and Online
In general, private college tuition is more expensive than public, so you can save a lot just by attending a public college over a private one. You can save even more by attending community college first to receive your Associate's degree (and get some pre-requisite classes out of the way). This way, you can transfer some or all of your college credits to your college of choice and pay two year's tuition instead of four. The other option is attending an online college, an option that's becoming more and more popular. Some online colleges allow you to work at your own pace so you can finish your degree early. This option is not for everyone, as you have to hold yourself accountable rather than a professor giving deadlines, but it can be a great way to save on tuition costs. Just be sure to research the school and make sure it's accredited and, of course, that it offers the program you're interested in.
Trade and Technical Schools
College is only one of many options for higher learning. Entering school to learn a trade is a great way to keep student loans low (or nonexistent) and secure a bright financial future. Electrician, carpenter, dentistry, and culinary careers are just a few examples of the many options available for prospective students. Many of these options offer lower costs than traditional colleges and have great future earning potential to boot!
Future Earning Potential
An education is an investment in your future, so invest wisely. Not all career paths are created equal, so before you take out student loans, look at how much money you can reasonably expect to earn. If your chosen career path is known to be difficult for entry-level jobs and your earning potential isn't as high as you want it to be, consider choosing a college with lower tuition fees. Earning potential varies by industry and location, so do your research before committing.
Start Early With a College Savings Plan
Try to create a budget that allows you to regularly save a certain amount of money for your or your child's education. As the years go by and you start earning more money, consider upping your contributions to save more. There are several college savings plans to choose from that can grow your savings; make sure to investigate 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 funds are withdrawn to pay for college, they are tax-free! You can also look into a 529 savings plan, a tax-advantaged savings plan sponsored by your state or local government or education institution. You can use this plan to save money for education expenses like tuition, books, and other related costs. The U.S. Securities and Exchange Commission has more information about 529 plans and how they work.
Apply for Scholarships and Financial Aid
A scholarship is a financial gift that does not need to be paid back. Finding and applying for scholarships may seem daunting, but there are many resources through the Office of Federal Student Aid to help you get started. The U.S. Department of Labor also manages a grant finder to help you search for different grants available, find out what's required, and apply for different grants (always apply for as many as you can!). 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 any loans are accepted. Instead, it gives you a clearer picture of your options. Before you or your child accepts a financial offer, ensure all the conditions they must meet to stay eligible are fully understood. In some cases, grants could become loans if any conditions are unmet. Federal Student Aid also has excellent information on this topic to help you understand your options and steps to get started.
Compare Different Types of Student Loans
Now that you've applied for scholarships, financial aid, and any work studies available, it's time to move on to student loans if you have leftover tuition costs. 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 (sometimes a lot of interest). That fine print can be confusing, so ask questions and thoroughly research before choosing and committing to any student loan.
Utilize 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.
WaFd Bank is Here to Help
While we don't offer student loans, we do have a Coverdell Education Savings Account to help you save for your child's future. And our friendly bankers are always available for questions, both big and small. Our checking and savings accounts all come with the tools and services you need (and expect) to make saving and managing your money a breeze. To get started, open an account online, visit your local branch, or give us a call at 800-324-9375.
