The hardships of paying for college are well-documented. In 2016, average tuition for a public, four-year college was nearly $10,000 (up 9% from 2011), while average tuition for a private, four-year college was more than $33,000 (up 13% from 2011) after adjusting for inflation. The rise in cost of attendance, coupled with nearly flat median wage growth for recent college graduates over the past quarter of a century, has resulted in piles of student debt.
According to Education Department data, median student debt increased by 164% between 1990 and 2015, after adjusting for inflation.
The rise in educational debt has affected more than just the students who incur it. Parents are not only taking on sizable payments while their son or daughter is in school, but are also helping their child attempt to pay off the debt after graduation because salaries for recent grads don’t pay enough for them to keep up with payments on their own. The average amount owed per borrower in 2015 was $30,100, and increasingly parents are making the payments.
Parents are often the co-signers for student debt, which can force them to take money out of retirement funds, take on extra credit card or home-equity debt, etc. to stay on top of student loan payments.
More than half the parents surveyed by Citizens Financial Group said they worry their child’s student loan debt will put their own retirement in jeopardy. Ninety-four percent of parents of college students said that they are feeling the burden of student debt, and 45% of them said they don’t have a plan to manage that debt.
With almost $1.2 TRILLION in national student debt, it’s important for the student AND the family to sit down and develop a plan for taking on and paying back loans. Parents who maintain a “we’ll worry about it later” attitude can snowball into insurmountable debt.
It’s more important now than ever before for parents and students in middle school and high school to educate themselves on the price of a degree. Financial literacy is every bit as important as reading and math literacy. Financial experts can help families navigate their way through this important life stage. Start early, create a plan, and stay disciplined.