Latino parents are opposed to their children obtaining student loans, listing nine other methods to help pay for college ahead of loans, according to new research from Massachusetts Mutual Life Insurance Company (MassMutual).
Scholarships (43 percent), federal student aid (40 percent), parent savings (36 percent), and starting at a less expensive two-year college (31 percent) top the list of methods, followed by borrowing funds from a retirement account, a 529 plan, a part-time job for their child, work-study programs, and parents borrowing.
Interestingly, while Latinos are one of the most optimistic groups when it comes to the affordability of college, they are also the group that saved nearly the least of any ethnic group surveyed.
This optimism is likely attributed to their higher awareness of more methods to pay for college and cultural beliefs that college doesn't necessarily have to happen on a strict four-year plan or only at one institution.
Embedded in this optimism may be deep cultural faith that it will all fall into place.
"For Latino parents, the financial security that comes from having a college education is a key factor in their level of confidence in a child's future happiness and having an open door to opportunities they or their parents did not have," said David Hufnagel, Latino market director, MassMutual. "College represents a way to better the family's financial future, parallel to the collective family-oriented behaviors of Latinos."
MassMutual's College Planning and Saving study examines the attitudes, behaviors and needs of families related to planning for and funding higher education. The study provides a deeper understanding of the importance placed on education and how ethnicity affects family decisions and financial behavior.
Based on the study's insights, MassMutual offers three practical tips to help Latino families plan and save for college:
1. Dream with a plan. Look at your financial situation today, identify priorities, prepare for the unexpected, and think about how long you have to save for your child's education. Next, do the math: determine how much it might cost to send your child to college and how much you can contribute to college savings every month. There are many tools and calculators to help you figure out how much you need to save. Visit the MassMutual college savings calculator.
2. Start saving as early as possible. Start saving as early as you can, even at birth for a child's education. Remember that time is on your side to have your money work for you through interest earned and compounded over the years. With a comprehensive savings strategy, you can help reduce – or possibly eliminate – your child's need for student loans. You may even be able to make saving easier through the convenience of payroll deductions. Many employers allow automatic withdrawals to be made from a checking account, with that money being automatically deposited into a savings plan.
3. Consider all options. There are many ways you can prepare for college costs and you should definitely consider all available options. From traditional college savings plans, grants, scholarships, two-year college, even life insurance, such as whole life insurance with guaranteed cash value growth. Since your dream of seeing your child graduating from college is not a matter of "if" but a matter of "how," make sure you learn how all these components may fit into your child's education funding plan.
The findings of this research study come on the heels of MassMutual's launch of its newly refreshed brand, which was designed to better reflect and build on the legacy and the core values that have guided the company since its founding. The new brand recognizes that while the world celebrates independence, true happiness comes from interdependence and our reliance on one another.
"We're here to help educate Latino parents about options for their families, and then help them make their financial goals a reality," concluded Hufnagel.