Save more now, pay less later.
With today's high college costs and relatively low interest rates, it can seem like a good idea to borrow everything you'll need for college when the time comes, rather than save what you can now.
That could be a costly mistake.
Consider these hypothetical scenarios:
Scenario 1: Terry's parents start investing $100 a month into a 529 plan account right after Terry's birth. In 18 years (assuming a 5% annual rate of return), they could potentially save more than $35,000.1
Scenario 2: After exhausting federal student aid options, Terry has to borrow $35,000 to attend college. Based on a private student loan rate of 7.0 percent, Terry could be faced with a monthly payment of $406 for 10 years (or $48,720).2
A college education is worth more than ever.
College graduates earn as much as 65 percent more than the typical high school graduate over 40 years.3
1 The hypothetical example assumes college begins at age 18 and is based on a 5 percent rate of return compounded daily, and is for illustrative purposes only. It does not reflect an actual investment in any particular 529 plan or taxes, if any, payable upon withdrawal.
2 This hypothetical example is for illustrative purposes only and assumes no withdrawals made during the period shown. It does not represent an actual investment in any particular 529 plan and does not reflect the effect of fees and expenses. Your actual investment return may be higher or lower than that shown. The loan repayment terms are also hypothetical.
3 College Board: Trends in College Pricing, 2013.
4 A plan of regular investment cannot ensure a profit or protect against a loss in a declining market.