With rising student loan interest rates, parents advised to start saving early
State Treasurer Ron Crane is declaring today as College Savings Day, where he hopes families will take time to start planning for their kids' collegiate future.
With the state seeing a steep decline in parents saving for their kids' future in higher education, Treasurer Crane noted the importance of exploring Idaho's 529 college savings plan, also known as IDeal.
Idaho State University's Director of Financial Aid and Scholarships Kent Larson said more and more people are relying solely on some form of financial assistance to help pay for college, especially with the rising costs of tuition.
“More and more students are relying on financial aid because the cost of attendance continues to rise higher than the average consumer price index,” Larson said.
As of July 1, the national interest rates for student loans is expected to rise once again. This means, students will come out even more debt piling higher. Larson said he has seen some students even drop out because they are not able to pay-off their heft loan debts.
“They leave the institution with debt they don't have that earning power that comes with the degree or the certificate,” Larson said. “The average loan rate is climbing and the federal government is putting more restrictions on students who are eligible to receive grant money.”
Some of those restrictions include the amount of time students are able to attend college, lessening the time from 18 down to 12 semesters. This means students need to be more mindful of how they spend that aid money and need to pick their courses wisely. As of this past year, the federal government has ceased to allow graduate students the eligibility for subsidized loans, so now the government will no longer pay the interest rate on their loans while they are in school.
Larson also said ISU doles-out more than $120 million in financial aid to more than 70% of the university's student body each year, and this upcoming school year will not be looking any different. Out of this pool, 64% of undergraduate students alone take out a loan or receive some sort of financial aid, and each student averages about $24,000 in debt by the time they earn their degree. An undergrad can also acquire up to $57,500 in federal loan debt.
But this number does not look bad at all compared to the rest of the nation.
According to an article by the Federal Reserve Bank of New York, in 2012 the national student loan debt stood at $840 billion, which dwarfed the national credit card debt at $693 billion.
Larson advised families to start saving for their kid's education while they are still babies. Along with that, a 529 college savings program will be beneficial to parents since there is no taxation on the earnings if the money is used for higher education.
Click here for a link to the IDeal website for more information about the 529 college savings program.
Here are some more links to more information and infographics about student loans and financial planning for college done by the Sallie Mae website:
2013 National Study: "How America Saves for College"
How America Saves for College
Finally, Here is a link to some statistics done by the American Student Assistance group.
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