Tackle Student Debt During College Savings Month
September is National College Savings Month, Financial Professional Barry Bigelow Offers Advice on Tackling College Debt
DULUTH, Minn. – In Minnesota, the average graduate leaves college with $32,052 in student loan debt.
September is college savings month and local financial professional Barry Bigelow from Great Waters Financial recently stopped by FOX 21 Local News with tips to tackle student debt.
Student debt is at an all time high, how much do we owe in student loans?
Our national student loan debt has soared over $1.56 trillion. Student loans aren’t just a young people’s problem. Older Americans are taking on student debt even faster than their younger counterparts. More than 3 million Americans over the age of 60 carry a student loan balance.
Older Americans could have their Social Security garnished by the government in an effort to pay off their federal student loan debt.
What payment options do families have as they plan for college?
Parents can start a 529 plan for their children, which is an educational savings plan. The money you contribute grows over time tax-free and can be used at any time for qualified educational expenses.
Anyone can contribute to it, even grandma and grandpa or your good friends! Starting this plan now will help you give the gift of college to your children and help them avoid being one of the millions of Americans with student debt.
Is there Free Money?
As your student gets ready to graduate high school, encourage them to look for scholarships. There are billions of dollars in scholarships available. There is a scholarship for everything from being a vegetarian to snowboarding.
In addition to scholarships, Bigelow recommend every student fill out FAFSA (Free Application for Federal Student Aid) form to see if they qualify for financial aid.
How much aid you receive is based on your family’s income and assets. Depending on your situation, you could receive scholarships, grants or loans. If you circumstances have changed since submitting your application, let your college or university know. You could be eligible for more financial aid options.
Grants vs. Loans
It’s important to understand the difference between grants and loans.
Grants are free money you don’t have to pay back, while loans need every penny paid back with interest.
Financial aid award letters sometimes mix together the list of grants and loans universities are offering you.
Separate the grants and scholarships from the loans. If you need to use loans, do the math carefully and don’t borrow more than you need.
For those who have graduated, what can they do to lessen their student loan burden?
Make sure you know when your student loan bills are due. You don’t want to be hit with a late payment fee, or worse, go into default.
More than 10% of federal loan borrowers default on their student loans within three years of repayment.
You can set up an automatic withdrawal to avoid missing a payment. Many servicers will give you a small interest rate break for setting up autopay.
Grads will regret it later on if they put off saving for retirement until they’ve paid off student loans. Saving early – even if it’s just a small amount – is crucial because it allows money to grow through compounding interest.
Bigelow recommends saving 10-15% of your salary in your sponsored 401(k) plan. If you can’t manage that, you need to be contributing at least enough to get the company match.