Avoid these big mistakes as a parent sending a kid to college

If your kid needs help paying for college, make sure you lend a hand the right way.

Want to help junior pay for college? Chances are good your kid could use a hand.

According to U.S. News & World Report data, tuition and fees at an in-state public college were about $10,116 for the 2019-2020 school year, while the average sticker price for a private college was $36,801. That’s a hefty bill for a college student to foot on their own — and it doesn’t include college expenses like housing, textbooks, or transportation to and from school.

As a result, many parents help their children shoulder their college costs. According to T. Rowe Price’s 2019 Parents, Kids & Money Survey, 45 percent of parents can cover some of their kid’s college costs, 25 percent can cover most costs, 19 percent won’t be able to pay for any college costs, and just 12 percent can pay for all college expenses.

If you’ve built a 529 savings plan that will cover a portion or all your kid’s college costs, your child can draw from those funds to pay their college bills. But if your kid still needs some financial help, you’ll want to take a few things into consideration first in order to avoid making the following mistakes.

1. Taking out a federal Parent PLUS loan instead of shopping around for a private student loan

A Parent Loan for Undergraduate Students (PLUS) is a federal loan that’s issued to the parents of a college student — meaning in taking out a Parent PLUS loan for your kid, you’re responsible for repaying the debt.

However, because Parent PLUS loans typically have higher interest rates and fees than private student loans, you may be better off co-signing a private loan with your kid. Consider this: Since 2006, the average interest rate for parents and graduate students taking out PLUS loans was 7.27 percent, compared with 6.17 percent for borrowers taking out 5-year variable-rate loans with a cosigner, according to Credible, an online marketplace that college-bound students and their parents can use to shop and compare student loan options.

Credible can help you find the right student loan for you with rates from 1.24 percent APR. See what different lenders are offering by comparing offers within just minutes.


According to a recent report by National Affairs, about 94 percent of all undergraduate students who borrow a private loan use a cosigner, which is their parent in most cases.

The caveat? You’ll need a good credit score (think 650 or higher) and sufficient income to qualify for a private student loan with a lower interest rate than a PLUS loan. See what kind of rates you qualify for today.

2. Overextending yourself and damaging your own financial future

Three in four parents of college-bound kids recently surveyed by Discover Student Loans said they were concerned, at least to some extent, about how the cost of their child’s college education may affect their own finances. Of that group, 35 percent of parents said they expect to give up vacation or entertainment spending, and 32 percent reported they may have to retire later to help to pay for their child’s college.

If you’re worried about overextending yourself financially, sit down with your child, and have a heart-to-heart to express your concerns. Also, consider meeting with a financial planner to determine how much student loan debt you can reasonably take on for your kid.


You may be eager to help your child pay for college, but you don’t want to jeopardize your own finances or sacrifice your future in the process. Striking a balance between helping them pay for college and saving for retirement is crucial.

3. Dipping into retirement funds

Speaking of your golden years, one of the biggest money mistakes you can make is to pull funds from your retirement accounts to help supplement your kid’s college costs. Financial planners say it’s a critical misstep because IRAs and 401(k) plans aren’t meant to be touched until you retire. If you borrow from either plan before age 59½, you’ll get hit with a 10 percent excise tax on the amount you withdraw, on top of the regular income tax you pay on withdrawals from an IRA or 401(k) plan.


What to do if you can’t help your kid pay for college

If you’re tapped out financially, there are still ways you can help your kid figure out how to pay for college. One tried-and-true approach: Encourage your child to apply for scholarships and grants. Roughly $46 billion in grants and scholarships is awarded by the U.S. Department of Education and the nation’s colleges and universities every year, Debt.org reports. That’s a lot of debt-free money up for grabs.


Another way you can lend a hand is to help your child evaluate all of their college options. Depending on your kid’s field of study, getting a two-year associate’s degree may make more sense — and can cost a lot less— than getting a four-year bachelor’s degree.