According to CollegeData, the average cost of an in-state public university for the 2014-2015 school year was $23,410. For a private school, the cost goes up to $46,272. The Institute for College Access & Success reported an average student loan debt of $28,400 for students in the class of 2013.
Struggling with student loan debt and figuring out a way to pay for an education has sparked a new way parents think about their children's future, according to a study by Fidelity Investments. In 2007, 58 percent of parents between ages 30 and 34 had started to save for their children's education. Only 16 percent planned on paying for all of their children's college payments.
Saving for college
In 2015, 74 percent of parents in the same age range have started to save and nearly half plan to pay for all college costs.
"Nearly half of parents plan to pay for their children's education."
"Millennials have weathered challenging economic conditions for much of their adulthood," Keith Bernhardt, Fidelity's vice president of retirement and college products, said in a statement. "Many have channeled that experience into setting college savings goals early, and taking steps to make savings a regular habit."
Though today's parents have big goals for their children's education, Fidelity found that many aren't on track to accomplish them. More than half of the parents surveyed say they realize they are off track. According to USA Today, most parents are in position to pay for only about a quarter of their children's college education.
These results indicate parents could use guidance from professionals to help them get on task with saving. Saving early on is the best way to make their goals a reality. Credit unions could do their part by offering advice to parents who wish to begin saving for their children's college tuition.
Coverdell Education Savings Account
For instance, one popular way to save for college is using a Coverdell Education Savings Account. ESAs are offered through banks, credit unions and other IRS-approved institutions, according to the IRS. The money saved isn't taxed, but accumulates interest.They allow people to save up to $2,000 a year. Credit unions that offer this service should let parents know how it could help.
However, if the average year at a public university continues to be $23,410, an ESA probably won't be able to cover 100 percent of a student's four-year education. At $2,000, it would take nearly 47 years without interest to reach the amount needed.
Taking out loans
Many students will take out loans to help with their college payments. Credit unions should be offering information about loan options to college students and their families. They should also be explaining payment plans to help members make payments in a way that best suits their needs.
Credit unions can also listen to member feedback to find what changes they need to make to their loan programs. The UW Credit Union recently made changes to its refinance limit and interest rate to help members pay off their loans quickly and easily.
"We're committed to helping members pay off their loans through lower interest rates and giving them the convenience of having all of their loans in one place," Sherry Peplinski, UW Credit Union's educational lending product manager, said in a press release.
529 plans
Another way parents can save for their children's future is through a 529 plan. Parents today are more likely to use this state-sponsored benefit than they were before, according to Fidelity's study. However, less than half take advantage of it.
There are two types of 529 plans, according to the U.S. Securities and Exchange Commission. One type is the college savings plan. This is when a person invests money in this plan on behalf of a beneficiary. The person investing can choose from several investment opportunities, such as stock mutual funds, bond mutual funds or portfolios that adjust as the beneficiary gets older.
The second type is a pre-paid tuition plan. This allows someone to begin saving money at a public or private university participating in the plan. The money will accumulate until the student begins to attend college, when the money would begin to go toward the student's education.
Saving for college is a big task that takes many years. The earlier parents begin to save for college, the better. Many millennials know what student debt feels like and the toll it can take on entering into adulthood and financial independence. Because of this, many are working to help their children avoid the same fate. Credit unions can help parents and students out by teaching them about all their options.