Do you pay for college, save for retirement, or try to do a bit of both?

A guy I know whose a financial planner always says fund the retirement first.

I could never save for my kids’ college. I barely had enough money to make it from one payday to the next. They still went to college. so, I would say that your own retirement should take precidence. You have to take care of yourself first.

Besides, my children tell me that those who went to college on their parents’ dime did not take it serious or care if they passed. Your kids can go to college like everyone else – with some scholarships and student loans.

It still pisses me off that when you save for college you are punished in the financial aid department. Fund the retirement.

@Judi makes a good point. If your income is low enough that you’ll likely qualify for financial aid, then any money you’ve set aside for college will be that much less aid you’ll receive. Do serious research into how the FAFSA works. You report not only income and savings (in your or the kid’s name), but also the equity you have in your home, the kinds of cars you own, any second properties…basically they’ll be looking for anything that you might possibly be able to convert to cash to pay for school. They’ll add all of that up and judge how much aid to give you based on that amount. Money that you have in tax deferred retirement plans like IRAs aren’t considered assets because you can’t really touch them.

If your income is high enough that you probably won’t qualify for aid anyway, then it might make sense to save for school.

Retirement. Your child can get loans for university. His/her future earning potential is much greater with the greater timeframe.

It’s far too late to start saving for college for your child. If you start a college fund for your grandchildren now, it would be good.

I agree with those above who suggest retirement. There is little financial help for the elderly, and a lot of help for college.

My youngest son’s grandfather opened a college fund for him when he was a baby, and he is now going to college on that legacy. Granddad passed away two years ago. We have opened college funds for out two youngest grandchildren as well.

All three of our adult grandsons barely made it out of high school. We did not have any college funds for them. My oldest son refused to go to college out of high school. He attended college classes free when he emigrated to Sweden.

I will respectfully disagree with everyone above.

My folks saved for their retirement and not at all for my college. When I graduated high school, they told me they could not help if I decided to go to college.

I could not get any financial aid as my parents made too much money and they refused to not claim me on their taxes. I got into a great private school, but could not go, as I could not afford it. I then went to a cheaper State school and worked almost full-time for five years while in school full time. I paid my tuition monthly. However, I didn’t make enough to pay for books and fees and supplies, so I charged all of that to the tune of $12,000.00 at 18% interest. My gpa was good (3.0), but probably would have been better if I had more time to do my projects. As a commuter student (couldn’t afford dorms), I drove a ten-year-old junker, held together with duct tape. I didn’t sleep much, had anxiety attacks and ended up seeing a counselor on more than one occasion to handle the stress.

Sure, I got through it – and I have no plans to spoil my kid (she can work part time and pay for her own books and fees and supplies and car insurance), but I will not burden her all that debt and the stress that goes along with it.

When I decided to become a parent, I decided that she comes first – all the way through college.

As for her wedding… she’s on her own.

@cookieman, I don’t think anyone is saying that the OP shouldn’t help if she can. She should cooperate with the FAFSA process but having cash on hand reduces the financial aid available. She can help with co signing and maybe even paying off student loans too.

@cookieman We still picked up the cost of our kids’ school—whatever wasn’t covered by aid—but it would have cost us (the parents) much more had we actually socked $ away for their school.

When did the American culture change to make it the norm that parents pay for their “children’s” college education instead of those wanting the education paying their own way?

@bkcunningham When tuitions hit the 30K mark. The government, via the FAFSA, calculates aid based on the assumption that the family is paying. If the family decides that it’s all on the kid, then the kid really gets screwed for aid, because the FAFSA just doesn’t buy that approach.

@bkcunningham That would mean that the only people who could afford the education required for high-paying jobs would be the children of rich parents; an oligarchy to go with our plutocracy.

Sincere thanks to you all. I have been saving for both college and retirement. So, I do have funds for my daughter. I most likely won’t have enough. What I have been doing is up until now, I have saved in equal measures for college and retirement. I have a new career now, so not as much income, and less funds to save. I am questioning my strategy of making it 50/50.

Is it true that any money saved, even if in a general account makes it that much harder to get aid? The whole aid thing makes me nervous because I keep reading about the “financial aid bubble” being the next to explode.

Like @cookieman I worked full time and attended school full time to pay my tuition. So, it is not that I do not believe that she should not contribute, but I do want to be able to lighten the burden. I was a wreck being a full time student and employee.

My concern is not wanting to underestimate what is needed for retirement. The financial planners confuse and frighten me. Does anybody care to share the percentage of extra non bill paying funds that you place aside for education?

@Judi & @thorninmud: Yes, I can appreciate that. I’m sure most folks will help in some way (unlike my folks).

However, as you point out @thorninmud, the FAFSA based system is less than ideal.

Basically, if the student is a dependent child (lives at home, claimed on parents taxes, derives more than 50% of living expenses from parents), then the parents complete a FAFSA.

Here they disclose all their income and assets. As was mentioned above, everything including cars. The feds determine the student’s eligibility for financial aid (grants) based on the parents ability to pay, not what their willing to pay. Next, they tell you what you qualify for in GSLs (guaranteed student loans). While these offer decent interest rates, they are the only debt that is non-dischargeable should you ever file for bankruptcy. You can maintain in-school deferments, and apply for different types of forebearances if you can’t afford the payments after you graduate, but Sallie Mae will get their money one way or another. If you default on a student loan (120 days late), they can attach your check and take it from your salary directly. So basically, you don’t want to get in too deep with GSLs.

Next up are the third party lenders who will offer you high interest student loans to cover what financial aid and GSLs wouldn’t cover. You want to avoid these. They’re sharks.

With 30K to 90K of debt for an undergraduate degree, it can get ugly real fast.

One way you can help your kid is to have him file for emancipation and, legally be on his own. You can’t claim him on your taxes, but he’ll be able to complete the FAFSA on his own and probably qualify for more financial aid that way.

Years ago, I was a collector (dunner) of defaulted student loans and I’ve been teaching college for twelve years (pretty involved in FA as a chair) – and I’ve seen way too many students buried in debt and often unable to complete their degree because of it.

Sorry. Rant over.

Don’t pay for your kid’s College at all. I didn’t pay for my kids and it worked out just fine, debt free. They wanted to take on loans, but since I forbade it, they took on work instead. Average salary for a high school graduate is around 30–35k a year. They both got into MIT which was about $54k (57k now) total per year (includes room, board, fees, books and personal expenses). After 6 years of work, each taking on two jobs, both saved up enough to pay their way through towards a bachelor degree. To make up lost time, they took on the maximum amount of credits (requires dean permission) which allowed them to finish in 3 years. After they got a real job, they saved up and went back to finish their master degree.
If all goes well, 27/28 year old, good job, debt free.

Whatever college your kid gets into, make sure you find out how long they reserve the spot before its given up to the next student that applies. If its a short time, see what can be done afterwards. GPA and SAT play a significant role.

The only thing I offered was to let them stay at my house rent free and to cover all expenses, food, gas, etc. while they were working to save up. Since I didn’t have to waste my money on their education, I invested in a little bit of everything, which is really, really paying off now with the current market performance.

@bkcunningham In my family that is always how it has been unless the parents truly could not afford it. I think even now if I went back to school for a masters my mom would float me some money, and I can readily pay for it myself. One box I checked when falling in love with my husband was his parents paid for his college education and that was normal to him (disclaimer: his parents aren’t isn’t American). I think among Jewish people it is the norm to pay for teritiary education of their children. Usually it is financially easier for a parent than a teen. Then that teen will grow up and pay for their children. In the end it is similar money out, but avoids going into debt. Starting with a loan when graduating college puts the young adult behind the 8 ball financially.

@Qipaogirl I say do a little of both, with emphasis on your retirement. Hopefully this new career path pans out and by the time your child is a jr. or sr. you will be bringing in more bucks. for now it sounds like you will be able to help with the first year or two at least. I recommend your child get a job to be able to pay at least for her own spending money while in school and maybe a few more expenses. Be honest with her about what you think you can afford so she can plan.

@tomathon Your kids were lucky. First off, being able to find two full-time jobs in an economy that many people have trouble finding just one is a bit fortunate; to not realize that is to have been living under a rock the last few years, if not outright having lived in a different world of privilege since birth.

The second is having someone to pick up living expenses for them; a luxury many lack. Try saving money when your entire net income from one job is taken up solely by rent and utilities while the other income is reduced by food and fuel and insurance, and you will see that your kids were just as privileged as if you handed MIT a six-figure check on their behalf.

Don’t get me wrong. I’m glad they managed to pull it off, but just because they did doesn’t mean everyone can. People survive gunshot wounds to the head, but that doesn’t mean I want to put a gun in my mouth, or make it safe to catch a bullet in the temple. Just be aware that not everyone can do what your family did.

This from a person whose mother took 24 years to get her Masters due to being a single mother and often working 2–3 jobs just to raise their kid.

@tomathon Now that is good parenting, in my opinion. I didn’t have any money to help my kids, but they figured it out on their own. All I could do was let them live at home while attending, and that worked out fine. Yes, they have student loans, but my eldest just got hers paid off, and my youngest daughter just finished her degree in molecular biology and got at job at the Utah Crime Lab in forensics, making a bundle. My two boys both went to trade schools for free. One is an auto mechanic and the other a die cutter. The boys wouldn’t have gone to college even if I paid for it – they just aren’t the “desk job” type. If you could see the self-satisfaction they all have for what they were able to accomplish, you could see what I am talking about. I don’t see that in kids whose parents paid for their college.

Happy Friday, all! Thank you for more thoughts and ideas. It seems the middle of the road is the best way. The debt stories are epic and frightening, and I would like to avoid too much of that, if any. @Skaggfacemutt I am happy to hear that your children are enjoying their respective careers. It sounds like you have a lovely family, and @jerv your mom sounds most inspirational! @JLeslie great advice about saving, thank you! I want to help, but not at the expense of my elder years. I don’t want to be one of those people who need to live with their child!