Retirement & Financial Planning Report

Many parents and students are unrealistic about college debt. Often, they think that a child will get an undergraduate degree and be offered a well-paying job right away. The student might graduate, only to discover that a college education does not guarantee a job that will enable the graduate to pay off the debt.

Other misconceptions may arise. For example, some families believe that a college student can drop out when money is tight, work for a while to earn the necessary funds, and then go back to school. Such families don’t realize that loans may come due if the student leaves school.

There are traps for parents who borrow, too. One family had a daughter who could choose between going to an Ivy League university and an excellent local college. The Ivy League school would cost her about $200,000 for four years while the local school offered her a full scholarship. Her parents borrowed to send her to the Ivy League school, and the added debt has forced them to postpone retirement for seven years.

Borrowing to send a child to an elite college may be worthwhile but you should know all the tradeoffs that are involved.