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Saving for College While in Debt


saving for college

A commenter on my last post brought up a topic that’s been on my mind lately: saving for college for our three kids. BAD community members then had a good discussion about how much to save for college and why, and how we should be upfront with our kids about what type of school they can afford.

Here’s what I’ve been wondering: How do you pay off debt, save for retirement, AND save for your children’s educations?


You see, our darling first baby is somehow 10 years old now. Ever since her birthday in January, we’ve been having our first real discussions about helping her (and her 8- and 5-year-old siblings) get to college. We just always thought we’d first pay off our debts, and then we’d have time to think about saving for college.

So… that means we’ve saved nothing for their educations. Zilch. Nada!

Our loans aren’t going anywhere for a while, and we only have eight years until our sweet girl is hopefully off to college or a trade school. The clock is ticking and we’d love to get started.

I’ve been researching 529 plans, college savings plans that have tax and financial aid benefits, and I had no idea each state offers its own plan. I wondered if we were too late to start a 529 for our 10-year-old, but I’ve been convinced to still go for it even if we can’t put a ton in.

Although I do think we’re too late to save for their entire educations, I’m honestly okay with that. I mostly paid my own way for my undergraduate degree. My parents were super supportive, helping stock my dorm room and paying for plane tickets traveling to and from home. But I was responsible for my tuition, books, and housing. I always worked summers and throughout most semesters. Plus, I used scholarships and Pell Grants when I could.

Fortunately, I went to an awesome, affordable university that helped make it possible for me to pay this way. It wasn’t until my senior year that I ran out of cash and took out a student loan. Sadly, no one had ever warned me against student loans. Luckily signing for it scared me so much that I paid it off within my first year of working.

(And then I married a guy who was off to a verrrrry expensive graduate program, and we somehow lost our minds and used student loans like they were fake money. Go figure.)

My point is that I want our kids to invest financially in their own education—I know that helped me get to class and not blow off my courses. I just don’t want them to be stressed out, run out of money like I did, and then turn to student loans that could burden them for decades. We’re considering offering to match what they earn. We can use those 529 plans, and then do our best to cash flow in those later years when our student loans are hopefully paid off.

But as I sort all this out, I always come back to the same question: How do we balance paying off our loans AND saving for retirement AND saving for college?

We have $288,000 of our student loans left to pay off, $100,000 in an IRA, and $0 saved for college. What would you do?


  • Reply Hope |

    This is an excellent question and one I can offer no help with.
    But I will say that, like you, my kids will have to contribute to their college/trade school plans. But I will support them in any way I can.
    We are already beginning to apply for scholarships for Princess, high school graduation 2021. And my twins have been blessed with higher than average Pell Grants due to their time in foster care, the Hope Scholarship which the state of Georgia provides as long as you maintain your grades and some other monies due to academic achievements.
    So getting out of school is possible…but it does take forethought and planning.

  • Reply Kay |

    Do you want your kids to have to pay for you when you are old and can no longer work? Because if you focus on them instead of your own debt and retirement that might be what happens to you. You are better off paying off your debt and saving for yourselves. Even if that means they have to take out loans. There’s nothing that says you can’t contribute to their loan payments after the fact once you are on a better financial footing.

  • Reply Margann34 |

    You are in a tough spot for sure. You will have to make some difficult decisions. Realistically, you would have a difficult time doing all three at once and making good progress. So you have to prioritize, you have to decide if these three goals are important enough to drastically cut other spending (food, clothes, tv, phones, vehicles). You have to consider which goal, if not met, would have the biggest negative impact. I think you first need to look at how to get the most bang for your buck for college education. Check out Anthony Oneal- he is a Dave Ramey “personality” who focuses on this very subject. Of course he is anti debt. So he focuses on other aspects of funding a college education: school choice, career choice, scholarships, working while in school, etc. He has just published a book called Debt Free Degree. I just started 529 plans for my daughters last year. My oldest will be 15 next month. Our plan is to fund it pretty heavily the next few years. My goal is to have $40,000 for her. I know that is not enough to pay for 4 years. In our state, that is probably half of the cost of a 4 year degree at a public university. But it will help. I am funded my own college education. Mostly with scholarships and $5,000 in loans. I am curious if you would encourage your children to get loans after your own experience? Don’t panic, you still have time to help them. But you probably will not be able to cover full tuition . But that is ok. It is your reality. Accept it and move forward!

    • Reply Sara |

      I think I would only tell my kids to take out a small student loan if they were disciplined enough to pay it off quickly. Hopefully they’re seeing what happens when you let loans get too high and let them stick around for too long.

      Thank you for sharing your experience! This is our reality. I’ve heard Anothony O’Neal on the Dave Ramsey Show, but I haven’t checked out his book yet… thanks for the recommendation.

  • Reply Walnut |

    I would focus on paying off your own debt and counsel your kids on making good decisions around their education. Any cash you save should be in your emergency fund or for your own retirement.

  • Reply Mary |

    I still have over $30K of grad school debt (although grad school was 25 years ago). Still, I prioritized saving for my kids’ college tuition while paying my loans (which used to be $120K). We did a prepaid tuition plan for both of them to go to in-state college for four years and it’s been a relief to only have to pay for room and board now that they’re both in college. However, our state had a program where they could have gone to community college and earned credits during high school, getting a diploma and 60 college credits at the same time for the last two years of high school – for free! This was a great deal and I wish they had taken advantage of it. My best advice is to prepare the kids for the reality of college costs – talk early and often about expectations, talk to them about the advantages of community, trade schools, and in-state colleges, and emphasize how you really limit your future freedom if you take on too much debt early in your adult life. Our kids knew they’d have to take loans out if they went out of state and neither one thought it was worth it, in part because we’d had so many conversations by then. Time is on your side right now so I’d start putting something away, but the main goal is to manage expectations and be honest with them about how much you can realistically contribute.

    • Reply Sara |

      This is great advice, Mary. I think managing expectations is very important. Thank you!

  • Reply Reece |

    There is a great podcast called “debt free degree” that you should listen to. So many great ideas and viewpoints and tips on things you can help your kids do so that they don’t have to take out many or any student loans. And I agree with some of the other posters, you need to prioritize repaying school debt and retirement. You can borrow (if you must) for college, you can’t borrow for retirement.

    • Reply Sara |

      Cool–I will check out the podcast. And that is a great point… you can’t take out a loan for retirement!

  • Reply Joe |

    “ You can borrow (if you must) for college, you can’t borrow for retirement.”
    I think Reece summed it all up right there!

    If you are in the rare state that offers an actual financial incentive to save in a 529 then do that to maximize whatever match/deduction is offered, otherwise just take care of your own financial ship. Tell your kids to study hard and make sure they are financially literate so they can use their student loan funds judiciously. This may sound harsh, but I am particularly concerned about this because several of your posts have illustrated some fundamental deficiencies in this area (e.g. the tax fiasco, not making sufficient payments on loans).
    At the end of the day, if you are financially stable, you will allow your kids to follow whatever career path they want and just have to worry about themselves. That should be the base case, and anything beyond is gravy!

  • Reply Angie |

    I’ve got no kids so it’s easy for me to take emotion out of it. But it’s likened to putting on your own life vest/oxygen mask before saving others. While it wold be great to help your kids with college, it will be difficult to manage that with your other goals. You really need to manage your own student loans first and start working on your own retirement. Or else you’ll be a burden on your kids later in life. Who was it who just posted not that long ago that their parents retirement plan was to be subsidized by their kids? Do you want that for your family?

    So I would stick with things that are in your control and low cost. Like keeping yourselves educated on career tracks and salaries, motivating kids to be good adults, exploring career options with them early well before college choice, and teaching them about finances and loans. Also, look to Hope for some inspiration in getting the kids prepped for college. I think she’s been fantastic in this area finding creative ways to get her kids through school for free or at least significantly cheaper. She’s also not pushing the typical must go to 4 year college, which in this day and age is kind of rare. AP classes, college classes, scholarships, etc. can get you part way there if you really push and work at it. Some trade schools can net more an engineering degree. Then who knows, maybe you’ll be able to save a lesser amount when they’re closer to college and be able to cover some living expenses or give them a gift of extra loan payments. No reason to get defeated over not being able to save full tuition for your kids. Anything helps.

    • Reply Sara |

      Anything does help. I think we do need to take the pressure off ourselves. Thanks, Angie!

  • Reply Klm |

    I’d start SOME sort of savings for each, even if you put in $25/ year. Main reason is because you can then encourage any family members (if they ask) to skip the 15th LEGO set Birthday present and put the $ in their college accounts instead. And you cut down on the excess if toys and stuff in your house.

  • Reply Marcy |

    A great resource with tons of wonderful advice is the Facebook group “Paying for College 101”. It has over 70,000 participants who actively discuss all aspects of funding a college education. Even with elementary-age kids, it’s not too early to join the FB group and avail yourself of the wonderful advice and resources. Good luck!

So, what do you think ?