avoiding the cycle: how to keep your child out of student loan debt

student loan debt

This week I'm featuring a guest post from Ian Caldwell regarding everyone's favorite topic:  student loans.  Have you ever wondered how your post-college years would have been spent if you weren't shackled with debt?  As someone who graduated debt-free (don't hate), I can tell you it's wonderful - and something I definitely want for my children.  This post focuses on how parents can help their little ones avoid the financial mess that our generation is currently experiencing - so for those of you with children, ask yourself this question:  What are you doing today to ensure your child won't be alone in funding their education?  Feel free to share in the comment section below!

With the increase in college costs and tuition fees, very few students are able to fund their own college education. Borrowing a loan for higher studies has now almost become mandatory. There are mainly two kinds of loans that are available for students for funding higher education:  federal loans and private loans.

If your child continually incurs debt during college, it will be difficult to pay the entire loan back without making some sacrifices. And while there are many free debt solutions that can help them to pay off the financial obligations, you, as a parent, may not want your child to face such financial trouble. Thus, it is better that you make some wise financial decisions to reduce the financial risk.


A parent should begin proper financial planning during the initial days of the birth of a child to make the little one’s student life more peaceful and potentially avoid student debt altogether. To reduce the risk of incurring student loan debt, every parent should avoid these crucial financial planning mistakes:

1. Not Following a Frugal Lifestyle

Kids are costly, especially when they start attending school. If you prioritize a frugal lifestyle from the beginning, it willhelp you to stay at the top of your finances. However, following a frugal lifestyle is challenging. It needs determination, but it has lots of advantages. It helps to maintain a family budget and set aside money in a savings account, which will give you extra room to make proper education plans for your kids.  A little determination and sacrifice can make your financial life, as well as your kid’s educational life, better.

2. Not Opening a 529 College Savings Plan

A 529 college savings plan is designed to encourage savings for college or other higher education, and not opening one is a serious mistake that can lead to huge student loan debt. The best thing you can do is to plan for education as soon as the child is born. Financial advisors suggest starting a 529 college saving plan immediately after the birth of a child.

3. Depending on Your 401(k)

Utilizing your 401(k) as a source of money for your child’s education cost is the biggest blunder a parent can make. Moreover, it may not even be possible without significant penalties - borrowing money against your 401(k) depends on company policies. Even in the event you can borrow money from your 401(k) account, you will still have to pay all the money back into the account within a stipulated period.  Remember, the plan is intended to secure your retirement days, not your child’s education cost.

4. Delaying to Save Money

Time moves quickly, so if you’re thinking that you've plenty of time to start saving for your little one, you’re wrong. Remember, saving is the key to secure your financial future. The sooner you start, the more money will be in your account. So start saving immediately.

5. Delaying Funding a 529 Account

Opening a college savings account is not enough. You have to invest money in it for many years in order to reap the best benefit. Since the tuition bills are rising and you have to manage other costs, you should deposit money for as long as possible to secure your child’s educational future. Also, don't make the mistake of closing the 529 account as soon as your child enters college - you can still contribute throughout their college years.

6. Underestimating College Costs

Underestimating college costs is one of the biggest mistakes that every parent should try to avoid. Tuition rates are increasing rapidly, so you should keep the growing tuition fees in mind when calculating your child’s education cost. According to a report from the College Board, the average cost of tuition and fees for the students who enrolled at private colleges and universities was $30,094 in 2013/14. A child joining kindergarten now will surely need to pay significantly more by the time he/she will complete graduation.

 Photo Credit: Padurariu Alexandru via Unsplash

Photo Credit: Padurariu Alexandru via Unsplash

7. Not Researching Grant Options

Per “No Child Left Behind Act”, the Federal Government is trying to push a large amount of money into the hands of the college students to help them complete higher education. By accessing these federal grants, a higher number of students are gaining their diplomas. Wondering about the difference between grants and student loans? Here’s how to differentiate:  grants are a free gift and thus do not need to be repaid like the student loans. Thus, you should look into the availability of federal grants and use these to offset some of the growing tuition costs.

8. Not Educating Your Children

Teaching a child about money is a very important part of parenting. Why? A student who doesn't have any financial education may not be able to manage money, budget correctly, maintain a checkbook, and so on. Above all, handling credit cards requires financial literacy; otherwise, a younger student can be trapped by vicious credit card debt cycle.  Educating them on financial matters will enable your child to learn how to save hard-earned money, make a wise college decision, pay off any student loans, and avoid financial disaster.

9. Splurging on the New Baby

People love to spend money on their bundle of joy before the baby even arrives, buying strollers, baby carriers, various baby gadgets and gizmos. And newsflash: these baby gadgets are expensive.  According to an Investopedia report, a new stroller costs $400, a new swing costs $200, and baby furniture costs $1,100. The question is, do you really require all of these expensive new things?

Parents who are financially intelligent will save 75% and more than those who decide to splurge on their bundle of joy. How? Some conscious parents prefer gently used baby items like baby gear or opt to buy their baby gadgets from Craigslist or other close friends and relatives. These mindful decisions help to save a significant amount of money.


You need to understand the enrollment fees, asset management fees, and your state's rules to successfully invest in a college savings plan (529).  Remember, the fees vary from college to college.  Moreover, it's important to guide your child while choosing a college because it's not just a personal decision. You have to make your child understand that it's a financial decision, too, and one that will hopefully enable them to avoid a financial mess in the future.


student loan debt