Parents, The Way You're Paying for College Is All Wrong

According to Sallie Mae’s “ How American Pays for College ” study released Thursday, many parents are paying for college in ways that experts say aren’t smart. Fully one in 10 parents borrow money to pay for their kids’ college (we’re talking just about parental borrowing, not child/student borrowing, which happens at much higher rates), the survey revealed — which, in the simplest terms, is a mistake because “it’s far cheaper to save than to borrow,” says Mark Kantrowitz, the senior vice president and publisher of Edvisors . Consider: If you start saving $200 a month for 10 years for your kid’s college, you’ll save more than $34,400; if you borrow that much to pay for his school, you’ll end up repaying it over 10 years at a rate of more than $390 a month — nearly twice what you’d have to pay if you’d saved the money (this example assumes a 6.8% interest rate), he explains.