How parents can help secure their child's future by avoiding costly student loans

How parents can help secure their child's future by avoiding costly student loans

In today's challenging financial landscape, parents and guardians play a crucial role in preparing their student for a successful future. 

As the cost of a college education continues to rise, the burden of student loans post-graduation can hinder graduates' financial growth. This blog post explores the IOU approach that empowers parents to financially support their children's college education without subjecting them to the pitfalls of expensive student loans. Here are five ways this strategy could help pave the way for a brighter and debt-free future.

1.) The impact of student loan debt and high-interest rates:

Student loan debt has reached staggering levels in recent years. Here’s a look at highlights from a 2023 Education Data Initiative report

- The average federal student loan debt is $37,338 per borrower.

- Private student loan debt averages $54,921 per borrower.

- The average student borrows over $30,000 to pursue a bachelor’s degree.

- A total of 45.3 million borrowers have student loan debt; 92% of them have federal loan debt.

- 20 years after entering school, half of the student borrowers still owe $20,000 each on outstanding loan balances.

High-interest rates on federal and private student loans can exacerbate this burden, turning a seemingly-manageable debt into a long-term financial strain. Even a 5% interest rate on a $30,000 loan can accumulate nearly $10,000 in interest payments over ten years.

2.) The IOU approach: empowering parents to secure their child's future:

The IOU approach (I owe you) is becoming an increasingly popular method for parents to provide financial aid to their children for college expenses. Even outside of education, more and more Americans are turning to loved ones for financial support instead of institutions like banks and lenders. By offering support without imposing interest rates, parents can help their children avoid the shackles of student loan debt and focus on their career and personal development.

3.) The long-term advantages of IOU financing:

Reduced financial stress: Graduates without student loan debt can focus their efforts on professional growth, personal goals and financial stability, without the stress of looming loan payments with high-interest rates.

4.) Enhanced financial freedom: 

If a student isn’t strapped with thousands of earnings already accounted for by interest tied to their loan, the IOU approach enables graduates to allocate more earnings towards savings, investments or major life milestones, preparing them for a potentially stronger and more secure financial future – dollars that could go towards buying a home or starting a family one day. 

5.) Strengthened parent-child relationships: 

By supporting their children's education without pricey interest rates, parents can foster trust and open communication, nurturing a more profound sense of gratitude and responsibility in their children. Working together to create an IOU and follow the repayment plan could even help strengthen the bond

In today's education landscape, parents and guardians are essential in helping their children navigate the financial challenges of college. 

While student loans with high-interest rates can be burdensome for graduates, the IOU approach offers a powerful alternative. By providing financial support without the burden of costly interest, parents can empower their children to pursue their dreams and build a brighter, debt-free future. Investing in a college education is an investment in the next generation, securing a path toward success and financial stability.

Zirtue Team
August 4, 2023
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