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Your Child Is Getting Back Admissions Letters. Are You Ready for Tuition Costs?

Your Child Is Getting Back Admissions Letters. Are You Ready for Tuition Costs?

College Finances
SouthEast Bank| February 20, 2024
Your Child Is Getting Back Admissions Letters. Are You Ready for Tuition Costs?

The closer your young student gets to their high school graduation, the larger college and career choices seem to feel. For many juniors, preliminary tours and application preparations are already in progress. For seniors, it’s crunch time for applications and decision-making.

Parents, where do you fit into the picture?

Among the major ways that parents support their high school graduates, financing their higher education remains a substantial choice. According to a 2023 Sallie Mae study, 85% of U.S. parents underwrite at least a portion of tuition costs for their child, with over half of those costs covered by parent income and/or savings alone. In fact, parents are contributing over 15% more toward higher education tuition today than ten years ago. 

So, let’s review how other parents are approaching tuition costs and how you can prepare your family’s finances for the choices that lie ahead, because there’s no time to waste!

Crunching the Numbers

There are more and more incentives for your high school graduate to stay in Tennessee while earning their degree. In fact, this fall the University of Tennessee (UT) System announced guaranteed admission to any campus for seniors with a 4.0 grade point average or sitting in the top 10% of their class. In addition, high-performing students at a number of Knoxville high schools are eligible for significant scholarships to attend a UT school.

Admissions and scholarships aside, however, the cost to attend one of the 160+ post-secondary institutions in Tennessee–including universities, community colleges, and vocational schools–varies greatly. According to the College Board, the average tuition and fees for in-state students at public four-year institutions in Tennessee for the 2021-2022 academic year is $10,770. For out-of-state students, the average jumps to $28,120. For private four-year institutions in Tennessee, the average tuition and fees for the 2021-2022 academic year is $33,660.

Based on current projections, the average cost of tuition in Tennessee for 2024 is expected to be around $14,000 for in-state students and over $35,000 for out-of-state students. This means that the average cost of tuition is expected to increase by at least 20% in the next four years.

Managing a portion or all of this cost over the span of four years or more can be a challenge for any family. Not to mention the number of kids you may have enrolled in higher education at one time!

Be Prepared

In the same Sallie Mae survey, of all parents who had a plan for paying for their child’s tuition, 55% were confident that their funds would not run out before their child completed their degree. 

While there are factors that may be beyond a family’s control, planning can help ensure other potential obstacles – changes in school tuition, loan rate fluctuations, or upsets in scholarship funding – can more easily be overcome. That confidence pays dividends in your student’s wellbeing, as studies show that financial strain is a significant cause of dropout. In other words, having a plan in place to prepare for and pay tuition costs helps everyone sleep better at night. 

If the common college savings strategies like 529 plans or Roth IRAs don’t seem sufficient, here is another option to consider.

Private Parent Student Loans

Private parent student loans are loans that parents or legal guardians can take out to help their child cover the expenses of higher education. These loans are offered by private lenders, such as banks, credit unions, and online lenders, and are not backed by the government. They are intended to bridge the gap between the student’s financial aid and the total cost of attendance.

Unlike federal student loans, private parent student loans require a credit check and often a co-signer. The interest rates and repayment terms are also set by the lender, rather than the government. This means that they may be higher and less flexible than federal loans. However, they can be a useful option for families who have exhausted all other forms of financial aid and need additional funds to cover educational expenses.

The Benefits of Parent Student Loans

Private parent student loans offer several benefits over other forms of financing, such as federal student loans or personal loans. These include:

Considerations Before Taking Out a Parent Student Loan

While private parent student loans can be a useful tool for financing your child’s education, there are a few things you should consider before taking one out:

Final Notes

For every student making their way through college, there are a number of choices that have gone into funding their education. The good news? There’s no one right way to do it! Parents and families have a number of tools at their disposal when planning and paying for their child’s college degree. 

Don’t hesitate to investigate your child’s financing options and consider how you want to support them through these decisions. With proper planning and research, you can help make their educational dreams a reality.