Parents Sacrifice Retirement to Cover 36% College Tuition Surge

With the escalating cost of college education, many parents are resorting to significant financial sacrifices to ensure their children can afford higher education without accumulating substantial student debt. These sacrifices include delaying retirement, liquidating personal savings, or taking on second jobs. According to a survey, more than 60% of parents are now going beyond traditional college funding methods, often without a clear savings strategy, which financial advisors warn could lead to risky financial decisions.

Parents are making numerous sacrifices to secure their children's futures. The cost of college has surged dramatically, making it a significant financial burden for families. Between 2010 and 2023, tuition costs at four-year public universities increased by over 36%, with the average annual cost of college now nearly $40,000. This financial strain has led more than 60% of parents to seek alternative financing options beyond typical methods like 529 plans and federal loans.

The survey data highlights that many families are underprepared for the financial demands of college education. The disconnect between college admissions and financial planning is a significant issue, with one in five parents admitting they focused solely on getting their child into college without considering how to pay for it. This lack of planning is exacerbated by the reluctance of parents to discuss financial matters openly, with nearly 50% of survey respondents preferring to talk about drugs and alcohol with their children rather than finances.

Financial advisors caution that the trend of parents taking on side jobs, withdrawing money from retirement accounts, and refinancing their homes to pay for college is both common and risky. These actions can have long-term financial repercussions, making it difficult for parents to recover from the financial setbacks. The phenomenon is driven by a desire to protect children from the burden of student debt, but it often comes at the expense of the parents' own financial security.

Experts suggest that while pulling money from retirement or taking on additional jobs may seem necessary, there are other strategies to consider. A 529 savings plan, for example, can help families save for college expenses tax-advantaged. Starting to save early allows money to grow through compounding, and any unused funds can be transferred to other family members. For families with children already in high school, open communication about financial realities and exploring schools with generous merit aid or transparent pricing can be beneficial.

For parents just beginning to plan for college, moving around investments and assets, as well as applying for grants, scholarships, and merit-based aid, can help minimize the financial gap. Even private colleges may offer generous aid packages that make the final cost comparable to or even less than public schools. However, the expected cost minus savings and free money will likely still leave a gap, which needs to be addressed through careful financial planning to minimize student debt and ensure enough money is left for retirement.