The Challenges Of Saving For College
As the school year draws to a close and a new crop of students heads off to college this fall, the age-old challenge of paying for it is on the minds of many. But this year another group is taking up that challenge: Congress, and the President.
On July 1, the interest rate for federal education loans is going to increase from 3.4 percent to 6.8 percent if Congress does not take action, which is where bill H.R. 1911 comes in.
This bill proposes tying the interest rate of education loans to the 10-year treasury note rate plus 2.5 percent.
This would allow the interest rate of student loans to adjust automatically with the inflation rate. Congressman Mike Pompeo, a Republican from the 4th District of Kansas voted in favor of this bill and advocated for the transparency clause within the bill.
"Students ought to have the capacity to know where their money is going," Pompeo said.
On the other side of the aisle, Congressman Emanuel Cleaver II, a Democrat from the 5th District of Missouri voted against the bill because he thinks it will keep interest rates low at first, but has the potential to make college for expensive for future generations of college students.
So with the issue of loans and interest rates in the forefront of many students' minds, how can a college student or parents of a future college student plan effectively to avoid contributing to the $1.1 trillion in current student loan debt?
Saving and discipline is the answer from local financial planner, Bob Anthony. Starting early and putting away a little money each month will save the investor and the student thousands of dollars later in interest. Stacy Belford of American Century Investments suggests a 529 plan because the money saved can only be used for education purposes.
Mel Tyler, Associate Vice Chancellor for Student Affairs and Enrollment Management at UMKC provided other options such as merit based scholarships, need based scholarships and scholarships from a university's endowment. No matter what avenue you take to try and get your child through college, all of the experts agreed that planning ahead is the best option to avoid staggering debt later on.
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