Forty-nine percent of parents polled for T. Rowe Price’s Family Financial Tradeoffs Survey agree with the statement “I’d be willing to delay my retirement to pay for my kids’ college education.”
In addition, 51% agree with the statement “I’d be willing to get a second or part-time job to pay for my kids’ college education,” and 53% of parents agree with the statement “I would rather dip into my retirement savings to pay for my kids’ college education than have them take on student loans.”
But, it’s not only their children’s education for which they are sacrificing retirement; 44% of the parents who used student loans to pay their own college costs said these repayments have impacted their ability to save for retirement. The survey finds most respondents (58%) have dipped into retirement savings to pay for something else. The top item was debt (20%), followed by day-to-day living expenses (13%), children’s education (12%) and covering expenses while unemployed (12%).
Twenty-seven percent indicated they have cashed out a retirement account from a previous job. The most common reason given was that it was needed for day-to-day expenses (37%), followed by “I was young and didn’t know any better” (29%). Twenty-one percent put it toward student loans and college expenses.
More than half (52%) of survey respondents are willing to take on $25,000 or more in debt to pay for their children’s college education, with 23% willing to take on more than $75,000 and 9% saying they would borrow “whatever it takes.” Forty-seven percent are willing to let their kids take on monthly student loan payments of $300 or more, and 32% are willing to let their kids take on $500 or more, with 77% saying they are at least somewhat likely to help their kids pay off student loans.
T. Rowe Price found 45% of parents who are saving for their children’s college indicated that they are using a regular savings account to do so. Thirty-one percent said that they are using a 529 college savings plan account, but nearly as many (30%) said they are using 401(k)s to save for their children’s college. When asked why they weren’t using a 529 account to save for college, 28% said they do not know what it is.
Even though contributions to a 529 account can be withdrawn anytime for any reason, 25% cited lack of access as a reason for not saving in a 529 account. Additionally, 15% mistakenly thought that saving in a 529 account meant that they wouldn’t be able to get financial aid, and they cited this as a reason they were not using one.
Sixty-eight percent of Millennials (respondents between ages 21 and 34) report being overwhelmed by financial pressures, compared with 58% of Gen Xers (respondents between ages 35 and 50). Of the Millennials who used loans to pay for college, 70% of them think they took out too much debt to pay for college, compared with 55% of Gen Xers.
Parents of Millennials were twice as likely to tap retirement savings to cover college. Of the Millennials whose parents helped pay for their college, 18% indicated that their parents had taken money from a retirement savings account to cover their college costs. However, only 9% of Gen Xers whose parents helped cover college costs said the same.
Millennials are more inclined to follow their parents’ example: 62% of this generation would rather dip into retirement savings to pay for college than have their kids take on student loans, compared with 44% of Gen Xers. Additionally, 34% of Millennials indicated they are using a 401(k) plan to save for college, compared with 25% of Gen Xers.
Among all survey respondents, 49% agree with the statement “I don’t think I will ever retire.” Sixty-four percent of Millennials believe they are more likely to win the lottery than receive any money from Social Security, compared with 49% of Gen Xers.
Nearly half (49%) of Millennials report losing sleep worrying about how they will pay for retirement, compared with 37% of Gen Xers. Nearly two-thirds (65%) of Millennials have taken money from retirement savings to pay for something else, versus 51% of Gen Xers.
T. Rowe Price’s Family Financial Tradeoffs Survey was fielded between December 18 and December 29, with a sample size of 2,000 parents of children ages 15 and younger, including a 50/50 quota for gender and age groups (i.e., Millennials and Gen Xers). Full results may be downloaded from here.