Should You Start Saving for College Now?

Editor’s Note: has partnered with to bring you a monthly series of posts about money topics related to moms.  These guest posts will be shorter, edited versions of longer features written by Cheryl Lock, Editor at LearnVest.

As we all know, the cost of parenting can last long after the kids are grown and out of the house.  Money spent on diapers and formula morphs into summer camp fees and back-to-school gear. Then, before you know it, you’re paying for your kid’s college loans well into your 40s and 50s.

Okay, so that’s probably not the way most parents envision spending their money as they near retirement, but according to recent data, quite a few are already feeling that sting. And it makes sense: The average cost of four-year universities rose by 15% between 2008 and 2010, and keeps on climbing higher. Not every family is willing to tax themselves beyond their limits to meet those new sticker prices, though.  In a recent survey, only 53% of parents (down from 64% in the 2009-2010 academic year) said they would stretch themselves financially to pay for college.

But taking out loans that you might not be able to pay back is a financial road you don’t want to go down.  Data released recently by the Federal Reserve Bank of New York shows that middle-aged Americans are actually the age group struggling the most with student loan payments. Not only has the number of middle-aged Americans with student loans doubled since 2005, the delinquency rate (the percentage of debt on which no payment has been made for 90 days) for borrowers ages 40 to 49 was 11.9%, compared to a delinquency rate of 8.7% for borrowers of all ages.

While it’s definitely true that some of these over-40 debtors are still paying off their own loans from college, it appears that many are parents who have taken out student loans to help fund their children’s education.  In fact, The Wall Street Journal reports that the federal PLUS program, which allows parents to take out loans  to help pay for education expenses not covered by other financial aid, is among the fastest-growing of the government’s education loan programs. 

To figure out how much either you can afford to put toward college loans, set up a budget that answers two questions:

  1. How much time do you have?
  2. How much can you afford to put away each month to reach that goal?

Start by comparing information about state schools where your child qualifies for in-state tuition and private universities. Once you have a good idea of the varying costs of tuition, calculate how much you should save each month by using our What to Sock Away for College calculator. If you’re working with a limited time frame (generally five years or less), figure out where you can cut back in your family budget to put aside extra money each month. (Read more about the additional ways you can come up with money for college in a short period of time.)  And even though colleges have slashed the number of grants and scholarships they offer by 15% in the past year, don’t forget the scholarship options available from private donors and funds. Click here to find out more about what scholarships are available for your child based on her unique background, interests, abilities and financial situation.

Plus, here’s something else to keep in mind: The White House, Department of Education, and the Consumer Financial Protection Bureau have unveiled the final version of their  “financial aid shopping sheet,” which is meant to replace the current (and notoriously confusing) financial aid award letters that colleges typically send to students. Colleges can voluntarily adopt the form which includes, in one simple page, personalized information about how much one year of school will cost, the loan options available to the applicant, the differences between grants and scholarships, and the net cost of college when grants and scholarships are taken into consideration.

So while taking out federal loans is sometimes a necessity to fund college, it’s also important to minimize how much you borrow, and to have a specific plan on how long it will take you to pay everything back. Check out our Student Loan Checklist in the Knowledge Center for more information.

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