FAST FACTS

College Debt:
Impact on Retirement

Maximize retirement contributions
Experts recommend that you maximize your contributions to your employer's retirement plan each year, and then start contributing to your children's college fund. After all, your children may receive financial aid to pay for college, but you can't earn a scholarship or take out a loan to pay for your retirement.
 
Approach student loans with caution
Loans can help your child earn a college degree, but they can also remain a financial liability long after graduation. Many parents who cosigned for their children's student loans have become responsible for repaying those loans when their children defaulted on them. Some retirees have even had their Social Security payments garnished to repay student loans that they cosigned for children or grandchildren. And since student loans are rarely dismissed in bankruptcy proceedings, these debts remain until they're repaid.

Rather than depending primarily on student loans to fund your child's college education—and potentially putting your financial security in retirement in jeopardy—exhaust all other sources of financial aid first. Meet with the financial aid office at your child's school to learn about grants, scholarships and work-study opportunities.

Involve your children in the process
In most families, paying for college is a shared experience—which can begin as soon as your children start earning money. Allocate a portion of their allowance to a college savings fund. When they're old enough for after-school or summer jobs, help them create a budget that includes a college-savings component. And once they're accepted to college, research financial aid opportunities together. Involving your children in the process teaches them not only the value of saving on a regular basis, but the importance of planning for a secure financial future.

Saving for retirement and your children's college education at the same time can feel like an overwhelming challenge. But it doesn't have to be. With thoughtful planning, and the resolve to stick with that plan, you can help your children earn their degrees without sacrificing your own financial security.