Happily Ever After?
When you’re a parent, you want your child’s future to play out like an after-school special. Everything works out in the end, right?
Here’s a familiar dream if you’re a young parent: Your child has a joyful childhood, goes to college, gets a great job, marries the love of their life, has kids and you become an eager grandparent who gets to visit your child at their beautiful … wait, hold that thought.
If your son or daughter has student loan debt, that home might be delayed. Recent reports from NPR and Forbes show many millennials aren’t buying homes or new automobiles, or they aren’t getting married and starting families because of their substantial debt from college loans.
Consider this statistic from the Wall Street Journal citing a recent Federal Reserve report: Student loan debt prevented 400,000 young Americans from buying homes between 2005 and 2014.
Which makes sense. With more than 44 million borrowers collectively owning $1.5 trillion in student debt, why would young homebuyers want to continue to pile on debt? As the Wall Street Journal recently reported, federal researchers pointed to at least two effects of the student loan debt on the decision to buy a home.
“First, many borrowers fell behind on their student loans and damaged their credit, hurting their ability to qualify for mortgages. Second, many others have good credit but are unable or unwilling to save for a down payment on a home because they funnel a chunk of their disposable incomes toward student debt.”
And as we mentioned above, it’s not just homes. Some of those student loan borrowers have also put off marriage, having children or other major life decisions.
In another national student debt study produced by a social impact startup called Summer and the non-profit organization Student Debt Crisis, Forbes quotes one borrower who acknowledged that “burden of debt” had impacted his marriage.
“We are waiting to have children and buy a home because our combined student debt is more than a mortgage on a home. This debt has been a huge burden and point of contention throughout our last 10 years,” the borrower said.
Discouraging, yes – but there’s a solution
This probably isn’t how your child’s story plays out in your dreams. And now you’re worried. That’s a natural feeling to have because these scenarios are real. And parents are right to feel concerned about their child’s future.
But you don’t need to feel overwhelmed. There’s a solution that could ease the reliance on student loans.
Putting money into a 529 college savings plan for your child could help them get a head start on their educational future. And it’s easy to do. Setting up a 529 account online takes just a few minutes, and in many plans, you can start with as little as $10. For some plans, there is no initial contribution required at all.
The savings in a 529 can be used for everything from tuition and books to room and board and other college expenses. Plus, the money invested grows tax-free and can be withdrawn tax-free when it’s used for higher education expenses. *
Nearly every state and a consortium of private colleges and universities offer a 529 plan, and one of many benefits is that anyone can contribute to your child’s college savings account, even if they live in a different state. That means if grandpa and grandma live across the country, they can still contribute to your child’s account, and they can still enjoy the tax benefits that come with it.
The point is, by setting up a 529 college savings plan account, you can get yourself one step closer to visiting your grandchildren at that dream house.
Want to know more about setting up a 529 college savings plan? There are a variety of informative blogs on this website, and you can visit CollegeSavings.org to learn all about the 529 plans offered by yours and other states.