Parents Should Pay for Retirement Before Paying for College

I don’t think parents should pay for their children’s college education. Why? Because most confuse “paying” with “going into debt.”

Parents’ first priority needs to be getting and staying on track for their own retirement. That means actively funding retirement accounts to the max every year, building a robust emergency fund and paying off all debt, including their mortgage, so that by the time they retire, they’re financially set — not a financial burden to their kids.

Parents who are in the position I just described AND also have funds over and beyond to help pay for their kids’ college, I say great. Do it, if that is the kind of gift you wish to give to your adult children.

Sadly, most parents are not in that position by the time their kids reach college age. The obligation they feel together with guilt that they have not built immense college funds prompts them to default to co-signing or taking out Direct PLUS Loans.
Unless you or your student dies or you become totally and permanently disabled, there are few options for forgiveness or cancellation. And do not look to deferment or forbearance as ways to put off repayment. That will only increase the pain in the long run.

You may need to get additional employment, pledging all side earnings toward the payment of these loans. You will doom yourselves to poverty if you forgo saving for retirement if you cash in existing retirement accounts or strip the equity from your home to repay the debt. And get used to the idea that you will need to work until age 70 or later, depending on your current ages and the amount of debt.

PLUS loans, as written, must be repaid within 10 years. However, if you consolidate, rewrite or become delinquent, they can turn into a mess that just won’t go away. If you allow these debts to linger and follow you into retirement, you need to know that the federal government will garnish tax refunds and even Social Security benefits until the debts are paid in full.

Mary Hunt is the founder is the author of The Smart Woman’s Guide to Planning for Retirement.

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