"It's understandable why Americans are questioning how to prioritize college education and retirement funding, particularly with the skyrocketing costs in both areas. But with graduates likely to earn $1 million* more in their lifetime than non-grads, college remains an important investment in a family's future despite the rising price tag," says Keith Brannan, vice president of Financial Security Planning for COUNTRY Financial. "The good news, however, is that people are putting their retirement savings first. You can always borrow to pay for college, but you can't borrow for retirement. With the proper planning, Americans can achieve their financial goals for both."
Borrowing for college
Nearly one-third (31 percent) of Americans borrowed money to pay for their education, 64 percent of whom have completed paying off their loans. Further, of those who borrowed, half say it had little to no impact on other life decisions like marriage or buying a home. Twenty-eight percent say it had somewhat of an impact and 20 percent say it had a large impact.
- Forty percent of those in the 18-29 age group say education loans had a significant impact on other life decisions, at least 24 points above all other age groups surveyed.
Should parents foot the bill?
A majority (65 percent) of Americans say parents should be responsible for paying part of their child's college education. Eighteen percent believe parents should foot the entire bill, while 13 percent thinks parents should not pay for any college costs.
- Younger Americans, those ages 18-29, were most likely to say parents shouldn't have to finance any of the costs of higher education for their kids (15 percent).
"No matter how much you choose to pay for your child's education, planning is the key," adds Brannan. "Most families can pay for college and achieve other long-term goals, no matter where they're starting from."
Tips for college planning
- Try to find alternate ways to pay for an education, like grants or low-interest loans. In many cases, you can also qualify for tax breaks like the American Opportunity Credit, Lifetime Learning Credit and student loan interest deductions. Community college can be a cheaper option as well.
- Financial aid formulas typically weight the student's savings more heavily, so make sure you are saving money in your name rather than your child's name.
- If your child has already been accepted to college, be proactive with the school's financial aid office if you experience major life changes like job loss or a steep decline in home value. In some cases, schools can work to find additional sources of financial support even after your child starts attending.
- Contributing the maximum amount to your retirement accounts can help you in several ways. First, you will have less taxable income, which means you could be eligible for a higher amount of financial aid. Also, if you need cash in a hurry, you can dial back the amount you contribute and use that money to meet your immediate needs.
