This is the fourth story in a series on student loan debt. Read the first three: on the many trapped in student debt, elusive federal student loan debt forgiveness and a program to help borrowers seek assistance in bankruptcy court.
The years are already flying by for the Feinberg Keenan family. Their twins, Penelope and Amelia, are in their last year of pre-school. Once the twins head to kindergarten, Beth Feinberg Keenan, the girls' mother, says the family will be able to free up the money they've been paying for preschool tuition.
"It's an opportunity where we will redirect the money we have associated to the girls," Feinberg Keenan said. "We'll have before- and afterschool care for them, extra activities for them, but that's going to be my opportunity to really boost up their savings."
Beth and her husband have a plan in place to pay for college. They opened a 529 college savings plan for the twins when they were born, and they have put what they can, including birthday and holiday money, into the accounts over the years.
"I also make sure that when my husband gets a bonus or a tax refund that we take a portion of that and put it into the 529," Feinberg Keenan said.
There is no single solution that fits every family, but a 529 college savings plan is often a good choice. The money can be withdrawn tax-free if used for college expenses. Just make sure you have a plan that doesn't charge a commission or fee.
"This house will be paid off by the time the girls go to college," Feinberg Keenan said. "So we'll have what we are spending on our mortgage to redirect to college related expenses."
With the cost of a college education skyrocketing and record levels of student debt, parents should have a rough game plan for how they will pay for their kid's higher education, according to Bill Weydemeyer, a senior wealth advisor with The Colony Group.
He says it pays to start saving immediately, so your money can build interest.
"You really want to take advantage of the time premium of investing so the earlier you save the better," Weydemeyer said.
You can check out one of the online college cost calculators to get an idea of how much you need to save, but be warned, it may make your stomach turn. The price could hit half a million dollars for four years. So pop some Tums, set a monthly savings goal and consider your investment options.
"Another option is to open a savings or brokerage account in the parents' name," Weydemeyer said. "You can save and allocate and bucket that as an asset for your child, however, if you need to tap it and you need access to those funds, there are no penalties."
The Fineburg Keenans are piecing it together. They aren't opposed to their kids taking out student loans and would consider helping them pay them back once they graduate.
"I think we'll be in good enough shape that the kids are going to have choices," Feinberg Keenan said. "I don't think that we'll be in a position where we won't have anything to pull from."
One thing you want to avoid doing on the road to graduation: tapping into your retirement account to cover college expenses. You can face early withdrawal penalties.
And while your kids can borrow money for college, you can't borrow money to make up for a retirement savings shortfall.