I don’t have kids yet and I feel like I’m already behind in saving for their college education. If its on my mind — I KNOW its on the mind of my employees and colleagues with kids. I was a scholarship kid and going to college would have been difficult for me without it. I finished undergrad debt free — but can’t say the same for my graduate studies. I mentor high school kids and I know that the process has changed. Not only is it more competitive to get into school, but its hard to find the money to fund it (hard but not impossible). Scholarships are harder to come by and the financial aide process continues to evolve with complexities each year.
Okay – so I haven’t told you anything that you don’t know yet. But this is something that you DO need to pay attention to. On July 25, 2013, the US Senate Senate approved a student loan deal:
The bipartisan proposal would link interest rates on federal student loans to the financial markets, providing lower interest rates right away but higher ones later if the economy improves as expected.
Undergraduates this fall would borrow at a 3.9 percent interest rate. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. The rates would be locked in for that year’s loan, but each year’s loan could be more expensive than the last. Rates would rise as the economy picks up and it becomes more expensive for the government to borrow money.
Rates as high as 6.4% for parents who could undoubtedly get larger loans than their students who could borrow at 3.9%.
If you were saving for a child’s education you might have to sock away a bit more.
There are TONS of strategies for funding a child’s education – I hope that we can explore some of them on this blog — but your big call to action is to look at your plan. If you don’t have a plan, you need to get one (yes I’m even talking to those of you like me who would like kids, but don’t have them yet). But don’t go it alone — involve your student. You pick the age, but I will say that at a very young age I understood the connection between my academics and my opportunities to go to college. I don’t exaggerate when I tell you that I was thinking about this at 7 (which totally explains why two words that never describe me are “laid back” – I’ve always been a little “intense”). Maybe its not 7 for you and your family but, IMHO, 17 is probably too late.
Don’t forget to consider your retirement plan and emergency funds in the mix. You’ve got to take care of yourself too. I’m not a financial planner, just calling out some of the big pieces that you want to consider and evaluate.
Don’t freak — take a breath, get some information, and get a plan.
Making the HR Connection, yours,