If you’re like most recent college graduates, you know what a tremendous burden student loan debt can be. It’s no wonder that many parents who’ve shouldered student debt themselves would like to help their children avoid the same fate, or at least help to lessen the load. The only problem is that a lot of these families are trying to save up to help their kids pay for college while still dealing with their own debt from their student loans.
Facts About the Current State Of Student Loan Debt:
The reality of the student loan debt problem in this country is staggering. There are a few facts everyone ought to know:
- Student loan debt is currently at an all-time high.
- 44 million borrowers currently owe $1.4 trillion in student loan debt. That’s more than Americans owe in auto loans and more than the total U.S. credit card debt.
- The average borrower has over $30,000 in student loan debt.
- In 2015, 68 percent of students graduating from four-year colleges had student loan debt.
- The majority of new grads have monthly loan payments of $300 or more.
These statistics tell us a lot, but a couple of big ideas jump out. First, graduating with some student loan debt is incredibly common. Second, because these loans are often significant, it takes a while to pay them back. This reality often has a big impact on your finances after graduation.
Parents Would Like To Help Their Kids Avoid Staggering Debt
Managing heavy student loans makes it difficult for new grads to obtain financial independence, much less start to think about putting something away for the next generation. Student loan debt, when coupled with rising rent prices and stagnating wages, makes it difficult for recent graduates to break out on their own.
Living at home with your folks after graduation has become almost standard practice these days. A recent study even found that in some metropolitan areas like New York and L.A., over 40 percent of millennials ages 18 through 34 are currently living with their parents.
In this economic climate, it’s hard enough to pay your loans and cover your expenses. So, how are millennial parents supposed to begin to think about saving up for their own kid’s educations?
Millennials are making it a priority because they know the impact of these loans. Despite their own debt, 90 percent of millennial parents say they plan to cover at least part of their children’s schooling.
Helping the Next Generation
A recent survey conducted by TD Ameritrade examined how current parents, and grandparents, are hoping and planning to help the next generation afford to pay for school.
One thing is immediately obvious from the results of this survey — they would like to help. Nearly one in five millennial parents, 19 percent, say that helping their kids pay for school is their top financial priority.
However, one in three of these parents also feel that they’ll probably still be paying their own loans down when their kids go to school. So, saving up for the next generation won’t be easy. This helps to explain why 19 percent of grandparents surveyed contributed to a grandchild’s college saving in the past year despite the fact that 57 percent of millennial parents said they don’t expect their parents to help.
Both of these generations are saving to help the next pay for school. Millennial parents who are saving for their children’s education are putting away an average of about $310 a month. Grandparents are chipping in another $205 a month on average.
Recent news that New York will be the first state to provide free four-year college tuition to families that earn less than $100,000 a year is exciting. If programs like these were to expand into other states it would significantly relieve the burden of student debt — not just for the next generation, but also for their parents and even their grandparents.
In the meantime, the best option for prospective students and their parents is calculate the ROI of those tuition dollars with student loan debt and future earnings in mind. PayScale’s College ROI Report is a good place to start.
Tell Us What You Think
Do you plan to help your kids or grandkids pay for college? We want to hear from you! Leave a comment or join the discussion on Twitter.