Your Child Will Need Student Loans

student loan debtPlease enjoy this post from staff writer, Mitchell Pauly.  If you’re interested in hearing more from Mitchell, he blogs over at

Annually, 20 million hungover young adults graduate college and move on to a miserable like the rest of us.  Of these 20 million, roughly 12 million (60%) will carry some form of student loan debt[1].  And they’re not alone.  There are currently 37 million people in the United States with outstanding student loan debt, which is roughly the same amount of people as the entire population of California.  With the rising costs of higher education ballooning upward like McDonald’s calorie counts, it’s become a safe bet that student loan balances will only continue to rise.  In fact, I would bet on it: Your child will need student loans[2].

 Why Your Child Will Need Student Loans

The 1980s were a time of excess, murderous dolls, and actor-Presidents.  They were also a time where college was fairly affordable.  In 1986, if tuition cost $10,000 and grew at the rate of inflation it would now cost about $21,500.  Instead, it costs $59,800, or 2.5 times the inflation based forecast[3].  The average tuition inflation rate is around 8% and the average cost around $23,000 for in-state public schools ($45,000 for private).  Thus, it is important to compare these two stats against two others:

  • Average rise in wages
  • Average family income

Currently, average take-home pay increases about 3% nationally[4].  That is far below the average rise in tuition by a factor of 266%.  This means that, even if tuition currently is an affordable percentage of your annual income (to be defined by you, not an overly general rule of thumb), it certainly will not be soon.

By the way, the average American family income in 2011 was $50,054.  Annual college tuition was therefore 46% as a percentage of income for public in-state universities and 90% for private.  Of course, this is shocking.  Also keep in mind that the average family income stated is pre-tax and household expenses.  It isn’t disposable income.  I won’t depress you with the math.  A lot of people making $50,000 per year would have no choice but to get pretty creative to cover the costs of college for their children- including strategies like borrowing against their 401K or taking out short-term loans.

Wait!  What about my 529 Plan?

While your diligent saving and selflessness might render higher education more affordable for your child, you have about the same chance of paying for all of it as a politician does of passing a polygraph.  Let’s say your child is born today, with the average cost of college being the numbers I used above along with the annual average tuition increase.  In 18 years, a public in state schools will cost $91,908.  A private one will run you $179,820.  Let’s generously assume your 529 Plan increases at 8% annually—a miracle, really.  You would need to invest $1,000 today and $100 every month for 18 years in order to pay for the public in-state route, and $1,000 today and $420 per month for the private option[5].   Good luck to you if you can’t yield that 8%.

All this adds up to one fairly obvious conclusion: your child will need student loans in order to go to college.


[2] Unless they aggressively avoid them, which is possible if not probable.



[5] All this is compounded annually for simplicity in calculations.

Well, that was depressing.  What about you?  Do you think that your child will need student loans?  What are you doing to save for your kid’s college?

About Holly

Holly Johnson is a wife, mother of two, and frugal lifestyle enthusiast. She is the co-founder of Club Thrifty and a staff writer at Get Rich Slowly, Frugal Travel Guy, and U.S. News and World Report's "My Money Blog." Holly has been featured in the Wall Street Journal, Kiplinger Personal Finance, Fox Business, and Daily Finance.


  1. I sometimes wonder why education costs so much. I’m trying to graduate without debt, and I know a lot of my friends who take student loans. Sometimes I think graduating without debt becoming more like a privilege than a norm.

  2. Given the ridiculous cost of education I might steer my future children to careers in the trades (or at least make sure they see all the options). Electricians, plumbers, carpenters are all in a much better position than the average college student these days. I have some friends and family in the trades and they’re doing very well for them selves. Some have even started their own businesses. My kids might have zero student loans, which actually sounds pretty cool.

  3. No I don’t think my children will need student loans. Part of this is because we save a good amount for their educations and they have some generous grandparents who are also saving for their education. On top of that there are other options besides loans that are perfectly acceptible such as ROTC or going to a service academy (all of which are excellent schools). Of course, as mentioned above, there is nothing wrong with pursuing a trade, I know the US is starting to get hit with a shortage of quality welders and machinists.

  4. I really don’t see the current tuition prices going down, so I’m sure my children will need student loans. It’s really unfortunate that there isn’t really any proposals to address the problem of the rising cost of higher ed.

  5. I agree that 529 plans won’t typically cover the total cost of college. Plus your kid might not go to college or better yet get a scholarship. So it’s really a tool just like loans are

  6. This is a depressing thought for me, as I have a young child. However, I don’t think that the tuition increases are going to be able to continue as they are right now. With the way the economy is today, there will have to be reform in our higher education system. I think more and more people from the millennial generation are seeking out alternatives to the traditional path of college, career, stability, and this is going to have an effect on how things shake out in the coming years. Entire generations carrying an enormous student debt load just doesn’t seem sustainable for a thriving economy.

  7. College costs are rapidly rising. It’s becoming inevitable that most students will need to take out student loans and consequently, take on student loan debt. The earlier you plan the more money you can save for the future. The rate of inflation has also made it harder for families to save for a college education. Scholarships, grants and on campus jobs are also great options to consider when coming up with the funds to pay for school.

  8. Maybe we were brilliant or just lucky but we financed our son through graduate school with zero student loans. We didn’t have a 529 plan as they weren’t available then. I started funding his college account when we found out I was pregnant. I never missed a single monthly contribution from then until he went to college. During some lean months the amount might have only been $25 but I made sure something was deposited. And I eventually worked up to about $750 a month when we were making more money. I put it in CDs that were yielding pretty good at the time and also in mutual funds that did well. Our son also held summer and after school jobs which went toward his spending money. But with all of that, I think the thing that helped the most is his choice of university. He went to our state’s flagship public university which had an excellent reputation for his engineering field. By the time he got his Master’s he had a job actually waiting for him to graduate. Too many people think they have to have a private college degree to do well, when mostly it just creates economic hardship. Choosing wisely is the key.

    • I bet he thanks you for it now!

      I hope to pay for most of our kid’s college as well, but I definitely want to urge them to make a practical choice. It seems like having a degree is a lot more important than where you got it for the most part.

  9. I don’t have children but I’m holding on to hope that my generation will pave the way for higher education reform before my peers’ kids grow up. College prices are outrageous today and if they continue to rise at this rate, it’ll just be ludicrous to get into that much debt for a degree in the future.

  10. I started saving a few years ago, but as of right now it’s on pause. I want to focus on financial freedom first. I don’t want my kids to be burdened with debt, but I also want to be secure in retirement. I hope the education system in the US is revamped. Either by streamlining the process to reduce the credits required or make the tuition a set amount every 3 years. Anything will help or else I will be forced to move to Europe, where education is free.

  11. We’re putting in $500/month for each kid and have been since they were born. If we stopped today, the oldest could afford 4 years of state tuition and then some. I don’t like our state schools (I teach at the flagship and am not impressed), so we’re assuming he’ll do private or out of state.

    We’re also paying college tuition and supplies for my husband’s relative’s kids. They’re so poor they qualify for large amounts of financial aid, so it’s really only cost us something like $500/year so far (mostly for books).

  12. I’ll pay for my child’s undergraduate degree, but if they want to study law or medicine or another graduate program, they’re forking out the cash for it.

    I’m actually really hoping there’s some changes to the education system before my child gets there. And since I don’t actually have a child yet, I’m optimistic ;) A lot can change in 20 years!

  13. I’m going to do everything I can to help my future kids pay for college but I think it’s going to be nearly impossible for me to finance 100% of their education.

  14. I read somewhere that a good college planning move is to have 30% saved up, pay 30% real time and finance the other 30%. We have been pretty aggressive with the savings, because we both had school paid for, but with tuition costs rising more than the financial markets, it is impossible to predict how successful our efforts will be.

  15. I would love to understand why college costs have become so astronomical and what merits that cost rising faster than the rate of inflation.

  16. Thankfully, My children are adults and completed their college education. I will be working on my grandchildren’s education when they occur in the future though.

  17. Yup.

    But not as depressing is the fact that you can get a college-level education online for free. Someone just needs to organize the information :)

  18. I highly doubt my children will even go to college. I firmly believe that college no longer serves its original purpose and quite frankly I expect that there is a huge revamp in higher educations a decade from now. While some may deem college to be “important” the rules of supply and demand plus capitalism will deliver a crushing blow to the higher education system that we have all grown to know and love =)

  19. College fees is totally very high. If we say, “scholar” even if 100% discount, there would still be things to be paid. Why is that so?

    But still thankful because I was able to finish 2 year course in college and my sister now is in college, studying Bachelor of Science in Nursing.

  20. Urge your child to go into the trades, or save up $$$ to give them a shot at entrepreneurship (mold it in them in the ensuing years, schools are useless at teaching it) … or if they do end up going into a school, go to an in-state school … ivy league creds are overrated anyways!

  21. This is a sad post but true. The numbers just add up that no matter how hard you earn, it will not be enough. There is no retirement option because even with your “529 Plan” it still isn’t enough. But you can look at it with a hopeful heart. Even if the prices for student loans are staggering high. Maybe the student will get motivated by this debt and work even harder and smarter. This is the information age and the rate where millionaires rise is also staggering, especially the internet millionaires.

  22. Here in the UK tuition fees are £9,000pa ($15,000) and my sons University living expenses are another £8,000 ($13,000) a year
    How does that compare to the cost in the USA ?

  23. Hmm, I disagree – at least I (and my kids) will be working hard to prove you wrong. :) When I was a highschool senior, I went into my high school office a couple times of week asking if there were any new scholarships or grant applications. I also contact my insurance company, my church, local businesses and the college I was going to attend. I filled out forms until my hands were permanently disfigured (ok, that’s an exaggeration). I received so many grants and scholarships that I earned money my first year in college. Some of them were only one year grants, but the recurring ones paid for my tuition and books for the remainder of my college years. Then, I got a job and paid for most of my living expenses – my parents kicked in a little each month to help out as they could. I graduated student loan free, and I’m hoping that we can follow a similar path and help our kids graduate loan free as well – even if it takes a larger contribution from their parents.

  24. Jolene Leslie says:

    I have been in great bondage for almost 2 years suffering in the hands of a cheating husband,we were happy and leaving well until he meant his old time time girl friend and he started dating her outside our marriage before you knew it he stopped caring and taking care of his own family it was to the extent that now he was planning to get married to her and divorce his own wife, i have cried and reported him to his family but he never listened to any one but to cut my story short i came in search for a real spell caster who could destroy their relationship and make him come back to his wife and 2 kids on my search i saw people making testimony on how their marriage where restored by Priest Ajigar i pick his email and i narrated my story to him and he agreed to help me and after performing a spell on the third day they both had a quarrel and he beat his girlfriend up and he came home begging for i and my little kids to forgive him that his eyes are clear now that he will never do any thing that will hurt his family again and promise to be a caring father and never cheat again.I am so so happy that i did not loose him to the girl all appreciation goes to Priest Ajigar for you are a Great spell caster and to whom this may concern if you have a cheating husband or wife yo can find his email by typing Priest Ajigar on and contact him.

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  26. Our children will need serious help, I think in year 2008 the amount of students getting scholarships every 30-student size class was 2 students.

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