Should I Pay $407,000 for My Daughter’s College? Insights Wanted!

Many parents, especially those who are well on track to retire comfortably and a bit earlier, have no problem with helping a child pay off their college tuition. And while we all want to give our children a head start, especially as they embark on the beginning of a lengthy career, by eliminating any hefty student loan debts before the interest accumulation becomes too overwhelming, there is a huge financial sacrifice to be made.

This individual’s daughter’s college tuition came out to more than $400k. What’s a parent to do?

For a specific individual I came across whose daughter has more than $400,000 in college bills (yes, you read that right!), we’re looking at an extreme case that could really set one back on more than just retirement. Even if the daughter’s educational pursuits (is it medical school, law school, or something else to rack up such a jarring debt load?) appear to have a decent return on investment (ROI), there are really no guarantees, especially in an age of AI-fuelled disruption.

Indeed, with all the headlines surrounding the big threat that AI poses to the future of white-collar work, it’s best to be cautious and ready to roll with the punches as they come along. And while paying a $400,000 bill (even for something worthy as an educational pursuit) would be fine with many on the r/fatFIRE subreddit, it’s not so easy a choice for most other parents, especially those who aren’t on track to retire early.

When student debts become as towering as a “lean” retirement

Indeed, $400,000 is essentially the FIRE number (the amount of money required to achieve a certain form of early retirement) needed for someone looking to achieve “lean” FIRE in a city with a low cost of living. For such folks who are set on lean FIRE, there’s a serious trade-off to be made. Should one give up retirement to allow one’s child to be free from debt as they graduate into the working world? There’s no easy answer here. And it’s going to differ for everyone. Apart from an affluent few, I’d be inclined to think that most wouldn’t be willing to forego such an absurd amount of money.

In any case, helping out the daughter with outstanding student debts doesn’t have to come at the cost of one’s own well-being. Indeed, there is a middle ground that exists whereby a parent can help chip away at mountains of student loan debt without having to go broke or retire their retirement dreams! If there’s a high six-figure sum, perhaps throwing an amount you’re able to over time can help out in a big way. While it won’t eliminate the debt, every dollar does make a difference as one looks to wither a part of the effect that comes with the compounding of debts.

In any case, I’d meet up with a financial advisor and go over potential scenarios that could allow our individual to help (if they so desire) without setting themselves back financially. It’s unclear how many years’ worth of retirement one could be set back by lending a helping hand. Either way, I think it’s best to have the difficult conversation and find a scenario that could allow one to assist without completely obliterating the retirement plan and draining one’s nest egg.

The bottom line

A $407,000 college bill is pretty horrifying for anyone. And while it’s tempting to resort to an extreme by going broke to help with the promise of reciprocal assistance at some point down the line, one should consider a wider range of options with a bit of help from a financial planning pro. For a child who hasn’t yet attended, perhaps switching schools is an obvious way to steer clear of a mountain of debt that could overwhelm for many years.

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