As tuition costs continue to rise, parents face an increasingly difficult dilemma regarding their children’s college education: should they pay for their children to attend post-secondary studies, and if so, how much is appropriate?

Before signing any checks or agreements, parents should consider their own futures.  Retirement may seem far away, but resist the urge to take funds out of your long-term savings.  Even if borrowing money seems risky, there are loans designed for students to attend college.  It is extremely unlikely that a bank will lend you money to retire because the likelihood of repayment is relatively low.  Additionally, money taken out of a retirement fund can be considered taxable income.  Since it’s viewed as additional income, your family’s eligibility for financial aid can be drastically affected the following year.

If you don’t want to directly give your child money, parents can consider helping students with loans.  One way of doing this is by cosigning a private loan.  Most parents have better established credit histories than their children do, and with a better credit score, they can secure a lower interest rate for a loan.  Before agreeing to cosign a private loan, parents must remember that they will likely be held responsible for repayment if their children are unable to do so.  Ask about deferment or if there are other protections for repayment in case of future financial hardship.

Pay For College

Pay For College

If parents have enough money but don’t want to give it away, they can lend money to their children.  One way to ensure repayment is to make your children sign an agreement, as they would with any other lender.  Parents can purchase contract templates or enlist the help of a loan service company to draw up a legally-binding agreement.  Being able to dictate the terms of your own loan has obvious benefits over agreeing to a traditional private loan; parents can choose their own repayment conditions, such as deciding whether or not to charge interest.

For parents who want to help their children pay for school, the best course of action is planning ahead.  A college savings plan, such as a 529 plan, ensures that money invested is actually spent on educational pursuits. is an online service that helps families put money away for school and track their savings over time.  Parents can create a profile for their child, which makes it easy for friends and relatives to contribute toward school savings.  (Aspiring students can create their own profiles too, if they don’t already have one.)  Profiles are usually linked to a 529 plan, but other college savings programs are available.

Above all, parents should make sure their children are personally invested in their studies.  Requiring students to hold a part-time job or work-study position not only teaches children financial responsibility, but money earned can be used to pay for living expenses.  Parents might choose to give students money only on a conditional basis, such as having a job or maintaining a certain GPA.  Whatever decision parents ultimately make, it is essential that both they and their children understand the responsibilities involved with paying for college.