With the rising cost of higher education and the increasing amount of debt that students must take on to attend college, parents often step in to help financially. Although they’re coming from a good place, parents can often pay for their children’s college at the cost of saving for retirement. When this happens, students should refuse their parents’ money and find alternative ways to pay for college. The two main reasons you shouldn’t accept your parents’ money to pay for college are because your parents’ retirement is just as important as your college education and you have multiple funding options while your parents do not.
Your Parents’ Retirement Is Just as Important as Your College Education
According to a study conducted by the U.S. Government Accountability Office, the average household age 55-64 with retirement savings has only $104,000 saved. That represents only 48% of the population in that age range. The rest have no retirement savings at all. What this means is that America has a retirement savings problem.
Your parents’ livelihood in retirement is just as important as your college education. Things like housing and health insurance will need to be paid. As your parents get older, they may even need things like assisted living, which comes at a large cost as well.
Instead of having them use money that could go to these important retirement expenses to pay for your college education, do them a favor and let them save that money. Not only will it improve their livelihood when they’re no longer working, it’ll remove the burden of you having to support them in retirement should something go wrong.
It’s important for you not to accept your parents’ money to pay for college because otherwise your parents may think of you before themselves. Especially if they’re years away from retirement, they may think they’ll have time to catch up once you’ve graduated and make additional contributions to their retirement accounts. Although the IRS does offer catch-up contributions for those age 50 and over, it’s best for them to contribute the max they can each year in order to take full advantage of compound interest.
To be sure, your college education is important as well. That’s why there are so many funding options for college. This leads into my next point:
You Have Multiple Funding Options; Your Parents Don’t
Your college education can be funded in multiple ways:
- Scholarships - You can land different types of scholarships to receive free money for your education. There are academic scholarships, athletic scholarships, minority scholarships, and community service scholarships to name a few.
- Grants - If you’re eligible, you can receive gifted funds from the government to pay for college. This money doesn’t need to be repaid.
- Financial Aid - Make sure you fill out the FAFSA every year so that your college can determine how much money they can give you to pay for college. Like grants, financial aid also doesn’t need to be repaid.
- Loans - Lastly, you can take out loans on a federal and private level to fund the rest of the educational costs that weren’t met by the scholarships, grants, and financial aid. Loans vary in interest rates and terms. It’s best to get federal loans first because those often come with lower interest rates and have the potential to be forgiven.
On the other hand, there aren’t scholarships, grants, financial aid, or loans for retirement. Your parents will have to rely on their own savings and any retirement benefits their employers might offer. So work hard to get those scholarships. Apply for as many grants and all the financial aid you can. Then take out loans to cover the rest. You’ll have your entire professional career to pay those loans back.
Your parents may mean well when they put you before themselves. It’s up to you to be responsible and not accept their money to pay for college. Not only will paying for your own college education help you learn responsibility, but it’ll also make you value your education much more. You’ll quickly learn the value of hard work and the value of money. You’ll learn what it’s like to be resourceful. By paying for your own college education, you’re taking an early step towards independence. Your parents will appreciate it in the long run.