Your child's college costs won't wreck your retirement—stay on track with this plan

Key Takeaways

Parents often overlook the full cost of college, especially non-tuition expenses, which can create financial strain on retirement savings. Prioritizing retirement is essential, and using tools like 529 plans, the FAFSA, and limited borrowing can help manage college costs without compromising long-term financial security. Regular check-ins on both retirement and college savings can ensure you stay on track for both goals.

How College Costs Can Squeeze Your Budget—and Your Retirement Plans

College is more expensive than many parents expect. According to a recent survey by private loan provider Sallie Mae, the average cost for an undergraduate student in the 2024–25 school year was $30,837. Some parents cover nearly half of this amount, but many underestimate the total cost of attendance, which includes housing, food, books, and transportation.

As these expenses rise, they compete directly with other financial priorities—especially retirement. Here are some key considerations as you work to fund both goals.

Why This Matters to You

Paying for college can quickly become one of a family’s largest expenses. Many parents underestimate the true cost of attendance or feel pressured to reduce their own savings to cover tuition. Understanding how to balance these competing priorities can help protect your financial future while supporting your child’s education.

Smart Steps To Protect Your Retirement While Paying for College

If you’re working to allocate money to both college and retirement, remember this: “You can borrow for college. You cannot borrow for retirement,” said Stu Bradley, wealth advisor at Hightower in St. Louis. “Avoid sacrificing retirement to pay tuition.” Keeping that in mind, it's worth exploring ways to fund college beyond just borrowing.

• Automate college savings early
  Opening and regularly funding a 529 college savings plan can significantly help generate funds for college. Named after a section of the Internal Revenue Code, 529 plans are tax-advantaged savings plans intended to help pay for education expenses. You can open such an account even before your child is born, which can give you a head start in amassing savings for education.

• Look at aid options
  Fill out the Free Application for Federal Student Aid (FAFSA) each year, as it determines your student’s eligibility for federal grants, work-study programs, lower-cost federal loans, and some merit aid. Consider options like low-interest federal loans for your student or Parent PLUS loans with payment plans for yourself. Also, know that parents can appeal a school’s financial aid package if circumstances have changed.

• Other cost-saving strategies
  Strategies such as starting at a community college or choosing an in-state public university can reduce how much families need to borrow or save.

• Treat retirement contributions as non-negotiable
  Continue contributing to your retirement plans and don’t use them as a way to pay for college. “If necessary, use a combination of cash flow, modest borrowing, [and] extended payment plans instead of retirement plans,” Bradley said. “Don't raid your retirement account.”

• Ask the experts
  If you’re considering withdrawals from your retirement accounts, taking on large Parent PLUS loans, or you’re unsure what you can reasonably afford, it’s time to seek guidance. Bradley recommends starting with a college’s financial aid office and its net price calculator, followed by speaking with a financial planner who can discuss the balance between retirement timing and college spending.

How To Stay on Track With Both College Costs and Retirement Goals

Pay attention to your progress toward retirement as well as to what you're saving for college. It doesn’t have to be complicated, Bradley said, but keeping track of both will help you see where your money should be going.

• Monitor retirement savings
  While you are paying for college, track your progress on your retirement goals, but keep it simple. Bradley suggests asking these questions:
• Are we still at least capturing the full employer match on retirement contributions?
• What’s our current savings rate for retirement as a percentage of income?
• Once a year, are we updating a basic projection that shows whether we’re roughly on track for our target retirement age and lifestyle?

“Even if contributions dip for a few years, continuing to monitor those three items keeps people engaged and makes it easier to ramp back up once college is behind them,” he said.

Resources

• Federal financial aid tools at studentaid.gov
• Net price calculators at college websites or The College Board
• Your state’s 529 plan website or hotline for details on tax benefits and withdrawal rules

Don’t Overfund Your 529

Once the balance in your college savings account, plus the projected growth, will cover the expected costs, stop contributing to the account. If your student receives a large scholarship or significant grant money, that’s a good time to curtail your contributions. “If it’s overfunded and you need to take money out for some reason, there is a 10% penalty on any earnings,” Bradley said. “So in addition to the tax, you’ll also pay a penalty for those types of non-qualified withdrawals” (for a non-educational expense). Note that the penalty applies only to earnings; contributions can always be withdrawn tax-free.

As you work on meeting these goals, remember that it’s not a long-term balancing act and it is possible to keep your plans on track while helping your student. “Sending a child to college is both joyful and stressful,” Bradley said. “Know that this is a temporary cash-flow squeeze in the context of a multidecade retirement plan.”