Today’s topic will probably be a touchy one and it’s all about whether or not parents should start (or end) saving for children’s college expenses. Ever since I paid off my $38,000 worth of student loans last year, I have received many e-mails from parents who are interested in seeking help for their children.
These e-mails are all related to whether or not parents should risk or sometimes even ruin their retirement by helping their child pay for college.
There is usually one common theme in these e-mails – the parents are usually not on track for retirement, they have debt, or they cannot afford to help their child in college.
Here are some of the stories I have heard in these emails:
- The parents have over $100,000 in student loans that they took out in THEIR name so their child could go to school. These parents are not on track for retirement and they have a lot of other debt besides student loans.
- Their child is in medical school and the parents are paying for all of their college expenses plus food, car, rent, etc. These parents are not on track for retirement and they have debt.
- Their child is in law school and the child said that if his/her parents don’t continue paying for their expenses, that they would hate their parents. This child was even more mad when the parents printed out every single blog post of mine and gave it to them (I did not tell their parents to do that, it was entirely their idea). The child said I was ruining his/her life (yup, that actually happened). These parents are not on track for retirement and they are afraid of losing their child now as well.
I know I’m not a parent.
I’m not a parenting or child expert either.
I know I don’t know what it is like to have a child and the feelings that go along with that. However, I do know that I raised my younger sister after my father passed away and her attending college did make me want to help her so that she wouldn’t have to worry about money as much.
The other day I was talking to my sister and she was bringing up different ways she could possibly side hustle so that she could make extra money. It sort of made me feel bad, and for a moment I thought about helping her financially. Luckily, she snapped me out of it and told “You’ve helped me enough already. Do not worry.”
Her saying that really made me happy. I actually had tears in my eyes!
Instead of just giving her money, I helped her with her budget, I have supported her, I helped her find side hustles so that she could make extra money, I helped her make a plan, and more.
I know all of these other things I am doing have shaped her into an awesome young lady. Yes, she has to learn things the hard way but in the end she will be just fine.
@SenseofCents Good question! As a CFP, I say no. You can get a loan for college but you can’t get one for retirement!
— Shannah Game (@ProfShannah) September 27, 2014
@SenseofCents No. Akin to ‘put your oxygen mask on first before helping others’ on planes. — BidAskDividends (@BidAskDividends) September 27, 2014
@SenseofCents they shouldn’t risk their retirement but If they are in a position to help they should. I couldn’t have done it on my own. — Erica (@raerica) September 27, 2014
Alarming information about student loans.
According to the Federal Education Budget Project, around $100 billion was borrowed by students in fiscal 2014 alone. Also, the default rate on student loan debt averages around 13% to 14%. 90% of student loans in recent years are co-signed by others (mostly parents), and that is a big burden falling on parents.
That’s a lot of debt, and that’s a lot of debt that isn’t being paid for. If you are a parent cosigning on student loan debt, I hope you understand the consequences that can come from it.
Should parents help their children go to college?
Okay, before anyone thinks this is a post bashing all parents who help their children, I should say that I have no problem with parents helping their children pay to go to college. However, that’s AS LONG AS THE PARENTS CAN AFFORD IT.
I have plenty of friends who went to college where a lot of it was paid for by their parents. These parents could afford it, and that is key. If you are on track for retirement, you are not struggling, and so on, and you want to help your children attend college, then by all means go for it.
I also have plenty of friends who went to college where everything was paid for yet their parents clearly could not afford it. Some of these parents took on a second or even a third job so that their child could go to school. They racked up credit card debt and student loan debt as well. Some of these students never paid a cent towards their student loans and their parents were forced to in the end. They risked their retirements, their happiness and more. While I understand that these parents care for their children, they need to realize they are putting their retirements at risk.
Like Shannah said above in the tweet, you can take out loans for student loans, but you can’t for retirement.
When we have children, as long as we are on track for retirement then we will most likely help our children attend and afford college.
I know that my story is not the average story, but I went to college with no help at all. I paid for all three of my degrees on my own, lived on my own, worked full-time, paid for all of my food, and more, all starting just days after I turned 18 and graduated from high school.
It was tough, but I do think it is possible.
For other students, it may take longer to graduate, or it may take less, they may take on more debt, or they may take on less. Everyone’s story is different, but it does not mean it is not possible.
One great story I recently read was How I Graduated College With $100k… in Savings on Budgets Are Sexy. Many say my story is impossible, but just wait until you read this great story. You will be amazed at how awesome Will is! I’m jealous but I know he worked hard for his accomplishments.
How can parents help but not risk their retirement?
Instead of risking your retirement, you can do other things to help your child go to college. Below are some of my tips if you have children who are about to attend college:
You don’t need to help in every way possible. For some reason, there is this myth out there that helping your child go to college means you need to pay for everything for them. Instead of paying for their tuition, textbooks, food, dorm, car, and everything else, set limits. You might help by giving them emotional support, letting them stay in your home while they are in college, helping them find ways to save money for college, helping them cut their college expenses, and more.
Help them get a job. If you don’t have the money to help your child, you may want to help them find a job. This way they can pay for their own expenses. Just a little bit can go a long way.
Help them create a budget. If your child doesn’t have a budget, help them create one now. Read Does your budget suck? – Budget Categories. A budget can go a long way and help someone overcome many financial difficulties.
There are quite a few questions for you today, because I think this topic is an interesting one. I know that not everyone will have the same opinion so I want everyone to chime in! 🙂
Do you think parents should risk their retirement and pay for college? What if the parents are on track for retirement? How much should they help, if anything at all? Will you help your children go to college?
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Parents should over-extend themselves just to help their kids out with college. If they can financially swing it, great. If not, let it be. If parents help their kids but really can’t afford to, the kids will just end up helping them later.
It kinda falls along the same lines as ‘pay yourself first.’
What if the kids don’t help out later though? When I was doing some research on this, many parents said that their children did a complete personality change and abandoned them later on.
Drats, I meant “Parents shouldn’t”. But yeah.
That’s terrible about kids turning their backs on their elderly parents who’ve helped them get where they are. I didn’t even consider this happening. Since that can be the case I guess, I still think parents should only help their kids with college if they can financially swing it without it being a huge personal sacrifice. If the kids abandon them, it will just hurt their hearts not their wallets as well.
Haha that makes much more sense now. I was very surprised by your answer so it all makes sense now 🙂
I should try sleeping more! 🙂
Haha probably 🙂
No, you should not risk retirement for your kid’s college. When we saved for our son’s college, I started almost from the moment he was conceived and never missed a month of putting something in the account. Sometimes it was only $25 but the contribution was made. As our income increased, I increased the contribution. But throughout the years until he went to college, we never stopped or lowered our retirement contributions. There are many options for assisting with college expenses; some don’t even have to be loans. Our son went to our state’s flagship public university. No private college. No out of state tuition. In high school he took advance placement exams and received credit for 3 courses. Since tuition is charged by the credit hour, that saved tuition of 12 hours of course work. He also took a couple of the basic, required courses during the summers at a community college where that course work would transfer to his 4 year institution. The summer session at the community college is cheaper that a regular semester at the university. And he worked part time jobs. So there are many ways to make college more affordable. But one of them should never be at the expense of your retirement fund.
Sounds like your son did something very similar to what I did. It saves a ton of money. Good job!
We will help our three daughters with college expenses. To a certain point. If they end up with a small amount of student loan debt, that is ok. It will teach them that loans/debt are no fun. The key is to start early. Saving for college is very similar to saving for retirement. You should always prioritize paying off debt and saving for retirement ahead of college savings, but ignoring it won’t work.
There are countless stories about how not to do things. I know well to do people who won’t save a penny and people scraping by to pay for their kids education.
Yes I agree. Saving for retirement should come first.
I know I was one of the lucky ones when it came to student loans. I was able to get a majority of my tuition paid for in scholarships but the remaining part was covered by loans. My dad made it clear that these loans were in my name and I was ultimately responsible for paying them back, but he would help out if he was in a good position to do so when those bills started coming in. Fortunately for me, he made a lot of sacrifices over the years to both put himself in a good position to retire and be able to help his kids go to college and when it came time to pay back the loans he was able to help me.
Having said that, I would have never wanted him to risk his retirement savings to help me pay off that debt if he wasn’t in a good position to do so. For many kids at the age of 18, college is an exciting time for new experiences, new friends, etc. – thoughts of interest rates and debt are not what they’re thinking about. As someone said above, I think better education in high school and from parents before college is key in helping them make the best decision for their future.
Having had solid financial support from my dad has made me want to look ahead and start saving so I can do the same for my (future, currently non-existent) kids, but I would not put my retirement at risk if that was the only option.
Awesome and interesting post! Sorry for the long-winded comment!
Thanks Adrienne! I think your situation is a perfect example of parents who can afford to help. There is nothing wrong with that!
Ten or twenty years ago, I may have said “Yes”. Today..no WAY. There are TOO many scholarships and opportunities for someone who REALLY REALLY wants to go. I worked three jobs through college and am debt free. If they can convince other people that they should get funding via their work ethic and the market, etc (private investors, etc), then I guess you can chip in (spending money for books during the semester, a plane ticket home kind of thing every once in a while). But otherwise; NO!!!
Yes, there are definitely a lot of ways for children to find other funding!
I think that’s a great idea. I have a friend where her parents did the same thing. this way they still know what they are getting themselves into.
Agreed!
My parents weren’t able to help me much but they did contribute a small amount. It made them feel good to be able to contribute, even in a small way, to my college education. They couldn’t afford to but I know they would have liked to help me more if they could have. I feel the same way- if I am able to afford it, I would help my kid out with their education. I would not, though, take out a loan in my name. That’s up to them.
Yes, I think taking out a loan in the parent’s name is a little excessive.
I agree that it’s fine as long as parents have already put themselves first and know they can afford it. My parents helped me out with my first semester, and then my dad lost his job, so it was on me to take out loans for the rest of it. I’m not resentful at all, because I’d rather my parents be happy in retirement! I don’t want them worrying about me. I love that you pointed out there’s other ways to help, too. It’s great that you’ve been able to support your sister in other ways.
Thank you Erin!
Thanks for stopping by 🙂
Yes, I agree! There needs to be a long thought process and some research put into it.
My parents took loans out for my sisters and I to go to college (which was mostly covered by scholarships). I come from a very family oriented culture though so my parents know they have nothing to worry about financially as all 3 of us (and respective spouses) are doing very well as a result of their selflessness and will help them out.
A lot of it is culture driven.
Great input. Definitely depends on culture as well.
I think retirement definitely comes first. If you can do both, then that’s awesome. Prepare as early as possible for it and you probably can. However, I don’t think parents should pay 100% of the costs even if they can afford it. The kids need to contribute something – whether it be through scholarships, jobs, finding a cheaper alternative…something. They need to appreciate it and having skin in the game is the best way to make that happen.
I think having some skin in the game is very important. I actually read a statistic that students who pay for their own college degrees (or at least a part of it) usually receive better grades.
Great post Michelle!
I don’t think a parent should risk retirement to pay for a kids college. There are loans, grants, and scholarships. Also, there is work. I had a full ride to play soccer in school, so I paid for undergrad. For grad school, I worked more than 40 hours a week at 3 different part time jobs, and I paid for school myself.
Kids can pick cheaper schools, start saving when they are younger, or work while in college.
There are ways for someone to pay for school, if they want to.
I definitely agree with everything that you said!
P.S. That is awesome that you had a full ride. Good job!
So glad I found your blog! I need to save a few of these posts for later 🙂
Thanks Katie! 🙂