How Much Should Parents Borrow for College?

Is No Sacrifice Too Great for Your Student’s Future?

Concept of investing in education
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When you ask most parents what they would be willing to sacrifice for their child’s future, the answer is usually “anything and everything.” They are willing to do whatever it takes to ensure that their child is successful and happy. But how much is too much? Where is the line drawn between being a supportive parent and teaching a child to be independent?

This question is uppermost in the minds of many parents now as they complete the FAFSA and await the receipt of financial aid award letters with their college-bound students.

In some cases they will be saddened to see that the amount of aid awarded is not sufficient to fully cover the costs of attending a coveted college. They then wrangle with the internal struggle of what to do next. Should they take on PLUS loans from the federal government, refinance the house, or borrow against a retirement account to come up with the extra money?

Often it is a balancing act between taking care of the entire family, supporting one student in college, and preparing for their own future. Here are some items to consider when thinking about how much to borrow when helping a student with college expenses:

  • How much has your child worked for this? Look back on your student’s high school years and think about how much effort went into achieving the college dream. Did he or she work for the grades, participate in extracurricular activities, hold a part-time job, or go the extra mile in applying to colleges? This kind of effort and enthusiasm certainly warrants some consideration in the borrowing decision.
  • Is your child set on this college and why? There are times when a student can become enamored of a particular college, and can become emotional when told it is out of financial reach. Before the money discussions begin, try to have a calm discussion with your child about why this college is so important. If the reasons are valid, it might be worth additional financial support.
  • Are there more affordable alternatives? Have you looked into all other options? There are many colleges with great programs that are very affordable. Is there a difference between living at home and staying on campus, or remaining in your state as opposed to going to college in another state? Can your child earn credits through AP exams, community college, or taking core classes at a local college during the summer? These can all help to reduce the cost burden at the primary college.
  • What is your student’s financial role? If you simply cannot afford the full cost of a college education, have a rational discussion with your child about their participation in the financial process. State in no uncertain terms whether your student will be expected to earn money during the academic year and breaks. How much of the student loans do you expect your child to repay after graduation? Look closely at anticipated income for your child’s major and college to determine if there is a reasonable expectation of being able to repay all of the money borrowed.
  • How does it affect the family? It can be easy to get caught up in the excitement of one child attending college, but it should not be at the expense of the entire family. Make sure you have enough in reserve to afford college for any other children, can pay for household emergencies, and will still be able to afford a comfortable retirement lifestyle for yourself.