As college tuition continues to creep upward, parents are weighing delaying their retirement to help save for their children’s education. And while the majority (71%) feel confident in their plan to pay, at least 70% say tuition and fees were more than they expected, according to a new study from College Ave Student Loans. This tracks with earlier reporting where a study found that there is a “staggering disconnect” regarding the actual cost of college and the reality, including the devastating impact it can have on retirement savings. Yet parents are increasingly willing to put their own financial wellness second to helping their children achieve the dream of college.
The College Ave survey also sheds light on the difficult budgeting choices many families are facing when they are simultaneously funding two major life events, such as retirement and college expenses for their children. Nearly half of the respondents (45%) say that they are “stressed” about the need to save for their own retirement and also contribute to their child’s college education. Unsurprisingly, this is causing difficult decisions for many with 56% saying that they are willing to defer their retirement to pay for their child’s tuition bills. More than 40% will prioritize paying for college over saving for retirement and 1 in 5 have already dipped into their retirement savings to pay for their child’s college expenses.
However, more than a third of parents surveyed said they would tell parents of incoming college freshman to not sacrifice their retirement to pay for college. While some may avoid tapping into retirement funds, the alternatives are creating more debt for families. According to the survey, of those families who help their child pay for college, 45% have borrowed federal student loans, 15% have borrowed private student loans and 15% use parent loans to fund their child’s tuition.
Joe DePaulo, Co-Founder and CEO of College Ave, says that their survey “gives a snapshot of the budgeting and financial prioritizing families must make with one of their biggest investments on the horizon – their child’s education.”
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
