The cost of higher education is skyrocketing and college debt has become a major headache for students and parents alike.

In 2017, the average student graduating from a 4-year college had nearly $40,000 in debt, more for graduates with advanced degrees. Entering adulthood so deep in debt can set the stage for long-term financial struggles. If you want to help your son or daughter manage college debt, here are some strategies to consider.

Start Saving Early 

Open a college savings account while your kids are young. There are several options to choose from including 529 Collage Savings accounts and Coverdell Education Savings Accounts. Even if you can't fund it with large sums yourself, you can encourage family to make contributions. And you can deposit birthday money and other gifts along the way.

If you are considering a 529 plan it's important to understand whether the investor's or beneficiary's home state offers any benefits (such as tax benefits, state financial aid or scholarship funds or creditor protection) that are only available for investments in that state's program when deciding which fund to invest in. Withdrawals used for qualified expenses are federally tax free, but tax treatment can vary by state. For these reasons, we recommend you consult with your tax advisor before investing.

Consider Alternatives to Full-Time, Four-Year College

With the increased availability of community colleges, technical schools, and flexible, part-time programs, pursuing that four-year liberal arts degree is no a necessity.

Depending on your child's career goals, it may be possible to secure a two-year Associate degree or technical certification, then continue pursuing their education part-time while gaining a foothold in their career. Many employers even offer tuition assistance programs.

Dig Deep to Find Additional Sources of Funding

Even if your child has their heart set on a $50,000-per-year private-school education, you can get creative in finding scholarships and other forms of funding. Parents are often surprised to learn how much assistance is available through local, niche and small-scale scholarship programs that often get overlooked. Work-study programs also offer a way to balance educational and financial needs.

Consider Contributing to Their Loan Payments

If you have the means and inclination, there's nothing wrong with pitching in. Approximately one-third of American parents help their children pay off student debt.

To avoid undermining their independent financial responsibility, consider matching their contributions as an incentive for them to prioritize the debt, too. Just make sure you're aware of federal gift tax parameters.

Of course, don't jeopardize your own financial needs or retirement savings. After all, your children will have more time to pay down their debt than you will. And use caution when considering taking out loans yourself. Federal Parent PLUS loans, for example, come with high interest rates, steep origination fees, and no grace periods or income-based repayment plans.

By staying within the framework of your own financial goals, you can help your kids without sacrificing what you've worked so hard to build.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article originally appeared in Brainerd Dispatch on June 15, 2019. You may view the article here.

By Bruce Helmer and Peg Webb, Financial Advisors at Wealth Enhancement Group and co-hosts of “Your Money” on KLKS 100.1 FM on Sunday mornings. Email Bruce and Peg at Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.

Peg Chromy Webb

Peg Chromy Webb

Senior Vice President, Financial Advisor & Host of the “Your Money” radio show

Peg Chromy Webb has specialized in financial consulting for more than 30 years and is a popular co-host of the “Your Money” Radio Show. She is passionate about financial education and shares her expertise on career-building and financial literacy through various charitable endeavors.