Should You Use Retirement Savings to Pay for College?
A college education can be expensive. With an average debt of nearly $35,000 after college graduation, more and more families are doing whatever they can to share that burden with their college students and reduce that debt.
There are many ways to do this. Here are three things to consider before you tap into your retirement savings.
Necessity vs. luxury
Surviving financially in retirement is a necessity. A parent-funded education is a luxury. Delaying retirement to pay for your child’s education is extremely risky, because you don’t know how long it will take to build that retirement savings back up. If you’ve been saving most of your life for retirement, there’s a good chance you will never recover that nest egg.
Less risky ways to pay for college
There are many ways to pay for higher education these days:
- Assistance from family members
- Students contributing their own money
- Student loans
The desire to keep debt as minimal as possible is understandable – especially for young adults trying to start their new lives after college. Parents who are passionate about paying for college with their students’ help sometimes let the students apply for student loans and just make the payments for them, instead of dipping into retirement savings. Whether or not that’s a good strategy is between you and your financial advisor. Talk to one for a solution that works best for your family.
More affordable college options
There’s no shame in attending a less expensive college. To be even more cost-efficient, consider sending your student to a community college for a year or two. Taking the basic class requirements at a less expensive school, then transferring to the more expensive school of their choice, could save you tens of thousands of dollars over four or more years.
Check out our retirement and investment services for more help with this decision.