Tips for Paying for College while Saving for Retirement

The cost of college can be crushing for many families. In 2021, the average yearly cost of a private college was approximately $44,000, whereas out-of-state public-school tuitions trailed not far behind at around $28,000 on average, and in-state public school tuitions were a relative bargain at close to $12,000 per year.

Many families rely on savings, merit awards, scholarships and other means to pay for college while loans typically cover the bulk of tuition costs. In fact, 43% of college attendees report that they are carrying student loans averaging $40,000 per borrower.

Are retirement and college competing priorities?

While almost one-third of the $1.75 trillion in college loans in the United States are held by Millennials (aged 20-35), you may be surprised to learn that Gen X borrowers also owe over $600 billion in debt, and retirees in their 50s and 60s owe almost $300 billion of the nation’s outstanding debt.

Most financial advisors agree that paying yourself first is the wisest budgeting move you can make, yet this suggestion can feel like it is in direct conflict with a parent’s desire to support a child’s educational dreams while also trying to save for retirement. It can also be a challenge for younger borrowers to balance college debt with trying to save for their post-working years.

Striking a balance between college and retirement

Here are some suggestions to help your retirement saving stays on track while also achieving educational goals.

  • Begin saving for a child’s college tuition early so that you can leverage the benefit of compound interest over many years on small, incremental deposits.
  • Consider a 529 plan but research the options closely to understand their benefits and potential limitations. Or explore IRAs that will allow you to withdraw funds without penalty if the withdrawals are earmarked for educational expenses.
  • When selecting a college or university for yourself or a child, use a net price calculator to find the true cost of attendance.
  • Try not to let emotions rule the decision. Consider the college search process as you would any other consumer decision. Shop around and compare each school on its merits.
  • Maximize your retirement savings first before saving for college, especially if an employer matches the contributions in any way.
  • When taking out loans to pay for college, do not exceed the combined yearly income of those who will be paying them off. This rule of thumb usually increases the chances that the debt could be paid off in 10 years.

The decision is yours

Every family is different, and their financial goals and aspirations are, too. There isn’t one correct formula that will dictate how much to save for college or retirement, how those funds should be split between the accounts or who should be responsible for making the college payments.

Those calculations depend on a variety of factors including how much money will be needed to pay the debt and how much savings is needed for a comfortable retirement.

Most families can agree that they need to find a way to strike a balance between college debt and retirement savings, and that seeking out a financial representative to help navigate the decision is a helpful way to sort through the competing priorities.

Bankers Life is here for you! We understand that the balance between college and retirement savings require thoughtful consideration. We can answer questions, discuss options, review portfolios and help create financial plans to make your wishes a reality. Call us to get started (844) 553-9083.


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