Finance
Parents rely heavily on borrowing to pay for college costs: survey
Federal and private loans are the top methods for making up a savings shortfall to pay for college. (iStock)
Most families plan to do some borrowing to pay for college despite saving for this milestone event, a recent survey said.
Roughly 42% of families said they planned to rely on federal student loans and 16% said they would use private loans to pay for college, according to the College Ave survey. These parents estimated they would borrow more than $46,000 over four years. Some families (19%) plan to make up for their college savings shortfall by borrowing up to $68,000 in parent loans.
Besides borrowing, families are also looking at debt-free options to raise cash or cut costs to pay for college. For example, 56% of families are budgeting for four years of schooling, and 10% plan to have their students live at home. Seventeen percent said they planned to take a second job or side hustle to pay for college and 39% said their child would work to help contribute to costs.
“Over and over again, our College Ave survey showcases that funding a college degree is a priority for families,” College Ave Chief Marketing Officer Angela Colatriano said. “With so many resources available to pay for college – like scholarships, grants, income and savings, loans and more – it can feel overwhelming putting the pieces together.”
If you are currently in school or starting soon, and you need more financial aid than what you can receive through the Free Application for Federal Student Aid (FAFSA), consider taking out a private student loan. Visit Credible to find your personalized rate without affecting your credit score.
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Tuition costs more than expected
About 66% percent of college students said college costs were more than they expected and 26% said that these costs rang in at $10,000 or more, according to a different College Ave survey.
The cost of higher education remains a significant expense for families who often underestimate the price. Costs have skyrocketed over the last 40 years, even after adjusting for inflation, according to figures reported by the Education Data Initiative.
From 2000 to 2020, average post-secondary tuition inflation outpaced wage inflation by 111.4%. Today, students, on average, can expect to pay $26,027 per year to attend a public four-year in-state university. Out-of-state students and those attending a private school typically pay more.
“Perhaps that’s why the majority report that paying for college is stressful (68%) and, for some, confusing (46%),” College Ave said. “Despite the surprises, stress and confusion, many college students demonstrate a remarkable commitment to their education and find resourceful ways to fund their college education while balancing their personal financial goals.”
Private student loan borrowers can’t benefit from federal loan relief. But you could lower your monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered.
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Tips for borrowing smartly
Many families plan to borrow money to shoulder the increasing costs of college. If you plan to take on debt to pay for school, here are some things you should consider in advance to keep it manageable:
Borrow what you can repay
The rule of thumb is not to borrow more than the student’s expected first year’s annual salary.
“Try not to borrow in total more than your child expects to make in their first year’s salary,” according to CollegeAve. “By doing so, you are likely to be able to repay your student loans within 10 years.”
Know your payment amount
Keeping debt manageable requires understanding how much you owe in order to budget. However, 40% of respondents did not know their student loan monthly repayment amount.
Choose repayment terms that make sense
Flexible repayment options tailored to your needs can help you stay on track with your obligations. Some borrowers choose lower monthly payments over a longer term, while others opt for a shorter repayment term.
Begin repaying early
Starting the clock on repayment today, no matter how small the amount, can help reduce the total cost of the loan.
If you’re borrowing private student loans to pay for college, it’s important to find a lender who offers reasonable rates, flexible repayment terms and is a provider you can trust. Visit Credible to learn more about private student loan options and get personalized rates from multiple lenders without impacting your credit score.
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Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
In this photo illustration, the Robinhood Markets, Inc. logo is displayed on a smartphone screen.
Rafael Henrique | Sopa Images | Lightrocket | Getty Images
Retail brokerage firm Robinhood is launching a new tool for more sophisticated traders as it looks for additional avenues for growth.
On Wednesday, the firm introduced Robinhood Legend, a desktop-based platform for active traders. The offering includes advanced charting tools for users who want to do detailed analysis of stocks.
“In looking at the landscape of trading tools and by talking with active traders, we realized there is frustration with legacy offerings,” Steve Quirk, chief brokerage officer at Robinhood, said in a press release.
“Specifically, moving back and forth between apps or charting platforms can be cumbersome and time consuming. So we set out to reimagine what a modern, intuitively designed active trading platform should look like, and built Robinhood Legend from the ground up so traders can do what they need in one place,” Quirk said.
Beyond the launch of Legend, Robinhood also said it will soon add futures trading and index options to its mobile platform. Customers must be granted approval to trade futures contracts, according to the press release, and futures and index options will eventually be added to Legend as well.
The new additions for Robinhood are another example of the firm looking to expand beyond its roots as a convenient platform for small-dollar traders. The firm’s rise coincided with the “meme stock” phenomenon in early 2021 as retail trading boomed in the aftermath of the Covid-19 pandemic.
Robinhood shares, all-time
Since then, Robinhood has been steadily adding new offerings, including a credit card for Robinhood Gold subscribers and a digital wallet to hold cryptocurrencies.
Robinhood said that it had $139.7 billion in assets under custody at the end of the second quarter, along with 11.8 million monthly active users. For the comparable quarter in 2021, near the height of the GameStop mania, Robinhood reported $102 billion in assets but 21.3 million monthly active users. The firm’s next earnings report is scheduled for Oct. 30.
Shares of Robinhood are up more than 100% so far this year.
The announcements on Thursday were part of HOOD Summit, a conference for Robinhood’s customers.
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