Reduce Student Loan Debt – Before It Happens

Your worry over your child’s future likely began long before they arrived in the world. Concern over student loans may seem misplaced when you’re helping them navigate their first steps. However, since the power of compounding interest requires time, the best time to start is, of course, now.

That’s a great foundation for funding post-secondary education, but it shouldn’t be your only strategy. Here are some age-appropriate things to consider, no matter where your child currently is along the path to college. Not all strategies will apply, but the more you work the system in your child’s favor, the better your chances for sending them into the working world with a minimum of student debt.

Birth to Elementary School

This is where time is on your side. Assuming you have credit card and other high-interest debt under control, it’s never too early to save for your child’s education. offers a simple, free-to-use college savings calculator to help you decide what’s an appropriate amount to put away, based on your current income and child’s age.

Your financial picture does have an impact on whether starting a 529 college savings plan is a smart idea, and it’s not just your debt picture. Think of the in-flight instructions regarding oxygen masks. Flight attendants tell you to put your own mask on first before helping others. The same holds true for your child’s education. Make sure all aspects of your financial health are addressed: insurance, retirement savings, emergency funds, etc. There are ways besides education savings plans to pay for college, so your overall financial picture should never be too heavily weighted toward the 529.

High School Age

Advanced Placement classes are a terrific way to jump-start the college process, if your child is capable and their school offers a program. Imagine having them complete college credits without leaving home or paying big bucks in tuition. Your child may be able to take AP exams even if these courses aren’t offered through their school. Even shaving half a year off college degree studies adds up to lower student debt.

As your child comes closer to graduation, generally around their 18th birthday, have a look at financial aid eligibility. Twenty percent of the student’s net worth is considered by financial aid, while a maximum of 5.64% of their parents’ is assessed. It may be worth your while to make college-age purchases on your child’s behalf prior to applying for financial aid. A car or computer bought now may improve their student loan picture after application.

Shop for the College

Conventional wisdom says that Harvard graduates make more money in the same jobs as state university students with the same degrees. However, this is an assumption that’s difficult to really test. Some research indicates that a student who has the stuff to earn acceptance at Harvard will still earn equivalent amounts with a degree for a “lesser” school.

It’s still not an easy rule-of-thumb to break, though. If your child aims for careers in high finance, the name on the diploma may still matter. Post-grad studies may make their undergraduate school less important in other fields, however. You may need to do some digging here.

Of course, it’s increasingly common for college-age children to be without a clear career picture. Encouraging a gap year to work or travel might be, in the long run, a good option. There’s more time for 529 investment income to accrue. Your child may have their own employment income to contribute, and time in the “real world” often puts further academic studies into perspective. Four years of college with strong focus is a better option than a year or two spent pursuing a poorly calculated guess.

There’s no sure-fire crystal ball anywhere along the education pathway for your child. All you can really expect is the unexpected. However, having a plan to pay for whatever happens will never be something you regret.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.

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