4 reasons to plan your child's college funding wisely
Avoiding
the debt trap can be just as important as getting a degree, says
financial specialist
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[July 22, 2013]
Generation after generation, parents have
taught their children to prepare for college now, which often means
in elementary school or even earlier.
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These days, financial experts like John McDonough are giving parents
the same advice.
"Can you afford the college that will give them the best chance
in life? Will paying for their education force you to have to work
well into your golden years? These are the questions I ask parents
every day," says McDonough, CEO of Studemont Group College Funding
Solutions,
CollegeFundingFreedom.com, which offers advice for parents
worrying about how to pay for their child's education.
"Many parents really don't know how to begin answering these
questions; they are afraid of walking into a financial situation
that they won't be able to safely walk out of. But the alternative
-- saddling their children with debt well into their 30s and 40s --
is not an appealing alternative."
McDonough reviews four disturbing trends in the challenge of
paying for a college education:
Adults in their 30s have 21 percent
less net worth than 30-somethings 30 years ago, according to a
new Urban Institute report. Why? Much of it has to do with
high-interest student loans and credit card debt. The return on
investment of a college education is excellent -- college grads
earn 84 percent more than those with only a high school diploma,
according to Georgetown's Center on Education and the Workforce.
But paying off that investment without outside help is
exceedingly burdensome for a graduate.
Student loan debt
is even greater than credit card debt: That's right --
topping all Americans who have made poor decisions with their
credit cards are ambitious high school graduates, whose
collective student load debt shoots past $1 trillion! More
important than this being a crucial social epidemic, it's
potentially a very real problem for your child. President Obama
scored some political points in identifying with most Americans
when he said his student load debt was paid off only after he
was elected to the U.S. Senate. Two-thirds of students leave
college with some form of debt, according to the Federal Reserve
Bank.
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Fluctuating
interest rates: Recent controversy over interest rates of
federal Stafford loans adds to the insecurity of borrowing as a
college financing strategy. Given the unpredictability of
Congress, which allowed the U.S. credit rating to drop while
standing on political principles, one can't reliably predict
whether interest rates will rise or fall.
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Your children
cannot refinance their loans: While borrowers who have
racked up tens of thousands of dollars in gambling debt can
refinance their payments, student loans remain at fixed rates.
In collecting money on student loans, there is no statute of
limitation, and today it's very common -- the norm, actually --
for student loan holders to take nearly two decades to pay off
their debt. With the annual average cost of public universities
exceeding $22,000 per year, and the same often surpassing
$50,000 at private universities, it's no surprise.
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John McDonough is the managing member at Studemont Group, which
is primarily focused on helping retirees gain peace of mind with
unique market rescue and recovery programs. He is also founder,
president and CEO of Studemont Group College Funding Solutions. His
experience in the financial services industry includes being
managing partner at Granite Harbor Advisors in Houston and
divisional vice president of AXA Equitable/AXA Advisors, the
third-largest insurance company in the world. McDonough is a member
of the prestigious Forum 400, a Top of the Table qualifier for
Million Dollar Round Table, an active member in National Association
of Insurance and Financial Advisors, and Society of Financial
Service Professionals. He is also an active board member for First
Financial Resources. He has completed the course work to sit for the
Certified Financial Planner professional designation exam from Rice
University.
[Text from file received from
News and Experts]
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