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Paying for college or retirement: It’s not all or nothing

Laura Mohammad

June 27, 2014

You’ve heard it before: You can take out a loan to go to college, but you can’t take out a loan to retire.

Financial planners will tell you not to sacrifice your retirement to pay for the kids’ college. The kids have plenty of time to pay back a student loan, they say. You’re doing them a favor by being well-funded in your retirement, they claim.

While that’s all true, it doesn’t mean you have to leave them to completely fend for themselves if you have the means to help them. Often, with a little belt-tightening, you can help your children and still build your nest egg.

The alternative is difficult, especially in 2014. It’s not easy to look your 17-year-old in the eye and tell him he will likely have $29,000 in student loans by the time he graduates, and that’s not including credit card debt. The pundits don’t advise you on how to explain to your child that he may have to defer buying a house or having children because he will be strapped with debt right out of the gate.

Every generation claims they had it rougher than the current one. I believe it’s flipped this go-around. Students pay tens of thousands of dollars every year for tuition and living expenses. My tuition in 1985 was $300 a semester. It’s now about $5,000 a semester for in-state tuition at the school my kids hope to go to, The University of Texas at Austin.

When I graduated in 1985, I didn’t owe a penny. I was able to work my way through college, getting grants and scholarships to supplement my income. For my husband, it was the same.

Not so today.

These days, grants are hard to come by and scholarships are incredibly competitive. The recent graduates I know are saddled with $30,000 to $40,000 in student loans.

The troubles of the millennial student are hitting home for me. You see, I’m the mother of two millennials, and my eldest starts college in a year.

It goes against the grain for me not to help my kids with college in some fashion. My grandparents gave my parents cars when I was growing up. My parents lent money to my husband and me so we could afford a house in an out-of-reach Austin market in 2000. Giving our kids support at key points in their lives is an important part of my family’s tradition. If our children are responsible citizens, if they work and get good grades, we help them out. That’s just the way we do things. (In fact, Peter Anderson of Bible Money Matters cites a study that shows kids who don’t help pay their way actually have lower GPAs.)

And we’re not alone, according to a 2014 Sallie Mae study. Future students can count on two-fifths of their college expenses being financed by parents, relatives and friends.

That’s not to say that my husband and I plan to blow our retirement on supporting the kids in college. This isn’t an all-or-nothing venture. Nowhere does it say that you have to pay for all of your kids’ college, and there is plenty of gradation between paying nothing and paying a part.

But, in the Mohammad household, things are going to be tight for the next few years while the boys do their studies, and that’s OK. I see it as our coming-of-age gift to them, the last great present before we send them out into the world. To minimize their debt as they prepare for adulthood will be immeasurably rewarding.

The boys still may have to take out some loans. We aren’t comfortable raiding our retirement for college, because the pundits are right: You can’t take out a loan for retirement. But hopefully, our contribution will make a dent.

My eldest plans to go to community college his first two years while living at home to save money. My other boy is shooting for a Navy ROTC scholarship, which would at least pay for tuition. I’m immensely proud of them for making plans to avoid loans. They seem to grasp that this isn’t free money, and there are consequences to having a stack of loans upon graduation. If we can help to offset loan costs with our contribution, it’s money well spent.

So, yes, we’ll be helping our children pay for college.  I’ve always found that generosity has a way of paying you back tenfold.