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CNBC
3 days ago
- Business
- CNBC
Many families feel confident about paying for college — until tuition bills arrive. Here's how they're covering costs
With the start of fall semester just weeks away, sky-high college costs are an extreme pain point for most students and their parents. A recent report by Citizens Financial Group found a growing "confidence gap." While 59% of parents said they were confident about managing college expenses when their child was accepted, just 21% said they felt prepared for the actual cost once tuition bills arrived. "We know the cost of attendance continues to grow, and a lot of forms of federal lending and grants and aid have not kept pace," said Chris Ebeling, head of student lending at Citizens. "Families felt like they were going to be OK, but once those tuition bills arrived, that number plummeted," Ebeling said. In April and May, Citizens polled more than 1,000 parents of children aged 13 to 29 who are either planning on attending or have some experience with college. More from Personal Finance:These college majors have the best job prospectsStudent loan forgiveness may soon be taxed againStudent loan borrowers — how will the end of the SAVE plan impact you? Tell us College costs have risen significantly in recent decades, with tuition increasing 5.6% a year, on average, since 1983 — outpacing inflation and other household expenses, according to a recent report by J.P. Morgan Asset Management. A growing share of schools are now crossing the $100,000 threshold for total annual cost to attend, and tuition is still rising roughly 5% a year. To be sure, few families pay a school's sticker price. As of the 2024-25 academic year, the amount families actually spent on education costs was closer to $31,000, on average, according to Sallie Mae's annual How America Pays for College report — but that figure is still up nearly 10% from a year earlier. Sallie Mae polled 1,000 parents of undergraduate students between the ages of 18 and 24, as well as 1,000 undergraduate students. In most cases, parent income and savings cover about half of college costs. Free money from scholarships and grants accounts for more than a quarter of the costs and student loans make up most of the rest, the education lender found. Scholarships are a key source of funding, yet only about 60% of families use them, according to Sallie Mae. Those who do receive about $8,000, on average. "Every dollar counts when it comes to paying for college," said Rick Castellano, a spokesperson for Sallie Mae. "The last thing you want to do is leave free money on the table." There are other "stubborn statistics," too, Castellano said, which are at odds with the growing cost-consciousness among families. For example, only 71% of families submitted the Free Application for Federal Student Aid, or FAFSA, which serves as the gateway to all federal aid money, including loans, work study and grants. That's down from 74% in the previous academic year. And although most advisors say 529 college savings plans are a "no-brainer" when it comes to financial planning for college — largely because of the tax advantages — fewer than one-third of families utilize them, according to Sallie Mae. "I think there is generally a lack of awareness around 529 plans," Castellano said. Recent data from Credit Karma paints an even starker picture: Fewer than one-quarter of the parents polled said they had a 529 account for their children and 43% said they've never heard of a 529 at all. Roughly 18% said they aren't contributing because they didn't realize the funds could be used for education expenses beyond college, such as K-12 private school tuition or trade and vocational programs — not to mention that Donald Trump's massive tax and spending package expanded 529 qualified education expenses even further to include educational therapies and tutoring, among other costs, for students starting in kindergarten. Most experts say 529 plans are often misunderstood and overlooked. But even among families that do have a college plan, and have saved for years, few have enough stashed away to cover the entire cost. "Even those families that are really well prepared, most families are going to have a financial gap," Ebeling said. Another point of contention is the growing share of young adults rethinking their education altogether. The rising cost of attendance and ballooning student loan balances have played a large role in changing views about the higher education system, with students increasingly deciding to opt out. "The last thing you want, as parents or students, is to feel like higher education is the ultimate goal and you get ready to pay and it's just not possible," Castellano said.
Yahoo
16-07-2025
- Business
- Yahoo
This Was the Average 401(k) Balance Last Year, According to a Recent Vanguard Report. Do Your Savings Stack Up?
Key Points Investing in a 401(k) is an incredibly powerful way to save for retirement. While everyone's savings goals are different, it can be helpful to see how your account balance compares to the average. If you're falling behind, there's one simple way to potentially boost your savings by hundreds of thousands of dollars. The $23,760 Social Security bonus most retirees completely overlook › If you have access to a 401(k) and are regularly contributing, you're already ahead of the game when it comes to retirement planning. A 401(k) is one of the most powerful retirement tools out there, and it can help supercharge your savings. When planning for retirement, everyone's journey will be different. Your savings goals will depend on many factors, such as the cost of living in your area, the number of years you expect to spend in retirement, and the type of lifestyle you want to enjoy. Your savings might look wildly different from others your age, and that's OK. That said, it can sometimes be helpful to see what the average American has stashed in their retirement fund. Here's what the most recent data from Vanguard shows, as well as one simple way to increase your savings. The average 401(k) balance by age Every year, Vanguard releases its "How America Saves" report detailing saving habits among Vanguard 401(k) participants. While these figures only account for Vanguard account holders -- not the general population -- they can be helpful to get an idea of where many Americans stand on savings. The most recent report, released in 2025 and based on last year's data, reveals that the average 401(k) balance among all Vanguard participants is $148,153. The median, though, is just $38,176. Because extremely high-earning outliers may skew the average, the median is often a more accurate representation of the typical person. Broken down by age range, though, the average and median figures differ substantially from the overall average: Age Range Average 401(k) Balance Median 401(k) Balance Under 25 $6,899 $1,948 25 to 34 $42,640 $16,255 35 to 44 $103,552 $39,958 45 to 54 $188,643 $67,796 55 to 64 $271,320 $95,642 65 and older $299,442 $95,425 Data source: Vanguard. Again, your individual savings goals will depend on your situation. So if your 401(k) balance doesn't match up with the average American's, that doesn't necessarily mean you're off track. Rather than relying solely on comparing your balance to the average, it's wise to talk to a retirement planning expert or run your information through a retirement calculator for a savings estimate. These tools can give you a rough idea of how much you should aim to save based on your unique situation. The simplest way to boost your 401(k) savings One of the best ways to save more in your 401(k) is to take full advantage of the employer match, if your plan offers one. A whopping 86% of Vanguard 401(k) plans offer some type of matching contributions, according to the report, which could boost your savings by thousands of dollars per year with practically zero effort on your part. For example, the median annual income among U.S. workers in 2024 was around $60,000 per year, according to the Bureau of Labor Statistics. Say you're earning $60,000 per year and your employer will match 100% of your contributions up to 3% of your salary -- or $1,800 per year. Let's also say that, right now, you're only contributing $1,500 per year while earning the same amount in matching contributions. If you're earning an 8% average annual return on your investments, here's approximately how much more you could earn by increasing your savings to $1,800 per year and earning the full match: Number of Years Total Savings: Investing $1,500 per Year + $1,500 Company Match Total Savings: Investing $1,800 per Year + $1,800 Company Match 20 $137,000 $165,000 25 $219,000 $263,000 30 $340,000 $408,000 35 $517,000 $620,000 40 $777,000 $933,000 Data source: author's calculations via In other words, contributing just $300 more per year -- or $25 per month -- to earn the full employer match could increase your total savings by more than $150,000 over a career. The company match is essentially free money, and taking full advantage of it can transform your retirement savings. Investing in your 401(k) is one of the most effective ways to save for retirement, and no matter how your balance compares to others, small steps can go a long way. By contributing consistently and taking advantage of perks like the company match, you can boost your savings by hundreds of thousands of dollars over time. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. This Was the Average 401(k) Balance Last Year, According to a Recent Vanguard Report. Do Your Savings Stack Up? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
16-07-2025
- Business
- Yahoo
This Was the Average 401(k) Balance Last Year, According to a Recent Vanguard Report. Do Your Savings Stack Up?
Key Points Investing in a 401(k) is an incredibly powerful way to save for retirement. While everyone's savings goals are different, it can be helpful to see how your account balance compares to the average. If you're falling behind, there's one simple way to potentially boost your savings by hundreds of thousands of dollars. The $23,760 Social Security bonus most retirees completely overlook › If you have access to a 401(k) and are regularly contributing, you're already ahead of the game when it comes to retirement planning. A 401(k) is one of the most powerful retirement tools out there, and it can help supercharge your savings. When planning for retirement, everyone's journey will be different. Your savings goals will depend on many factors, such as the cost of living in your area, the number of years you expect to spend in retirement, and the type of lifestyle you want to enjoy. Your savings might look wildly different from others your age, and that's OK. That said, it can sometimes be helpful to see what the average American has stashed in their retirement fund. Here's what the most recent data from Vanguard shows, as well as one simple way to increase your savings. The average 401(k) balance by age Every year, Vanguard releases its "How America Saves" report detailing saving habits among Vanguard 401(k) participants. While these figures only account for Vanguard account holders -- not the general population -- they can be helpful to get an idea of where many Americans stand on savings. The most recent report, released in 2025 and based on last year's data, reveals that the average 401(k) balance among all Vanguard participants is $148,153. The median, though, is just $38,176. Because extremely high-earning outliers may skew the average, the median is often a more accurate representation of the typical person. Broken down by age range, though, the average and median figures differ substantially from the overall average: Age Range Average 401(k) Balance Median 401(k) Balance Under 25 $6,899 $1,948 25 to 34 $42,640 $16,255 35 to 44 $103,552 $39,958 45 to 54 $188,643 $67,796 55 to 64 $271,320 $95,642 65 and older $299,442 $95,425 Data source: Vanguard. Again, your individual savings goals will depend on your situation. So if your 401(k) balance doesn't match up with the average American's, that doesn't necessarily mean you're off track. Rather than relying solely on comparing your balance to the average, it's wise to talk to a retirement planning expert or run your information through a retirement calculator for a savings estimate. These tools can give you a rough idea of how much you should aim to save based on your unique situation. The simplest way to boost your 401(k) savings One of the best ways to save more in your 401(k) is to take full advantage of the employer match, if your plan offers one. A whopping 86% of Vanguard 401(k) plans offer some type of matching contributions, according to the report, which could boost your savings by thousands of dollars per year with practically zero effort on your part. For example, the median annual income among U.S. workers in 2024 was around $60,000 per year, according to the Bureau of Labor Statistics. Say you're earning $60,000 per year and your employer will match 100% of your contributions up to 3% of your salary -- or $1,800 per year. Let's also say that, right now, you're only contributing $1,500 per year while earning the same amount in matching contributions. If you're earning an 8% average annual return on your investments, here's approximately how much more you could earn by increasing your savings to $1,800 per year and earning the full match: Number of Years Total Savings: Investing $1,500 per Year + $1,500 Company Match Total Savings: Investing $1,800 per Year + $1,800 Company Match 20 $137,000 $165,000 25 $219,000 $263,000 30 $340,000 $408,000 35 $517,000 $620,000 40 $777,000 $933,000 Data source: author's calculations via In other words, contributing just $300 more per year -- or $25 per month -- to earn the full employer match could increase your total savings by more than $150,000 over a career. The company match is essentially free money, and taking full advantage of it can transform your retirement savings. Investing in your 401(k) is one of the most effective ways to save for retirement, and no matter how your balance compares to others, small steps can go a long way. By contributing consistently and taking advantage of perks like the company match, you can boost your savings by hundreds of thousands of dollars over time. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. This Was the Average 401(k) Balance Last Year, According to a Recent Vanguard Report. Do Your Savings Stack Up? was originally published by The Motley Fool
Forbes
29-04-2025
- Business
- Forbes
Should You Use A HELOC Or Student Loans To Pay For College?
'We need more cash to cover college: Is it a good idea to use a HELOC or student loans?' asked a client, recently. Amid rising tuition fees and increased uncertainty around the future of higher education funding, American families are seeking alternative strategies from conventional aid. Were I to send my kids to my alma mater, it would cost 35% more than when I attended, and that's after accounting for inflation. Parents have gotten creative in financing these rapidly inflating college expenses. Enter the HELOC (Home Equity Line Of Credit), which requires the use of home equity to secure financing, but potentially reduces borrowing costs, albeit at substantial risk. Many families have equity in their home that can be tapped, but should they? Not to be confused with a home loan (also known as a home equity loan), a HELOC is a revolving credit account homeowners can use to borrow against the equity in their homes. Think of it like a credit card where you're borrowing money, only you've put up your home as collateral to get a reduced rate. Interest is usually charged only on the amount borrowed and, while most HELOCs have floating rates, some lenders may offer the option to lock in a fixed rate over some set period of time. This flexibility can make a HELOC an attractive option for managing cash flow or handling unexpected or 'lumpy' expenses like tuition payments. It's easy to confuse a HELOC with a home equity loan. Unlike the HELOC, a home equity loan gives you a fixed sum of money you repay over time at a fixed rate. The HELOC's flexibility may be a better fit for families facing unpredictable costs, whereas a home equity loan is more appropriate for known, one-time expenses where the homeowner prefers a steady, predictable repayment at that fixed rate. The top reason students choose a particular school is due to cost, according to Sallie Mae's 2024 How America Pays for College study. While the majority of families receive some form of aid, scholarships and grants only made up about 27% of higher education funding for the average American family in 2024. Higher education has never been less affordable than it is today. The traditional avenues of federal aid and conventional student loans are limited and under threat by the current political environment. Against this backdrop, families are looking for alternatives that offer competitive or lower interest rates and flexibility without relying on federal aid. Financial aid still accounts for a substantial portion of college financing, but the amount granted ... More - especially to middle-income Americans - is often insufficient. Just like with home equity loans, interest on student loans is fixed, meaning their interest rates don't change over the life of the loan. By contrast, HELOC interest rates float, which can be good or bad depending on how their rates fluctuate over time and your capacity to meet shifting bills. For example, your rate may start at 8%, go up to 10% or down to 6%, making it difficult to plan for ongoing payments. That said, HELOC rates may be competitive with many student loan rates, and are usually substantially lower than personal loans. In addition, the 'as needed' nature of a HELOC means that families can withdraw funds as needs arise. This makes a HELOC particularly advantageous given the fluctuating costs associated with college. Tuition and fees might not change dramatically in a four year period, but textbooks, living expenses, supplies, room, and board are subject to wider swings. HELOCs can also provide a buffer for cash flow. Rather than depleting savings or tapping into retirement funds prematurely to meet a sudden expense (thank you, year abroad), parents can manage expenses on an as-needed basis, aligning their borrowing more closely with their child's actual financial needs over time. In turn, this approach helps maintain financial stability and preserves other critical assets. HELOCs and Student Loans are wildly different, but there are some key points to consider if you have ... More to choose between the options. HELOCs can be an attractive option given low rates and their 'borrow as you go' versatility, but there are several substantive risks that should be considered. HELOCs are secured by your home, so any unexpected financial challenges like job loss, an economic downturn, or rising interest rates can put your primary residence at direct risk. Unlike federal student loans, if you miss your HELOC payments lenders have the right to initiate foreclosure proceedings. Further, HELOCs are subject to floating interest rates tied to the 'prime rate.' The prime rate is usually about 3% higher than the Federal Reserve's 'fed funds rate,' the interest rate banks charge each other when lending overnight to meet reserve requirements. This is the rate you often hear about in the news that the Federal Reserve uses to combat inflation or to stimulate the economy. While current HELOC rates may be modest compared to those of private student loans, because they fluctuate it can increase borrowers monthly payments unexpectedly. If unprepared, HELOC borrowers may find a previously inexpensive loan has rapidly become unaffordable. When borrowing through a HELOC be sure to budget for potential rate hikes even if current rates seem favorable. This chart is not adjusted for inflation. The median annual increase in college costs since 1964 was ... More 5.5%. That's 2.1% higher than the CPI (Consumer Price Index, typical measure of inflation). Further, almost half of Americans rely on the equity in their home during retirement, according to the U.S. Department of Housing and Urban Development. Borrowing against your home equity for a child's college may put future borrowing capacity at risk, leaving you vulnerable to emergencies later on. This is especially true of those payments become difficult to manage. Lastly, HELOCs lack the current borrower protections available with federal student loans. HELOCs don't offer IDRs (income-driven repayment plans), forbearance, or deferment options in times of financial hardship. There are no adjustable terms during difficult periods for HELOC borrowers. While some student loan forgiveness programs are threatened by the current administration, there are many types of IDRs, and not all of them are on the chopping block. Keep in mind, too, that HELOCs are not a substitute for student loans, but a complement, and that a combination may be the preferred option. For example, imagine you have substantial home equity and elect to fund college expenses via a HELOC. Everything goes fine at first, but a shift in market conditions leads to a sharp rise in interest rates. The family's monthly obligations increase and funds are diverted from emergency funds at first, then retirement accounts just to manage the new payment demands. There is a delicate balance between seizing short-term opportunities and safeguarding long-term financial security. Remember: You can borrow for college, but you can't borrow for retirement. All debt creates a burden that must be serviced. When you borrow against your future, it creates an ... More ongoing obligation that can become both a financial and emotional burden. If you're considering tapping into your home equity to fund college expenses there are legal and tax issues you'll need to know. Unlike conventional student loans governed by federal guidelines, HELOCs are governed by the terms set forth by your lender and the underlying mortgage agreement. These contracts are legally binding, meaning that any lapse in payment can result in severe consequences, such as foreclosure. Because your home is collateral for the HELOC, you need to review the fine print, paying close attention to anything related to default, prepayment penalties, and any restrictions on how the funds can be used. If it feels overwhelming you might want to consult with a real estate attorney to have the language and risks of your particular HELOC offer explained plainly. On the tax front, recent legislative changes have redefined the boundaries of what constitutes a tax-deductible expense. Traditionally, interest on home equity debt could be deducted if the funds were used for home improvements. However, when HELOC funds are used for other expenses like tuition and other education-related costs the interest loses its deductibility. A HELOC still might make sense due to its lower interest rates, but consulting with a tax professional current with IRS guidelines is a good idea before making a commitment, as mistakes in interpreting IRS rules can lead to costly audits or unexpected liabilities. Keep in mind, too, that the application process for a HELOC requires extensive documentation. Borrowers usually need to provide comprehensive records like property appraisals, income verification, and reports of existing debts and financial obligations. This is so that the lender can evaluate your candidacy as a borrower, but the process also ensures you're fully aware of your financial commitment. Keep meticulous records and understand the legal structure of your agreement to protect against any potential disputes arise later. It's critical to read the fine print on a HELOC, as different financial institutions may structure ... More the credit line in very different ways. Ultimately, while a HELOC may offer a flexible funding option for college expenses, savings and student loans are typically the preferred funding option. HELOCs are more of a consideration if there is a funding gap and, even then, should only be considered in the context of your financial strength over the long term. If you're putting your home at risk, you might want to reconsider the importance of funding higher education. Consider instead deferring the education, transferring to a lower-cost institution, or seeking alternate funding (applying for alternate aid, direct personal loans, etc.). If you still have doubts, consider speaking with professionals that most closely align with your personal financial situation, whether it be a financial or legal consultant to ensure you have explored every option before putting your home and financial well-being at risk.
Yahoo
12-02-2025
- Business
- Yahoo
I'm 59 with $42,000 in my 401(k), $77,000 in student loans, and no property — is my retirement doomed?
When you are 59, you are getting very close to retirement age. Fidelity says you should aim to have eight times your salary saved by 60. Although this is quite a lofty recommendation, if you only have $42,000, you've likely fallen short of that milestone by a lot. This can be a tough place to be, especially if you don't own any property and you also have $77,000 in student loan debt. A near-record number of Americans are grappling with $1,000 car payments and many drivers can't keep up. Here are 3 ways to stay ahead 5 ways to boost your net worth now — easily up your money game without altering your day-to-day life Home prices in America could fly through the roof in 2025 — here's the big reason why and how to take full advantage (with as little as $10) But many Americans are in a similar spot. Vanguard's How America Saves report shows the median amount Americans have in defined contribution plans at age 55 to 64 is just $87,571. That's more than what you have, but still far short of what's recommended or what Americans believe they'll need for a comfortable retirement, according to one survey.. Sadly many of those approaching retirement or retired with low savings may also carry debt. Credit card debt is the most common type of debt in households whose head is 65 years old or older, per one government report, but student loan debt has increased among these households in the past two decades. The Urban Institute estimated that as of August 2022 around 7.2 million older adults (age 50 and over) in the country carry student loan debt. Among these borrowers, 8%, or 580,000 older adults, were delinquent on their loans. And when borrowers default on federal student loans, their Social Security benefits may be reduced due to forced collections. Between 2001 and 2019, the number of Social Security beneficiaries experiencing this increased from approximately 6,200 to 192,300. You have options to try to get back on track. Here's what you can do. When you are very behind on retirement savings, you have a few options for getting things back on track. First and foremost, you need to start saving aggressively. If you have only $42,000 invested, that would produce around $1,680 per year in annual income in retirement if you follow the 4% rule. That limit is recommended to avoid draining your account too quickly. Depending on how much your monthly Social Security benefits will be, that may be not be enough income. You should aim to save as much as possible to bring up your account balance, even if you have to take a side job, do some overtime, and drastically cut spending to do it. You may even need to make big lifestyle changes, like moving to a place with cheaper rent or switching to a less expensive car to free up more money to invest. If you want to know how much you need to save, a popular guideline says you will need 80% of your pre-retirement income each year to maintain your current lifestyle during retirement. Use the 4% rule and calculate how big your portfolio balance will need to be for you to safely withdraw an adequate amount each year. Taking advantage of tax benefits can help, though. If you have a 401(k) at work, you can contribute up to $23,500 plus make additional catch-up contributions since you are over the age of 50. Those catch-up contributions allow you to invest another $7,500 with pre-tax dollars this year, and from ages 60 to 63, you can make catch-up contributions as high as $11,250. Managing your student loans will also be important. "Stakeholders have expressed concern that holding student loan debt in retirement may affect the financial balance sheets of older households. Unlike other types of loans, student loans are usually not discharged if a borrower declares bankruptcy, and some Social Security benefits can be withheld to recover the student loan balance," according to a 2021 Congressional Research Service report on debt in older households. The remaining balance of $77,000 is very high, so you may want to look into which payment plan you're on. Income-driven plans cap payments at a percentage of income and allow forgiveness of debt after 20 or 25 years depending on which plan you pick. In an ideal world, you'd have this debt paid off before retirement However, you may be better off funneling more money into an investment account so you have income coming in and choosing an income-driven plan that will likely have low payments since your retirement income probably won't be very high. Read more: Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Working longer than normal is likely also going to be vital in your situation. In this, you also aren't alone. According to Pew Research around one in five Americans ages 65 and over were employed in 2023. This is close to double the number of elderly employed workers compared with 35 years prior. Unfortunately, roughly half (48%) of those working in retirement felt they needed to work for financial reasons, per recent T. Rowe Price's research. The good news is that even if you have to work for financial reasons, you can hopefully still find work that you enjoy. Staying on the job for longer will also provide more opportunities to increase your retirement income. Specifically, you can benefit because: You have more years to save and invest You can delay a Social Security claim if you work, which increases your benefit You won't need to rely on your savings for as many years If you can aim to stay in the workforce until 70, that would give you 11 more years to save. If you managed to contribute $500 a month on top of the $42,000 you're starting with, you'd end up with just over $230,000 invested assuming a 10% average annual return. That's not a fortune, but it's not terrible -- and you could also increase your standard Social Security benefit by 24% due to a delayed claim. The sooner you start saving aggressively, and the sooner you make a plan to deal with your student loans, the better off you'll be. A financial adviser can help you explore repayment plans and make a retirement investing plan that helps to set you up for as much success as possible, so it may also be worth getting that professional help as well. I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) 'Savers are losers': Robert Kiyosaki warned that millions of 401(k)s and IRAs will be 'toast' — here's his advice for older Americans who want to protect their wealth Suze Orman: If you think you're ready to retire, think again — 4 critical money moves to avoid a financial crisis in retirement This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
