There are many programs that allow a parent to save for the college tuition of their son or daughter. Some are even state sponsored. These programs allow you to put away a little money each month so that when your child graduates high school and is ready for college, the tuition will already be paid for. College tuition is very expensive and seems to get more expensive every year. With the savings plan in place you will be able to meet that financial challenge and get your child through college without taking on a second job or putting a second mortgage on your house.
Pre-paid tuition just makes good sense. You are earning interest on your money instead of paying interest on a student loan. Interest bearing student loans can be as high as 8% and if you are not guaranteed an interest rate and it is variable, it could be much higher. The interest rate you earn just goes right back into the account where it can be used in the future. You don’t want yourself or your children to be burdened by student loans and the grief they can cause students when they get out of college.
Some colleges allow you to pay them directly. This will allow you to pay for the college at the cost of tuition now, not the tuition eighteen years from now. College tuition rises on an average from a half a percent to seven percent yearly. If you take the high number of seven percent time eighteen years, you will see that there is a lot of money that you will be saving. If the college has the funds now, they will use the money to help fund programs and other endeavors, so the money is actually making the college better for your child in the future.
A parent who has a child and does not contribute to a pre-paid tuition plan can have severe difficulties in coming up with tuition. If you have a child this year, with current interest rate hikes, you could be paying through the nose in the year 2026. Sounds like it’s a long way away but it is not. Can you imagine the cost of tuition in that year and what you would have to do to raise it? Pre-paid tuition is almost essential in this day and age and to not contribute is to gamble with your child’s future.
