I’m a 40 y/o single father. I make $125,000 annually and I contribute 18% of my income to my 401k (6% match; fully invested at this point; around $230,000 total in retirement). My only child is in his freshman year of college which costs me about 1,800/month which is essentially all my disposable income +400/month that I give him to enjoy college life to the point that I’m losing a few hundred per month of my current savings (at 28,000 currently). My original plan was to eat the income loss for the next four years so he could graduate college without student loan debt. I have $28,000 in savings so perhaps that leaves me with 15,000 remaining when he graduates in 3.5 years (assuming unexpected expenses). My son is planning on getting a job this semester to help but I am wondering if I should consider having him take out student loans ($6,000/year) to help offset the fact that I’m losing money each month. Any advice is appreciated. Thank you.
Son in college but I’m losing money. Am I making the right decision?
byu/layered-popsicle inpersonalfinance
Posted by layered-popsicle
35 Comments
I know this might seem like a question from left field, but how do you feel your retirement is doing? Are you on track to where you want to be? The answer to that question will help dictate what you should do.
This is entirely a question of your values. You son starting his life off with student loans, which are now much more expensive, will set him back for years to come on becoming financially stable. On the other hand, it requires sacrifice from you to continue this.
Research student loans first- they have become far more expensive and predatory than they used to be. But only you can decide how much you’re willing to sacrifice for your son to get a good start in life.
Have him take out student loans for the cost of school. Then take the money you would be putting towards school into a HYSA while the student loans aren’t accumulating interest. Then just pay off the loans to the extent you can at the end without jeopardizing your own financial security.
Dude, your boy needs to be invested in his own future. Make him take out some loans or get a job. Otherwise he won’t appreciate it. One of mine just dropped out with a free ride….. You just never know. Also, having $125k annual income yet only having $28k in savings and $1800 a month after all your obligations is a little concerning.
What is his major? Does he understand the god like gift you are giving him or is he just blowing it and drinking and smoking that 600?
You don’t have enough money to be operating like this. He can borrow money to have fun with, and to pay for living expenses. You can not borrow money to fund retirement.
First, tell your son the situation, and ask your son to see what grants and scholarships he can apply for to help out. See what kind of income he can bring in with his job. And if a small amount of loans are still needed, then consider it.
As long as the debt is modest, it won’t be that hard for him to manage after school if he stays serious about paying it down quickly. Just make sure you don’t get shitty terms on of the loans.
I know as a dad you want to help as much as you can for your child, but I feel you should talk to him about your situations too.
Take care of yourself so he doesn’t have to.
Can he get Federal student loans? If so, that would be a good option.
You’re not “losing” money. You’re choosing to spend it on your son’s education.
If you choose to spend less, that’s valid. Time to sit down and have that conversation.
He can get a part time job or 20k in loans. 20k in loans is very manageable. He can absolutely fund his own fun money.
First remember that it is *personal* finances. As in what you personally value.
The next question is what you are planning to use your savings for? If you have it just to have it, doesn’t seem to be a problem to actually put it to good use.
Do you feel restricted in your own personal life by paying all these expenses?
Honestly the costs doesn’t seem to actually hurt you. Savings are there to be used.
But to make yourself feel better, and push your kid to be more responsible, perhaps make a deal with them next year that you are going to cut the “extra” $400 to $200 and encourage them to get a job to make up the rest.
I took out student loans because it was my choice where I went and what I studied. If your son believes in what he’s studying he should be fine with taking the loans also. Do not sacrifice your retirement for his education.
Don’t listen to people here. Do everything you can for your son. Family is everything, money comes and money goes. You’re setting him up the best you can, and you can be proud of that. My parents did everything they could for me growing up, sacrificing a lot for my well being. I now do everything I can for them in return
I’m on the other side of what you’re doing right now and for me it was completely worth it to pay for my kid’s education and have them graduate debt free. They’re now in their mid 20s, fully funding their retirement and HSA, have a full year’s income in an emergency savings account, and are saving for a house.
However, do look at the ROI. If you need to cut back, consider having your son go to a community college. Are you investing in a college degree he’ll actually be able to get a job in, or are you funding his “college experience?” Can he go to a school closer to you so he can live and eat at home?
Hi everyone. I’d like to take a moment and say thank you. It’s only been 15 minutes and I wasn’t expecting so many responses already. I promise you that I will read them all. Harsh truths are ok. I just want to do right by my son so that I can set him up to be as successful as possible.
I would say cut down on his allowance, IF he decides to take out loans, have him get a job and start paying on the loans while he’s in school. 100% of the payment goes to principle, zero interest. If he doesn’t have to get loans that would be the best option. There’s a ton of money out there (grants etc.)
Don’t destroy your situation man. At a minimum take away the spending money – he can find a part time job. Also think about having him take out half the student loans and you’re paying for half. Thats more than generous and you’re still stacking money away because you never know when that job can be gone
Not nearly enough of a safety net. Now’s the time to have him take lower int rates on a loan you can always help him later.
Is he getting a degree that will pay right away like engineering?
I plan to have my child take out student loans for school. They are usually good terms and low interest rates. You don’t have to pay until like 6 months after graduating. I can help her pay off the loan afterwards. This will allow me to invest what I currently have now instead of using it for college.
You’re underfunded in you’re retirement by almost 40%. You cannot afford to be cash flowing college.
My advice, have him get the federal loans, keep your savings. Then assist paying them down after he graduates. It’s what I am doing with my son. We are splitting the cost of what is left over from scholarships, and I will help as I can when he graduates. But managing my cash flow right now is important. So I pay half now, and I will help later to pay down the rest.
$400 a month is a lot for disposable income in college. Outside of food, books and emergencies (assuming rent is covered) – disposable income should be considered time that should be invested into studying more, not going out.
$125k sounds like student loan territory?
The best think you can do for your son is make sure you can take care of yourself
400 dollars a month is not needed for enjoyment
Assuming you’re talking about him having fun and not him having food don’t feel bad about cutting back on that.
Normally a bachelors degree adds like 2 million dollars or so to lifetime earnings, and that is a fantastic tradeoff *on average* and over a whole career. That doesn’t apply to every single person, some people drop out, some people get unlucky and it just doesn’t help them get the job they end up with or whatever. But without knowing specific info about their personality, grades, and so on, it’s a very lucrative investment on average. Even with average student debt.
If you pay for that and there is no agreement for him to pay you back, then obviously you lose more money than if you left him to his own devices, and obviously he gets an even better deal. But that would you be giving him an early inheritance basically, that’s a social thing, not a finances thing. It of course makes no sense purely financially speaking outside of family emotional connections.
My point though is that on average, college grads are fine and well off compared to not going to college, even without a lot of extra help. So he will be fine with less help.
My spouse and I took out student loans for our educations back in the ’80s–very little help from our parents, based on lack of resources, not willingness. We wanted our kids to have it easier, and we were fortunate enough to be able to fund their tuition, room and board, and happy to do so. But the kids still had jobs at school and paid for their own pizzas and lattes.
Paying for your son’s college is an investment in his future, not necessarily yours. I think this question goes beyond finances because you’re clearly willing to sacrifice some of your future for the sake of his. From one parent to another, I get it and I just want to give you props because it can be hard to sacrifice like that, and he may not realize the gift you’ve given him for years to come.
Whatever you decide is the best path forward, just make sure you also invest time in your relationship. Not being able to give your kid the moon is probably the toughest pill to swallow as a parent. But the fact that you’re willing to put your future on hold to give his a leg up shows your heart is in the right place and you’rea caring parent. I know this doesn’t answer the question you asked, but there’s an emotional component to your question and you shouldn’t ignore it.
$6k a year for 3 years isn’t onerous, I graduated with $20k in debt and the payments were manageable.
I also had a part-time job nearly every semester.
400 months spending is too much. My son was a resident advisor. It gave him free dorm and meal plan. Cut the bills in half for a year. Also, he did some part time stuff for the school too. Did the tours, and some other events hosting. So he made his extra cash a d I didnt have to pay it all.
1. Cut the fun money. My kids are home from their first semester. I think they spent $200 over the whole semester. No more giving the kid fun money.
2. Kid gets a job. He can contribute and the soft skills learned at a first job are more valuable than we usually give them credit for.
3. Kid takes out student loan. If you want to be very generous, you can pay the interest on the loan while the kid is in school so he graduated owing the exact amount he took out.
4. Kid applies to scholarhsips. Most schools have internal scholarhsip portals which have scholarhsips only available to students at that university. Your student should apply to all of the ones he qualifies for. And he should do so every year. The number of applicants to them is typically low, and the effort to complete them is minimal.
I know this doesn’t answer your question, but I want you to know how lucky and privileged your son is to have everything paid for like this.
I was told I had to go to college whether I wanted to or not. Also that I had to take student loans out, despite my academics and athletics scholarships. And that I wouldn’t be helped at all financially during those 4 years.
I remember when my dad gave me $100 for groceries one month. I felt like I was BALLIN OUT at Giant Eagle lol
Just know you’re doing A HELL OF A LOT for your son.
What is he in college for? I came out of college as an engineer with student loans (about $31k) and paid them off in 4 years (cost less than what the average car payment does these days) while saving for a downpayment on a house ($12k).
Student loans aren’t the worst thing in the world, and if they really ick you out and you really want 0 loans, you don’t have to pay all of the expenses over the next 3.5 years.
The strain is trying to squeeze all of that money out while racing his graduation date.
You also have the option of paying the loans off after he graduates college, allowing you to have that $6k/year now, and then you have quite a while to pay off the $25k left over.
Obviously, this is just my opinion, but he should probably be at least taking advantage of federal loans. That extra $5.5k – $7.5k would drastically reduce the pressure on you to have that money on hand right now. Even if you’re committed to helping him, you can avoid burning all that money all at once and help them out with the repayments overtime. Most of those loans are on a 10-year repayment schedule, and it’ll likely be a lot easier on you to toss him ~$200-300 a month when he has a job than trying to do it all now.
Debt isn’t always bad thing so long as he is able to serve it responsibly, and it sounds like eating a bit of interest expense makes both of your lives a lot easier. He can focus on doing well in school and getting jobs that give relevant experience rather than a paycheck, and you don’t have to stretch your expenses to the limit.