College Selection Time – The Student Loan Factor

We are in the peak season for children of baby boomers to make college decisions. (We are out of that mode, with our youngest son finishing his junior year of college.) For many families, a college choice can have serious financial repercussions for both student and parent. If the student wants to attend an expensive private or out of state college, the parents may feel obligated to pay for it. This can be a fine gift to your child, if you can afford it. Not many can.

The question is whether parents nearing retirement will recognize what is affordable for them. Emotion must be left out of the equation and replaced by common sense and forward thinking. Even if you have money in savings to pay for a big ticket college education, will you be using retirement savings?  In my opinion, funding a basic retirement income plan must take priority over a child’s college tuition. Too many people tell Johnny or Susie to go off to an expensive school, saying or thinking “we’ll find a way to pay for it” without having a realistic plan.

Unfortunately for many, “finding a way to pay for it” means student loans. I don’t like student loans for all of the obvious reasons. They are particularly bad for baby boomer parents who promise to pay them back, a promise that must be fulfilled at the absolute worst time in their financial lives for making loan payments.

What should you do in this situation? Actually, I was asked that by the writer of an article about debt addiction for the University of Denver Magazine.  The focus should be on what the student (not the parent) will be able to repay after graduation. I recommend you read the entire article. Ask your college-bound child to read it also. Then guide him or her to a college selection that makes financial sense for all of you. The pain of financial discipline now will be far less than the pain of student loan regret and oppression later.

For another interesting boomer read, Steve at the bripblap blog has some excellent thoughts on how to let go of clutter. This is an emotional decision that is one of the great challenges of successful downsizing.

If you are making a last minute decision to fund a Roth IRA, Consumer Boomer has some suggestions on where to open an IRA account. I’ve changed my mind on doing a Roth conversion this year. Although tax rates are heading up, I think ours will still be lower in retirement than they are now. So I’ll continue to practice tax deferral.

Speaking again of taxes, the Money Crashers blog is giving away an iPad to a lucky winner. All you have to do is file your federal tax return on-line.

Finally, pay a visit to the Carnival of Personal Finance for some other interesting reading.

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My Related Posts:

1. Boomer and Retirement Weekly Reader – Home Repair Edition
2. Personal Finance Guidance for Your Children