On The Money

Student Loan Debt Repayment is Becoming a Parent-Child Engagement

Student Loan RepaymentMore than six out of every 10 parents plan to help their child with the payment of their student loan debt. This may seem like a heart-warming statistic of parental duty and compassion, but financial experts say that such acts of charity would be at the literal expense of the giving parents.

Nurturing a Debtless Generation

Professionals from RapidLoans.co.nz mention Millennials as the key to this attitude shift in regarding the next generation’s college financing. They say that as education costs rise, willingness among new parents to subsidise their children’s student loan burden becomes an understandable, yet still damaging behaviour.

The results of a recent Fidelity survey serve as the basis of the financial experts’ concern. Researchers found that nearly half (46%) of millennial parents plan on paying for their child’s full college bill. This financial outlook involves new parents saving up instead of relying on their child to make do with future student loan setups.

Creating a Grateful Future

‘Parents view their children’s loan debt as a shared burden that they should help out with’, says Jodi Okun, founder of College Financial Aid Advisors. The downside to this sharing mentality is, of course, having to dip into the parents’ retirement fund.

‘Whatever the reasons they’re pledging to help out, one thing is clear: the financial implications that come with paying off kids’ student loans can make for a grim reality for parents because, by doing it, they are often underfunding their own retirement, or in some actually withdrawing retirement funds’, says Kimberly Foss, the president and founder of Empyrion Wealth Management.

Parental responsibility is indeed extending beyond children gaining their independence. At the cost of a smaller retirement fund, new parents are planning to save their children from the burden of looming student debt. Such a pursuit may be unconventional, but it is a noble plan from parents who know first-hand the pitfalls and restrictions of student loan repayment.