Picture this: James and his wife Nola, both 62, have done well in life, earning a combined income that gives them an upper-class lifestyle. But, when their daughter Tia went to college, they told her they couldn’t afford to pay her way.
Most of their money is tied up in investments and employer-sponsored retirement plans, as well as real estate. Aside from a lack of highly liquid assets, they also felt it was important for Tia to learn about financial responsibility.
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But they’ve also left the door open for resentment. Now that Tia has graduated, she owes $90,000 in student debt — and she isn’t happy about it.
Now James and Nola are wondering if there’s anything they should do to help their daughter without putting their retirement savings at risk.
Should you pay for your child’s college education?
This is a complex issue and there isn’t a “right” answer. For some families, paying for their child’s college education could put them into debt, possibly jeopardizing their own retirement or other financial goals.
Of American workers and retirees saving for both future college expenses and retirement, 58% said they were delaying retirement to reach both goals, according to a survey by the Society of Actuaries. And 41% said they withdrew money from their retirement funds to pay for a family member’s tuition.
Almost all parents (95%) expect to cover more than half of the cost of a college education for their children, according to Northwestern Mutual’s 2024 Planning & Progress Study. Roughly one in three (36%) say they’ll pay the full cost, while about two in three (64%) expect their child to pay at least something.
While college loans exist, “there is no such thing as a retirement loan,” said Christian Mitchell, chief customer officer at Northwestern Mutual, in the study. “If parents can’t afford life in retirement, that unexpected financial burden may fall on their kids’ shoulders. That’s why it’s so important to consider every money move as part of a larger financial plan.”
Most advisors don’t recommend dipping into your retirement savings, withdrawing from 401(k) savings or using home equity to help your child avoid college debt.
Mitchell noted that each family will need to determine “what feels right for them,” but the key is to “act intentionally” or the “window to save for college costs may close.”
This, perhaps, is the mistake that James and Nola made by not having honest conversations with their daughter long before she ever started applying to colleges. They left it too late, and now that window for Tia has closed.
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Finding middle ground
For wealthy families, the debate about paying for a college education is a tough one. On one hand, if they pay for everything, their child doesn’t have to worry about going into debt or juggling a part-time job with schoolwork.
On the other hand, they may want their child to have some “skin in the game” so they’re better prepared for the real world. However, with the cost of a college education skyrocketing, parents may want to find some middle ground with their child.
“The average federal student loan debt balance is $38,375, while the total average balance (including private loan debt) may be as high as $41,618,” according to the Education Data Initiative, which also points out that 4.86% of federal student loans were in default (as of Q4 2024).
In total, Americans owe close to $1.8 trillion in student loan debt, according to Q1 2025 Federal Reserve data.
If they could go back in time, James and Nola could have discussed the situation with Tia and explained why they couldn’t afford to pay for all of her college expenses — and perhaps worked with her to come up with some options.
For example, they could have paid a percentage of her costs if Tia paid the remainder. They could have matched her savings from a summer job, or, they could have helped Tia research alternatives such as merit-based scholarships and grants.
Other options to pay for college
Students from families who earn above a certain income threshold won’t qualify for federal student aid, but they may still want to file a free application for Federal Student Aid (FAFSA).
Many colleges require students to submit a FAFSA to be eligible for scholarships, grants, work-study funds and federal subsidized and unsubsidized loans — which Tia could have applied for.
Even better, they could have started early by setting up a 529 plan while Tia was still young.
It should be clear from the outset what you’re willing to contribute and what you expect your child to contribute. That’s the case even if you plan to pay for your child’s tuition in full. It should be clear if there are “strings” attached, such as whether the child is expected to go to a school close to home.
While James and Nola can’t go back in time, they can have open, honest conversations with Tia about her debt and how they might be able to help.
Maybe they gift her some money (keeping in mind the $19,000 annual gift tax exclusion for 2025). Or maybe they loan her some money, with or without interest, that she has to pay back at regular intervals.
They could also co-sign a private loan, which could help Tia get a more competitive interest rate — though it’s important to have a repayment plan in place. Ultimately, if Tia can’t repay the loan, it will fall to her parents as co-signers.
Having a plan could help ease the tension and start Tia off on the right foot as she begins a new life chapter.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
