Over the past decade we have witnessed the unprecedented growth in the cost of attending public and private four-year colleges and universities. According to the United States Department of Education, since 2001, the cost of attending public institutions has grown at a rate of 6.5 percent per year (through 2010). If this trend continues for the next several years, the cost of a public education in 2016 will be more than double the cost in 2001.
As the cost of college attendance increases exponentially, the average indebtedness of students is increasing at an alarming rate. The Project on Student Debt published a 2010 study analyzing the Class of 2009 and found that college seniors who graduated in 2009 had an average of $24,000 in student loan debt, up six percent from the previous year.
Another challenge facing students is less availability of non-federal sources of post-secondary school funding. Banks and other private lenders, like banks, are increasingly reluctant to issue unsecured loans.
The Project on Student Debt study also reflects the reality facing graduating seniors post-recession. Recent college graduates are struggling to pay back loans because of the challenging economic climate. The unemployment rate for young college graduates rose from 5.8 percent in 2008 to 8.7 percent in 2009, the highest annual rate ever recorded.
529 College Savings Plans
For years, parents have had several ways to save for college that can help reduce the student debt burden on their children. 529 plans are College Savings Plans operated by a state or educational institution, with tax advantages to make it easier to save for college and other post-secondary education for a designated beneficiary, like a child or grandchild.
Juvenile Life Insurance
Juvenile life insurance, also known as child life insurance, is permanent insurance coverage on the life of a child. Juvenile life insurance is recommended by many financial planners and wealth management professionals because it takes advantage of the low cost of insurance for a child, and offers many of the same tax-advantages of 529 plans. However, unlike 529 plans, there are no restrictions on when or how the money can be used. Funds can be used for college or any other purpose. Also, with child life insurance, a well-designed plan will provide a lifetime of fully-paid, permanent insurance coverage regardless of the future health or lifestyle choices of the insured. You can get a free quote for child life insurance at http://newamsterdamlife.com.
With the rising cost of college and the serious consequences of massive student loan debt, parents and grandparents saving for college should consider 529 plans and child life insurance as part of a smarter college savings strategy.
Author Bio – This educational piece of content is created by Todd Kosher, Guest writer and strategist for New Amsterdam Life.