From 401(k) Loans to Side Hustles: Parents’ Extreme Debt-Proof Strategies

The Rising Cost of College and the Financial Struggles of Parents

As the cost of college in the United States continues to rise, many parents are taking extreme financial measures to ensure their children do not have to face the burden of student debt. These strategies include pausing retirement contributions, liquidating investments, and even taking on second jobs. This trend reflects a growing concern among families about the long-term impact of higher education expenses.

A survey conducted by Researchscape for Citizens Bank revealed that 61% of parents believe they need to go beyond traditional college financing options like 529 savings plans and federal loans. Out of the 1,000 respondents, 19% reported taking on a second job, 30% had borrowed against their 401(k) or withdrawn personal funds, and 26% paused investing altogether. Many also cut back on vacations or major purchases to manage rising costs.

Parents Are Delaying Retirement to Support Their Children’s Education

The financial strain is so significant that 62% of parents expect to delay their retirement to help cover their children’s college education costs. This decision highlights the tough choices families are making to prioritize their children’s future over their own financial security.

According to the Education Data Initiative, the average annual tuition at a public four-year college has increased by 40 times since 1963. Between 2010 and 2023, tuition at four-year public universities jumped over 36%. Another report estimates the average annual cost of college—including tuition, room and board, fees, and supplies—at about $38,000. These figures underscore the growing financial challenge families face when planning for higher education.

Emotional Decisions with Long-Term Consequences

Tony Durkan, vice president and head of 529 college savings at Fidelity, told Fortune that the pressure on families has increased due to rising tuition, inflation, and uncertainty around future costs. He noted that many families are still underprepared, often relying on rough estimates rather than clear savings goals.

Pam Krueger, an investment advisor and founder of Wealthramp, has seen a growing number of parents refinance homes, pull money from retirement accounts, or take on extra jobs to manage college expenses. “It’s coming from a place of love and a desire to protect their kids from the burden of student debt—but it’s also very risky,” she said. “These choices can set parents back in a way that’s really hard to recover from.”

Krueger also pointed out that many families make college decisions based on acceptance letters rather than financial considerations. A Citizens Bank survey showed that 20% of parents focused solely on getting their child into college without thinking about how to pay for it. Additionally, nearly half of the parents surveyed said they would rather talk to their child about drugs or alcohol than discuss college costs.

Strategies for Better Financial Preparation

Durkan emphasized the importance of starting early with a 529 plan, which allows for tax-advantaged savings for tuition. These accounts can also be reassigned to other family members if unused. “The earlier you begin saving, the more time your money has to grow through compounding,” he said. “Even small, regular contributions can add up significantly over time.”

Krueger recommends open conversations with children—particularly in high school—about what’s realistic. She encourages considering schools with strong merit aid programs and transparent pricing. “Sometimes the ‘big name’ school isn’t the best financial fit—and that’s okay,” she said.

Planning Strategically for Late Starters

For families who start planning later, Brian Safdari, CEO of College Planning Experts, suggests focusing on applying for aid, reallocating investments, and estimating true out-of-pocket costs. “Even private colleges with sticker prices over $95,000 per year may offer enough aid to cost less than a public school,” he said. However, he also warned that gaps will likely remain.

Safdari emphasized that once families understand the expected cost minus savings and free money, they can start figuring out how to fund the remaining amount over four years. “This approach helps minimize student debt and leaves enough money to retire,” he said.

Finding Help with Financial Planning

Navigating retirement and college planning can be overwhelming, but there are resources available to help. Financial advisors can provide guidance on creating a comprehensive plan that balances college expenses with long-term goals. Tools like SmartAsset’s free service match users with qualified financial advisors, allowing them to interview potential advisors before making a decision.

With the rising cost of college and the increasing pressure on families, it’s more important than ever to plan strategically and seek expert advice. By taking proactive steps, parents can better prepare for the financial challenges ahead while protecting their own futures.