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
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.
- How I Graduated From College In 2.5 Years With 2 Degrees AND Saved $37,500
- How to Pay Off Student Loans Fast
- We have $200,000 in Student Loan Debt
- How We Handled $32,000 in Student Loans
- My $38,000 Student Loan Payoff Plan
- How To Save Money On Textbooks + Campus Book Rentals Review
- The Benefits of Paying Off Student Loan Debt Early
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?