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Student Debt Levels Keep Growing. Here’s How to Help Minimize the Burden for Your Kids.

It’s hardly a secret that student loan debt is a major problem — one that’s potentially approaching crisis levels. A whopping 43.5 million Americans owe money on student loans. But it’s not just the number of borrowers that’s problematic. There’s also the fact that student loan debt totals have increased dramatically over the past 10 years.

In 2013, U.S. federal student loan debt totaled $948 billion. But by the last quarter of that year, outstanding federal student loan debt had crossed the $1 trillion threshold. And at this point, student loan borrowers owe a rather astounding $1.78 trillion.

That higher total may be a function of rising education costs. But it may also be a function of students being willing to extend themselves financially in the course of getting a degree — whether that’s a wise move or not.

A person at a laptop putting their hands on their face and closing their eyes.

Image source: Getty Images.

If you’d rather your kids not pile onto these statistics, then it’s imperative that you do what you can to save for their education so they’re able to borrow minimally, or perhaps avoid student loans completely. And the good news is that you don’t necessarily need to sock away $10,000 a year for your kids’ education. You just need to save consistently from when they’re young.

Use the power of time to your advantage

If you wait until your kids reach their teenage years to start saving for college, then you may very well end up having to scramble as that milestone approaches and part with loads of income each year to cover their education costs. And that may not actually be feasible. But if you start saving for college when your kids are young, you might manage to accumulate a nice education fund for them without straining your finances too badly.

Imagine you’re able to sock away $300 a month for college savings purposes when your kids are 3 years old. If you invest that money at an average annual 8% return, which is a bit below the stock market’s average, by the time they’re 18, you’ll have close to $98,000. And if you start saving and investing that $300 a month when your kids are just a year old, you’ll have more than $121,000 in college savings by the time they’re 18, assuming that same return.

On the other hand, it would take $1,400 a month in college plan contributions to have $98,000 for college by your kids’ 18th birthday if you don’t start saving until they’re 13. That, too, assumes an average annual 8% return, which may or may not be feasible given that shorter window.

The point? If you want your kids to be able to attend and graduate college without accruing a mountain of debt, then you shouldn’t wait to start saving. Instead, bust out a spreadsheet, run some numbers, and figure out how much money you can afford to set aside for college savings starting now. The sooner you begin, the lesser your chances of having your kids wind up saddled with debt in the course of getting a degree.

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