Is Using Retirement Money So My Daughter Can Graduate a Mistake?


Dear Penny,

I am a single parent. I am 67 years old and ready to retire. However, I am anxious about decisions I need to make.

My daughter is in her last year of college. I don’t have any more money to pay for it. So for her last year, should I take from retirement monies or get a loan?

She is a good kid with some special problems that she overcomes daily. I want her to have this degree and a chance in life. She worked very hard to overcome all of the physical and mental challenges in her life, BUT expenses are starting to affect my retirement. Any advice?

-J.

Dear J.,

Sometimes I get antsy when parents talk about spending retirement money on their child’s education. But we’re talking about one year of college, not four. I think you’d deeply regret not giving your daughter the financial support she needs to make it through this final year.

Contact the financial aid office for your daughter’s school if you haven’t already done so. The Free Application for Federal Student Aid, or FAFSAbases financial aid on income from two years earlier. For example, aid for the 2022-23 school year will be based on 2020 income. But some schools offer a process called professional judgment where administrators can adjust FAFSA information based on major life changes, like a parent’s retirement, on a case-by-case basis.

If financial aid can’t make up the shortfall, a Parent PLUS loan is a good solution. A Parent PLUS loan is a federal student loan that you, as the parent, are responsible for repaying.

A big advantage of Parent PLUS loans is that you can qualify for something called income-contingent repayment. Basically, your payment is capped at 20% of your disposable income. You’re planning to retire soon, so I’m assuming your income will drop soon as well. That means you could qualify for an extremely low payment once your daughter graduates .

With private student loans — whether you take them out in your name or…



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