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Picture this: James and his wife Nola, both 62, have done well in life, earning a combined income that gives them an upper-class lifestyle. But when their daughter Tia went to college, they told her they couldn’t afford to pay her way.
Most of their money is tied up in investments and employer-sponsored retirement plans, as well as real estate. Aside from a lack of highly liquid assets, they also felt it was important for Tia to learn about financial responsibility.
But they’ve also left the door open for resentment. Now that Tia has graduated, she owes $90,000 in student debt — and she isn’t happy about it.
Now James and Nola are wondering if there’s anything they should do to help their daughter without putting their retirement savings at risk.
This is a complex issue, and there isn’t a “right” answer. For some families, paying for their child’s college education could put them into debt, possibly jeopardizing their retirement or other financial goals.
While college loans exist, “there is no such thing as a retirement loan,” Christian Mitchell, chief customer officer at Northwestern Mutual, said in their 2024 Planning and Progress study.
“If parents can’t afford life in retirement, that unexpected financial burden may fall on their kids’ shoulders. That’s why it’s so important to consider every money move as part of a larger financial plan.”
Most advisors don’t recommend dipping into your retirement savings, withdrawing from 401(k) savings or using home equity to help your child avoid college debt.
Of American workers and retirees saving for both future college expenses and retirement, 58% said they were delaying retirement to reach both goals, according to a survey by the Society of Actuaries. And 41% said they withdrew money from their retirement funds to pay for a family member’s tuition.
“The average federal student loan debt balance is $38,375, while the total average balance (including private loan debt) may be as high as $41,618,” according to the Education Data Initiative. What’s more, the data also points out that 4.86% of federal student loans were in default as of Q4 2024.
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In total, Americans owe close to $1.8 trillion in student loan debt, according to Q1 2025 Federal Reserve data.
If they could go back in time, James and Nola could have discussed the situation with Tia and explained why they couldn’t afford to pay for all of her college expenses — and perhaps worked with her to come up with some options.
For example, they could have paid a percentage of her costs if Tia paid the remainder. They could have matched her savings from a summer job, or they could have helped Tia research alternatives such as merit-based scholarships and grants.
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Students from families who earn above a certain income threshold won’t qualify for federal student aid, but they may still want to file a free application for Federal Student Aid (FAFSA).
Many colleges require students to submit a FAFSA to be eligible for scholarships, grants, work-study funds and federal subsidized and unsubsidized loans, which Tia could have applied for. Having a FAFSA application on file can make it easier to pursue these opportunities during her degree. Even better, her parents could have started early by setting up a 529 plan while she was still young.
Federal student loans also don’t typically cover the entire cost of college — including housing, food, utilities and other costs. A private student loan, however, can bridge the gap between federal student loans, scholarships and any grants your child may receive. College Ave can help you secure a private student loan at the lowest available rate.
It’s easy to apply, and parents can also sign on as the guarantor for their child’s student loan. They can be approved with an instant credit decision, and the whole process can be completed in as little as three minutes.
College Ave. also offers the opportunity for co-signer release after your child proves they can make payments responsibly. That means you can help them get off the ground, and spread their wings – ideally without dipping into your retirement savings.
It should be clear from the outset what you’re willing to contribute and what you expect your child to contribute. That’s the case even if you plan to pay for your child’s tuition in full. While James and Nola can’t go back in time, they can have open, honest conversations with Tia about her debt and how they might be able to help, including gifting her money or offering a loan.
Having a plan could help ease the tension and start Tia off on the right foot as she begins a new chapter in life.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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