SHOULD PARENTS PAY FOR COLLEGE? By Anna Helhoski
Parents, you may want to pay for your child’s college education, but it’s only a good idea if you can afford it. Whether you decide to take on the entire financial responsibility or split the cost with your child, first answer these questions to determine if you should pay for college: • Will it put your retirement at risk? Your child can always borrow to pay for college, but you can’t borrow for your retirement. Make sure you’re on track to save enough for retirement; use this calculator if you’re unsure. • Do you have other debts to pay off? If you’re deep in credit card debt or have other high- interest debt, you shouldn’t add to your burden. • Can you afford the payments? Add the tuition or parent loan payments you’d make to your existing debts to make sure you can fit both into your budget. • Will you have an emergency cushion? You don’t want to choose between fixing the car and paying a student loan bill. • Can you accept the risk? Taking on a parent loan could jeopardize your credit or ability to borrow for something else. Co-signing also leaves you on the hook for your child’s behavior. Nearly nine in 10 families expect their children to go to school, but only just over one-third — 36% — have a plan to pay for all four years of college, according to How America Pays for College 2017, a study by Sallie Mae and market research firm Ipsos. If your own finances are solid and you can afford to help pay for college, you may decide to take on a parent loan. Before you borrow, consider these tips to avoid taking unnecessary risks with your own finances.
Max out federal loans first
Turn to private loans only after your family has exhausted grants, scholarships, savings earmarked for school, work-study and federal student loans. The higher your income, the less free aid your child will receive. If you opt not to help pay for school, less free aid means your child may have to take on more loans to fill the gap. Free aid such as grants
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