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More Parents Are Putting Limits on College Help
A growing number want their kids to help pay and fewer are willing to sacrifice their retirement funds. That’s a good thing.
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Liz Weston, CFP®, is a personal finance columnist, co-host of the "Smart Money" podcast, award-winning journalist and author of five books about money, including the bestselling "Your Credit Score." Liz has appeared on numerous national television and radio programs, including the "Today" show, "NBC Nightly News," the "Dr. Phil" show and "All Things Considered." Her columns are carried by The Associated Press and appear in hundreds of media outlets each week. Prior to NerdWallet, she wrote for MSN, Reuters, AARP The Magazine and the Los Angeles Times. She shares a home in Los Angeles with a husband, a daughter and a co-dependent golden retriever.
Rick VanderKnyff Senior Assigning Editor | Los Angeles Times; University of California, San Diego; Microsoft
Rick VanderKnyff leads the news team at NerdWallet. Previously, he has worked as a channel manager at MSN.com, as a web manager at University of California San Diego, and as a copy editor and staff writer at the Los Angeles Times. He holds a Bachelor of Arts in communications and a Master of Arts in anthropology.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.59-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Variable APR
5.34-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.49-15.49%
Lowest rates shown include the auto debit. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 11/25/2024. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Variable APR
4.92-15.08%
Lowest rates shown include the auto debit. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 11/25/2024. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
Tyler Luker of Plano, Texas, is a high school junior who already knows which college he wants to attend (University of Missouri), how much it costs ($43,300 for out-of-state residents) and how much he can expect his single mother to contribute: nothing.
“That’s protecting my retirement,” says certified financial planner Sharon Luker, 64. “I don’t want to work when I’m 70.”
While most parents plan to help with at least some college expenses, more are coming around to Sharon Luker’s point of view that they shouldn’t sacrifice their own financial well-being to do so, a survey by student lender Sallie Mae found.
“As a parent, you want to do what’s best for your kids,” says Sallie Mae spokesman Rick Castellano. But “parents do want their students to have some skin in the game.”
The 2018 survey of 2,003 parents with children under 18, conducted by pollster Ipsos, found:
More parents say their kids should help pay for their own educations, with 59% saying college costs should be a shared responsibility compared to 51% in 2016. The proportion saying the burden should be entirely the parents’ dropped to 26% from 30%.
Sixty-nine percent vowed not to touch their retirement funds for college costs, up from 60% in 2016. An improved economy seems to have convinced more parents that they’ll be able to pay for college out of their income and savings, rather than tapping retirement, Castellano says.
Still, more parents were saving for college (56%) than their own retirements (54%). Ideally, people would be on track with retirement savings before saving for their children’s educations.
As college costs continue to spiral, parents tempted to spend excessively to educate their kids need to think twice. Here’s why:
Stinting retirement savings is costly. You can’t get back lost company matches, tax breaks and all-important compounded returns if you don’t contribute.
You can overdose on debt. Federal PLUS loans, which can help parents pay for college, don’t require thorough credit checks or proof that you can repay, which means it’s easy to borrow more than you can afford to pay back.
Education debt can follow you to the grave. It’s difficult to erase education loans in bankruptcy court, and the U.S. government can even take a portion of your Social Security checks, normally off limits to creditors, if you fail to repay federal loans.
Certified financial planner Monica L. Dwyer of West Chester, Ohio, whose three children attend the University of Cincinnati, was upfront with them about how much help they could expect. Each child had about $25,000 in 529 college savings plans, plus Dwyer and her husband, Sean, pay for food, health insurance, cell service and car insurance if the child lives at home.
“I think that if you give children limits, and explain what they have available to them … they will likely make the right decisions,” she says. “Or maybe I have been lucky.”
The Dwyers refuse to co-sign private loans or take out parental loans. The kids got jobs and federal student loans, which are limited to $5,500 the first year, to help cover tuition and books. Sean Dwyer recently took a post as an academic advisor at the university, so the $11,000 annual tuition is now waived for all three kids and “it is such a huge relief for our family,” Dwyer says.
CFP Martisha Patterson of Nutley, New Jersey, also put conditions on her college help. If her daughter had attended an in-state public school, she could have lived on campus. Because she opted for City University of New York, where she’s now a sophomore, she commutes the roughly 15 miles from home to offset the higher cost for out-of-state students. Patterson says her daughter also works, seeks scholarships and looks for other ways to help.
“She meets with a college counselor each semester to make sure she is applying to classes that meet the graduation requirements so we don’t waste money,” Patterson says.
And while Sharon Luker won’t contribute financially, she also plans to limit her income during the years when her children will apply for financial aid. That’s important, because need-based financial aid is largely determined by the parents’ income.
Tyler, 16, and his twin sister, Timarie, each have about $60,000 in 529 college savings plans funded by their grandfather and they’re looking for scholarships (Timarie’s already nabbed a $2,500 one from the Girl Scouts). Timarie is open to taking on “some” student loan debt, but Tyler is convinced he wants to avoid it.
“I just don’t want to be paying stuff off in the future. It just adds more problems,” he says.