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The total amount of outstanding student debt in the US has passed one trillion dollars. The enormity of the sum is mind boggling; equal to over 6.5% of America’s GDP. The figure was confirmed in the annual report of the Consumer Financial Protection Bureau Student Loan Ombudsmen, which also revealed some major problems around the issue of financing a university education.
The report reveals that student debt is a massive problem in the US. There are currently 850,000 people in default on their student loans totaling $8bn. It is worth taking a moment to reflect on the enormity of the predicament; hundreds of thousands of young people, who set out to better their lives through study, left struggling financially under the weight of their student loans.
The cost of higher education is rising across the world at a rate that has consistently outstripped inflation. In his study of historical tuition fees in the US, Professor Ronald Ehrenberg of Cornell University concluded that over the last century, university tuition fees have consistently risen annually at around 2 to 3% above inflation. In the UK, student fees, which were free up until 1998, have now risen for domestic students to $14,500 at 64 of the leading universities (fees for overseas students and expat children are significantly higher). In August the BBC reported that UK students starting this academic year are set to leave with an average debt of $85,000 (£53,000). The pattern is similar in Australia, Canada and even in mainland Europe, a bastion of subsidised higher education, there has been a shift in attitude on university tuition.
To leave university with such high levels of debt is a millstone, the facts of which are beginning to be seen in the dwindling numbers of enrolees across western universities. A number of western countries have experienced a decline in university enrolments with the UK seeing a significant drop because of the controversial rise in its tuition fees this academic year.
It begs the question of whether a university education is worth the cost, but the truth of the matter is that people with a quality university education, are statistically still more likely to earn more money in their careers. Many studies across the western world have confirmed that there is a significant distinction between the average salary of graduates and non-graduates; according to the UK’s Office for National Statistic’s for example, graduates earn, on average, 85% more. It remains true that a university education is still the best possible route to a well-paid job as well as an undoubtedly a life-enriching experience that many parents desire for their children.
The question therefore is how can parents help their children obtain a high quality university education without financially crippling themselves or leaving their children with an unmanageable mountain of debt after graduation?
The solution to this dilemma is advanced planning. Increasingly, it is going to be vital for families to start making provision early in a child’s life, preferably at birth. By putting aside a regular monthly sum, parents can build up a sizable amount which will help mitigate the costs when they are ready for university. For expats in Asia, the availability of tax efficient international savings schemes can help the money grow year after year due to benefits of compounding. For many families, it really will be the only way their children will get to college.
If you are worried about how you will pay for your children’s university education get in touch for a free, no obligation consultation to see how we can help.
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