The older I get, the more I consider retirement and what that looks like. While it is kind of exciting to think about, it is also kind of scary! Questions pop into my head:
Did I save enough? Where will I live? Can I afford to move an exotic location? Can I afford to travel? Did I save enough? How many cars can I afford? How much will health insurance cost? Will I have to work to make ends meet? Did I save enough? How much will retirement cost and how will I pay for it? I think you get the picture…
Ever since I started working as an adult, I knew in the back of my head that retirement would come at some point. The thought was always there. I really did not think seriously about it, though, until I was in my 30’s. At that point was when I started to put money away for my future expenses. I wish, like a lot of people I think, that I would have started saving money for retirement sooner…
I bring all of this up because I think a lot of parents are in the same boat when it comes to paying for college for their children. They know the expense might be coming but it is easy to put the thought in the back of their mind until the time actually arrives.
They complete a FAFSA for their high school senior to be considered for financial aid, receive financial aid offers from colleges telling them how much they need to come up with out of pocket for the first year of college, and wonder how they will pay for it?
They start to have some of the same questions that I have as I get closer to retirement:
Did I save enough (or any)? Where will my student live? Can we afford the college my son or daughter wants to attend? Did I save enough? Will the student have to work to make ends meet? How much will college cost and how will we for pay it?
I get a lot of calls this time of year from parents asking me some of these questions. Many of them are considering student and parent loans to help pay for college. It is important to remember that financial aid is not meant to pay for all of a student’s education, it is supposed to supplement what the family has in order to offset the cost of education.
To me, setting aside money for college (for either a student or parent) should be just as important as setting aside money for retirement. Just like retirement plans, there are many plans that can be used to save for college (529 plans, IRA’s, savings accounts). These plans can be used by parents, students, grandparents, relatives, etc. The earlier you start saving, the better. The money set aside in these plans may not pay for all of the out of pocket costs of college, but it can certainly help keep student and parent loan debt down.
Before considering borrowing for paying for college, I suggest considering the following for the student:
- Apply for more scholarships. Any scholarship money received is money that will not have to be borrowed in a student loan.
- Work during high school and the summer before college to save money.
- Live at home and attend a nearby college or university.
- Be a resident assistant at a dormitory to save money.
- Consider attending a less expensive (out of pocket) college.
- Know what your first year’s starting salary will be after college graduation and make sure you do not borrow more than that throughout your college career.
- Have discussions with your son or daughter about what the family can realistically afford and what the expectations are. For example, having the student pay their own living expenses.
- Help the student in locating scholarships and be supportive.
- Set money aside monthly for college expenses (the sooner the better).
- Do not tap into your retirement plans to pay for college.
- If you do decide to borrow, look into private loans as compared to the PLUS loan.
Happy saving!!
John - ICAN Advisor - Northeast Iowa
