The number of Americans torn between funding their retirement and their children's college debt is on the rise.
The number of U.S. residents aged 60 or more with student loan debt has risen from 700,000 in 2005 to 2.8 million in 2015, and majority of the beneficiaries of those loans were their adult children and grandchildren, according to the Consumer Financial Protection Bureau (CFPB).
Advisors say parents and grandparents are often contending with this student debt on a fixed income, impacting their retirement goals.
Andrew Anable, a financial planner at Safeguard Investment Advisory Group in Santa Barbara, Calif., thinks no one should go into grave debt for his or her child’s college education.
“You should not take out more than $50,000 of debt on behalf of your child across their four-year degree,” said Anable.
Wendy Liebowitz, a branch manager at Fidelity Personal Investments in Fort Lauderdale, Fla., said, “Students can take some accountability and responsibility towards their education.”
And the American Sociological Review published a study touting how college students get higher grades when their parents do not completely pay for their adult child’s education.
Parents, grandparents and their children should budget together for college, said Leibowitz, adding that it is important that clients pay themselves first—for retirement, an emergency fund, etc.—and use whatever surplus is available to help others.
When Anable’s daughter became a college student, he and his wife made her take out a student loan in hopes of motivating her to not only treat her education seriously, but also her retirement.
After graduation, Anable said, he encouraged his daughter to save towards retirement by offering to help repay the loan while she paid into a retirement savings account.