Survey: Saving for Kids’ Student Loans Takes Priority over Saving for Retirement
Sep 7th, 2016 @ 8:33 PM by Amber Nelson
College tuition costs have risen so steeply over the past decade that many parents are now more worried about saving up for their children’s student loans than about their own retirement needs.
According to a recent T-Rowe Price survey, 67 percent of all households say saving for their kids’ college education is a higher financial priority than saving for their retirement. That flies in the face of traditional financial advice. And while only 12 percent of parents expect to entirely pay for the college expenses for their children, 26 percent plan to take on loans to help pay off those expenses on behalf of their children. Retirement will take a backseat to paying for kids’ student loans for 76 percent of American parents.
The survey found that 28 percent of parents are carrying some sort of student debt already, whether for themselves or their kids. On average those who still had loans from their own college education had a balance of roughly $27,000 while those who were paying back student loans for their children owed an average of $10,000. And “parents with student loan debt (from their own education) are significantly more likely to say they lose sleep worrying about college costs for their kids,” according to the survey.
Americans feel that a college education is essential for a good career and life, as evidenced by the 57 percent of parents in the survey who said they are willing to take on $25,000 or more in debt in order to pay for their kids’ education. And 15 percent of them were willing to take on student loan debts of $100,000 or more for their children. Taking on a second job would be a consideration for 68 percent of parents in order to help pay for those loans.
While it is noble that so many parents want to put their kids’ future ahead of their own, it is troubling because of how it is affecting the quality of life for seniors. Because of debt, many Americans are delaying retirement. The federal government projects that by 2024, almost 22 percent of those aged 65 or older will still be working or even looking for a job, double the share in that situation from 30 years ago. Today one in four Americans 60 or older are still working and haven’t saved anything for retirement. If parents are not saving as vigorously for their own retirement as for their children’s student loans, there may not be time to pay off those debts.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.