Financial Focus: Parents paying for college and the potential hit to retirement fund

10:00 AM, Aug 29, 2019

COLORADO SPRINGS — It's no secret that college is expensive and it's not getting any cheaper.

So when students don't have enough money to cover tuition many times it's parents who have to pay the rest and take out loans.

Our partner at Carlson Financial explained how this can be a big hit to a parent's finances.

Between tuition, books, and all the other expenses that come with college, Carl Carlson said, "It can run $20,000, $40,000, $50,000 a year...that's a lot of money especially for a student that doesn't have a lot of time to work."

The CEO of Carlson Financial said that means a lot of parents get roped in to help pay for college.

"Students are capped. They can only borrow about $5,500, maybe up to $7,500 a year."

That's when mom and dad might step in to help - a move that can cost them big time.

"The parents are taking on Parent PLUS Loans and now they're going to be socked with some of that debt after their child graduates...more and more parents are doing it...it's so expensive and kids can't afford to do it."

He said there's no cap on the Parent PLUS Loan and that the average loan is about $26,000. Paying that off means a monthly check parents will have to write once their child graduates.

"I think a lot of parents are concerned about it because that's taking away from the parent's retirement...retirement should be a higher priority than helping finance a student through college."

His rationale - you as a parent only have a certain number of years left to build up your retirement nest whereas your child has many more.

Carlson said if you and your child have college loans keep track of them carefully and start to pay them off as soon as you can. Don't just defer it all because interest is still being accrued and being added to the principal amount.

Carlson Financial is a sponsor of Financial Focus.

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