One of the leading debt types among adults in the nation is the student loan. With the rising expense of secondary education, students and parents often find themselves struggling with post-college debt repayment. Though student loans may be low interest, they often stack, creating monthly payment totals that are seemingly impossible to pay. For residents in Wisconsin, pre-college savings plans may offer a better solution than student loan debt.
Experts say parents who plan early for children’s college education don’t have to face the scary tuition amounts unprepared. In Wisconsin, 529 savings plans administered by educational institutions or the state offer one way to plan for the future. The state offers families two plan options. Tomorrow’s Scholar and Edvest are managed by investment firms much the way mutual funds are, letting families save and grow funds without paying taxes on the income. The savings accounts offer the added benefit of reducing taxable income on your state return.
Money saved using either plan can be used later to cover the cost of books, room and board and tuition. Edvest funds are available to support education at one of 3,800 colleges and is not limited to schools in the state. Individuals that invest in the accounts and then move out of state retain ownership of the accounts.
According to a statement from Edvest, the average cost of a public four-year degree is around $18,000. The total jumps to $40,000 for private colleges. Experts say the best way to meet financial needs of that magnitude is to start early. According to Edvest, saving $50 every month in a Wisconsin 529 plan beginning as soon as a child is born results in around $25,000 savings by the time the child is ready for college.
For those that are unable to save, student loans to offer a viable alternative for funding education. It’s important to review loan language carefully, however, because one poor decision or sudden change in circumstance can result in a personal debt crisis. In that case, understanding all your options for debt relief, including legal channels such as bankruptcy, is important.
Source: The Journal Times, “College savings accounts can help alleviate debt problems for parents, students” Lindsay Bullock, Apr. 08, 2014