When College and Retirement Collide
For many families, two major financial milestones hit at the exact same time: funding higher education and preparing for retirement. It’s a tension that catches people off guard, not because they didn’t plan, but because they didn’t realize how connected those plans really are.
College isn’t just a bill. It’s a potential fork in the road for your long-term financial well-being.
1. Why Education Decisions Can Echo Into Retirement
When families tap into retirement funds to cover tuition or stop saving altogether during college years, they’re interrupting decades of compounding growth. Even skipping a company 401(k) match during those years can reduce lifetime wealth. And for students who take on large loans themselves, repayment timelines may overlap with the need to start saving for their own retirement.
2. The New Rules Are Here: What’s Changing
Recent legislation, known as the “One Big Beautiful Bill Act” or OBBBA introduces several meaningful updates:
- Expanded Pell Grant access for low- to middle-income families
- Higher loan limits for both undergrad and grad students, with new lifetime borrowing caps
- 529 plan flexibility, now including trades, certifications, and more eligible expenses
- FAFSA strategy shift, where grandparent-owned 529s may no longer reduce aid eligibility
These changes can be helpful, but only if you know how to apply them.
3. The 529 Ownership Trick
One of the biggest missed opportunities we see? Who owns the 529 plan.
In many cases, having a grandparent own the plan may reduce the impact on FAFSA calculations, possibly increasing eligibility for need-based aid. It’s a subtle strategy, but it could make thousands of dollars of difference.
Just keep in mind, every family’s financial picture is different, so this should be reviewed with a trusted advisor.
4. How to Think Strategically
Here’s what we encourage our clients to ask:
- What is our total budget for education, and how much can we truly afford without jeopardizing retirement?
- Are there ways to leverage tax credits, state programs, or financial aid strategies before taking on debt?
- If we borrow, are we clear on the repayment terms and who’s responsible?
- Are there alternatives (trade programs, dual enrollment, certification tracks) that could reduce cost without limiting outcomes?
5. Plan Early. Review Often.
The earlier you start planning for education, the more flexible your retirement strategy can remain. That doesn’t mean you need all the answers today, but it does mean the questions should be asked sooner rather than later.
If you’re navigating this balancing act or wondering how education policy changes could affect your broader plan, we’re here to help you run the numbers and make informed decisions.
Tune in to our podcast for even more insights!
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