Dear Dr. Don,
I need some advice on financing college expenses. I am 70 years old, working part time to help two grandchildren with college. One is an 18-year-old freshman at Colorado Mesa State and the other is a 20-year-old sophomore at Denver Metro. They were born and raised in Colorado, are average students and their scholarships are need-based. I helped their older sister out in much the same way. I was able to earn enough to help out one student at a time, but I am overwhelmed with two students attending college at the same time.
Due to my age, I don't know if I can keep working long enough to help them for three more years to finish their college degrees, and I don't have enough money to assist them both at once.
I get about $1,000 a month from wages for their expenses. I have an individual retirement account of $100,000 but have been advised to keep that invested. I might need the money for myself.
The Mesa student has private scholarships totaling $7,000 and each has both secured and unsecured government student loans of $5,500 a year. I thought they would get Pell Grants because of family income and having two students in college, but they didn't because the parents' income was too high.
The parents are divorced, bankrupt and have moved into other relationships at the expense of their children. Their children's college education doesn't matter to them! If I can't do it, they will pull them out of school.
We have it worked out for this year. I will work with them on scholarship applications for next year, but there are no guarantees that they will get that assistance. They are not eligible for many of the need-based scholarships and are ineligible for work study.
What options do we have?
They really need the Pell Grants, but is there any way to file for emancipation at age 18 and 20?
They are dependent on me, but I have my doubts if I can keep working and make enough money to see their education to completion. How wrong would it be to use my IRA for college expenses? This is becoming a heavy burden for a 70-year-old grandma to handle alone. Any advice would be appreciated.
-- Linda Labors
While I appreciate your dedication to your grandchildren, I'm not going to give you permission to raid your retirement account to pay for their college expenses. Right now you're spending $12,000 a year subsidizing their college costs. Assuming the two students both complete their degrees in four years, it sounds like you want to subsidize five more years of college - three for the freshman, and two for the sophomore.
That's a $60,000 hit to the retirement fund if you stop working next year. It is more if you consider taxes you have to pay on the distributions.
While scholarships and grants are better than loans for financing college costs, your grandchildren are eligible for unsubsidized federal student loans to fund some of their college costs as long as they file the Free Application for Federal Student Aid, or FAFSA. The amount they can take out annually is based on what year they are in college. Dependent students can take out $5,500 as freshmen, $6,500 as sophomores and $7,500 as juniors and seniors. An extra couple of thousand dollars per year isn't going to cover the gap, but it will help.
Financial aid packages can be appealed, but the fact that the parents are unwilling to contribute to the children's education isn't likely to help the appeal. An 18- and a 20-year-old aren't going to be considered independent of their parents for financial aid, even if that's the reality. The Department of Education's student aid website explains the standards for students to be considered an independent student, and from what you've told me, your grandchildren don't qualify.
I don't have an easy answer for you in solving the college-financing puzzle for your grandchildren. You could consider co-signing private student loans for them, with the understanding on their part that they would be responsible for the payments, but that path can be a real burden if they don't hold up their end of the bargain. That could be because they can't afford it or they choose not to make the payments. There are a lot of grandparents out there that would tell you not to do it, no matter how highly you think of your grandchildren.