Tuition costs have risen at a yearly rate that is far greater than the growth of the median household income, and they show no signs of slowing down anytime soon. This is not good news for parents, and even worse news for their students. Families must find a way to plan for their high school graduate’s tuition expenses before it is too late. While that sounds like a dooming cliché, it’s true. More high school graduates are attending college than ever before, making it difficult for students to receive sufficient financial aid. Financial aid is awarded based heavily on student need. Without proper planning, parents can hurt their student’s chance of receiving grants, scholarship, and even student loans, which can be detrimental to their child’s college plans. If this seems exaggerated, just take a look at the statistics and visualizations below:
Between the years of 2004 and 2013 (a 10-year period), tuition costs increased by $809 per year, on average. Between the years of 2004 and 2013 (a 10-year period), the median annual income increased by $1027.89 per year, on average. Seeing that the average median annual income (over the same time period) is $32,712.30 greater than the average yearly tuition cost, the difference in the average increase in the average median annual income and the annual tuition cost (which is only $218.89), seems insignificant. That’s because it is. In fact, over the 10-year period between 2003-2014, the average annual percentage change of tuition (5.08%) is 236% higher than the average annual percentage change of median income (2.15%). If all of these numbers confuse you, you’re probably not alone. There’s just one thing you should take away from this. It is becoming more imperative to plan for your student’s college career.
How to Reduce This Gap
If you are like most, you have no clue where to start. Planning for your child’s expenses seems daunting and insurmountable. The good news? Just by being here, you are already taking a step in the right direction, and college planning may be easier than you might think. There are several education accounts that parents can utilize, but they are not all same. Each type of account comes with a unique set advantages and disadvantages. While each account is different, and whether or not you have started saving for college expenses or just looking for a better alternative to college savings accounts, there is an option for you. Click here to view several types of college savings tools available to parents.