Start with a Savings Estimate—Don’t Panic!
Only about a third of college expenses are covered by income and savings for the typical family. The remainder of the cost can be covered by the student’s own savings, grants and scholarships, as well as gifts from family and friends and financial aid. Use the College Savings Planner to estimate how much a college education can set you back and learn how saving can alleviate that financial burden.
Act now and you’ll be grateful to yourself later!
With a goal in mind, consider how much money you could save if you were to put that money aside. Small amounts saved over time might add up to big savings when it comes time to pay off your student loans.
Put it this way. For college, you’ll need $35,000 every year
Save for it
Save $21,000 to pay for $35,000
When Sophia was a newborn, her parents started putting away $100 per month so she could have a college fund. They could put away over $35,000 if their investment yields a 5% return per year. 2
Pay it Back
Pay $49,000 to pay $35,000
To pay for Sophia’s further education, her parents must take out a $35,000 loan. They opt for a private loan with an annual percentage rate of 7%. They will be paying $406 a month for 10 years after she graduates.
Check the figures. Sophia’s parents saved enough to pay the $35,000 debt with just $21,000. They borrowed $35,000 but ended up paying back $49,000 for the privilege. The out-of-pocket total increased by 50% because of insufficient savings.