Real Answers for Life’s Money Challenges
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 dont 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.
-J.
Dear J.,
Sometimes I get antsy when parents talk about spending retirement money on their childs education.
But were talking about one year of college, not four.
hit up the financial aid office for your daughters school if you havent already done so.
The Free software for Federal Student Aid, orFAFSA, bases financial aid on income from two years earlier.
For example, aid for the 2022-23 school year will be based on 2020 income.
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A big advantage of Parent PLUS loans is that you’re able to qualify for something calledincome-contingent repayment.
Basically, your payment is capped at 20% of your disposable income.
Youre planning to retire soon, so Im assuming your income will drop soon as well.
That means you could qualify for an extremely low payment once your daughter graduates.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Neither is an ideal option, but sometimes life forces us to choose between less-than-perfect options.
You want to limit your withdrawals as much as possible right now so that your money can recover.
But at least since youre 67, you wont pay an early withdrawal penalty.
Did you know?
I dont know if she currently has a job.
Stretching out the timeline further could pose a greater risk to your retirement.
Instead, Id ensure your daughter understands the financial situation.
Talk to her now about what her responsibility will be in helping you repay any loans.
Id also be clear with her: Youll pay for one more year of school.
But beyond that, you wont be able to help her financially.
Youre making a sacrifice to pay for her last year of school because you believe in her.
Once she graduates, paying off any debt youve incurred will be another challenge youll need to conquer together.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder.
Send your tricky money questions to[email protected].
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
