Introduction

Do you recall being young and carefree, barely out of high school, and signing on the dotted line for student loans to finance your higher education degree? If you’re anything like me, you might’ve not fully grasped the gravity of that decision.

I sat in my first finance class during my sophomore year at the University of Texas, hastily taking notes. My professor’s words echoed in my mind: “One of the biggest mistakes young adults make is taking on too much student loan debt.” It was too late for me. I was drowning in student loans, intensifying my regrets.

You see, my parents didn’t save for my college education. They both worked and lived within their means, instilling in me the importance of hard work, but we never discussed higher education or financial support.

When the time came, my path was clear – I needed student loans to pay for my education and/or higher learning. A decision I made when I was just 18 years old.

I didn’t have the tools or understanding to fully grasp the weight of that decision. Yet, it was a choice that would shape the trajectory of my life.

After high school, Baylor University’s offer could have saved me from this financial quagmire. However, I chose the University of Texas for my education, a costly choice that led to massive loans and delayed homeownership, altering my career path unexpectedly.

The Burden of Education Loans

Let me take you on a journey through my personal experience with education loans. Like many, I was ecstatic to attend the University of Texas for both my bachelor’s degree and postgraduate study. The price? A staggering $103,000 in education loans. This figure that far surpasses the U.S. average of $37,574 for a bachelor’s degree. As well as the $80,494 for a master’s degree. This debt was a heavy burden that shifted the course of my life in unexpected ways.

Turning Points and Tough Choices

As it turns out, the debt was so weighty it hindered my husband and me from purchasing our first home. I was determined to eliminate this debt, which led me to a career in public schools, despite my choice of not to pursue education as a matter for profession. Why? It allowed me to be eligible for public service loan forgiveness after making 120 successful payments.

A Glimpse of Freedom

I found myself teaching high school- a path I hadn’t initially planned on following after graduate school – solely to qualify for the public service loan forgiveness program. It was a roller coaster journey but it eventually paid off. Last month, my loan provider congratulated me on my loan forgiveness – an achievement that felt like winning the lottery. Nevertheless, it was an ordeal I would not wish upon my children.

What is higher education?

There are many stories as of late questioning the value and quality of higher education. Examples show that there are mixed feelings about our perception of higher education. But what exactly is higher education? Higher education refers to post-secondary education whether it is a college, a university or other institutions that offer academic degrees or professional certifications. It goes beyond the basic level of education taught in primary and secondary schools and provides individuals with specialized knowledge and skills in their chosen field.

Higher education institutions, secondary education, community colleges, oh my!

Higher education can take different forms such as undergraduate degrees, graduate degrees, professional degrees, or vocational training programs. A higher education degree come in a broad range typically include bachelor’s degrees awarded by institutions, secondary school, junior colleges, professional schools, after completing a specific course of study. Graduate degrees include master’s and doctoral degrees and require advanced coursework and research in a specific area of study.

The Approach to Masters Programs

In the realm of higher education, pursuing a master’s degree is interesting in that it typically requires work experience. This experience in the real world equips students with a better understanding of employer needs and how a master’s degree could help them contribute to society.

Professional degrees are geared towards specific professions such as medicine (MD), law (JD), or engineering (PE). These programs combine theoretical knowledge with practical skills necessary to succeed in these fields. Vocational training programs focus on providing individuals with technical and practical skills required for specific jobs such as carpentry, plumbing, or culinary arts.

Higher education can play a crucial role in preparing individuals for successful careers and personal growth if approached correctly. It can equip students with specialized knowledge, critical thinking skills, and problem-solving abilities necessary to thrive in today’s competitive job market. Higher education also can provide opportunities for networking and building relationships with peers and industry professionals, opening doors to future career opportunities.

A word of caution, because higher education courses can provide these opportunities, doesn’t mean that it is an easy button or a guaranteed outcome as many people realize once they have a certificate. This is where it pays to plan and have careful intentions or it can be a gamble.

Open Conversations and Informed Choices

Inspired by my own tribulations, my husband and I committed to saving for our children’s college education even before they were born. We initiated a 529 plan, a flexible, tax-advantaged account specifically designed for education savings, which as was confirmed later was a good idea.

Enter Dan Dillard, The Financial Planner

As I began working with Nest Financial and Dan Dillard, I learned so much more that I want to share. Dan, a financial planner with 23 years of experience, has helped thousands of families navigate saving for college. Dan’s experiences and insights have deeply colored my understanding of higher education, its cost, and its value.

Dan Dillard on Saving for College

Dan emphasizes the importance of starting early when it comes to saving for college. Over the past 25 years, the inflation rate for college expenses has grown at 8%. This inflation rate makes it increasingly challenging for middle and low-income families to save for a full tuition and board for their children.

Tax Advantaged Saving Options

According to Dan, anytime families can save for college and have access to tax advantages, it helps. Both 529 plans and some retirement accounts provide some advantage by minimizing taxes when the funds are used for college.

As mentioned earlier, the decision my husband and i made about starting a 529 for our kids, was a prudent one given the financial landscape of higher education. According to Dan, “The inflation for college expenses has grown at 8% for the last 25 years or longer. It’s increasingly difficult for middle and low-income families to save for full tuition and board for their children, so starting early is always recommended.”

The 529 plan’s flexibility will allow us to withdraw funds tax-free for nearly any type of college expense at accredited schools nationwide. We could choose between an age-based strategy or a fixed allocation strategy based on our risk tolerance and investment goals. This gave us peace of mind knowing that we had a dedicated fund specifically earmarked for to support our children’s higher education.

The Higher Education Decision: A Family Affair

Dan suggests being open with your children about just what is higher education you can afford and the struggles of student loans. Having this discussion early on can help your child make an informed decision when choosing a college. This way, they’ll know what to expect and how much they need to contribute, either through scholarships or their own savings.

A Word of Caution

One of Dan’s most striking stories involves a mom who went back to work for several years just to save $100,000 for her son’s college education. However, her son ended up getting a degree he will likely never use. Dan believes this example perfectly encapsulates how college savings can transition from an investment into a gamble.

According to Dan, not all degrees or education provide equal opportunities. Youth must have a clear intention before starting college, as it is no longer affordable for students to “find themselves” in college, as was the norm 30 years ago.

Final Thoughts

The rising cost of higher education has become a significant concern for many families. Tuition fees, accommodation costs, textbooks, and other expenses associated with college can add up quickly, making it challenging for students and their families to afford higher education without taking on substantial student loan debt. This is where starting early and saving for higher education becomes essential.

We need to give our youth the time to grow and mature before they make life-changing decisions about their higher education institutions, and career. Investing time in self-discovery before college can save a lot of money and potential disappointment down the line. Start a conversation about higher education, let them know what higher education means, and ensure they understand the implications of student loan debt. Most importantly, start saving early.

In my quest for financial knowledge, Dan Dillard and the NEST Financial team have been invaluable. Their insights not only fortified my understanding and management of education savings plans but also shed light on the landscape of higher education financing.

DISCLAIMER: We are legally obligated to remind you that the information and opinions shared in this article are for educational purposes only. These are not financial planning or investment advice. For guidance about your unique goals, drop us a line at info@nestfinancial.net.

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Candace Wofford is a University of Texas alum, where she holds her undergraduate and graduate degrees.  Her degree in MS in Marine Science with a focus on Reproductive Endocrinology. An expert in the Social and Emotional Learning Field where she shares her passion to high-school students to inspire them to become the best versions of themselves. She is a mother of two beautiful children, Jace (5) and Piper Beverly (1.5) so together they are PB&J and she is happily married to her Action Sports Expert Hubby, Jade.