Think $5,000 or $10,000 is what a typical college graduate owes in student loans? Think again. The average student loan debt at graduation is actually $39,487.
As a parent, you might be wondering if there’s a better way. The good news is, there is! By starting a college fund now, and with dedication, planning, and effort, you can save enough to help your child graduate college debt-free.
KEY TAKEAWAYS
Education Savings Account (ESA): Allows up to $2,000 per year, per child, and grows tax-free. Over 18 years, with a 7-10% return, $36,000 could grow to around $87,000. However, contributions are limited by income and must be used by age 30.
529 Plan: Offers higher contribution limits (up to $300,000) with no income restrictions. Choose flexible plans to avoid poor options and check if you can transfer funds between family members. Money grows tax-free.
UTMA/UGMA Accounts: These accounts are in the child’s name but controlled by a guardian until the child reaches adulthood. There are no contribution limits, but the money can be used for any purpose, not just education.
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