Stop 401K contributions vs. HELOC

[Gary905]

Hi All,

This is my first post. I'm very private about my finances, so I can't say too much, but would love some friendly advice/opinions.

I'm paying for most of my Daughter's college education. We're not getting any help at all from the school or anyone else. She's taking whatever Fed loans are offered, which comes to about 6K per year or so, which she is working to pay off while she is going to school. I'm footing the rest of it, which comes out to about 24k per year out of my pocket. No, I wasn't able to save 100k before she got to college. I'm earning and paying as she goes. Since she started school in August of 2012, I've been "going backwards" each month by about $700 per month, which I'm covering by ... here goes ... using a Home Equity Line of Credit (HELOC). Right now my house is worth about 230k and I owe about 125k on it between the first mortgage and HELOC. One way I can pretty much totally offset the $700 monthly underrun is to stop my 401K contributions (and lose the 50% company match on the 6% of my salary I contribute, plus lose the gains (or losses...) those contributions and matches will make).

So that's the basic situation. Keep incurring additional HELOC debt for the next 2.5 years while continuing to get the nice company match and (as of this moment) nice gains in the market, OR, end the HELOC dependency but sacrifice the company match and investment gains?

Whaddya think?

[disneysteve]

Welcome.

I think there is always another choice. I wouldn't do either of the things you suggested - the HELOC or stopping the 401k contributions. Funding your retirement is more important than her college education (to you at least). And racking up tons of debt isn't a great idea either.

Is there any way she can earn more than $6,000/year? If she can have a decent part-time job during school and work full time on breaks and summer vacation, she should be able to make more than that.

Have you considered having her transfer to a less costly school? 30K/year tells me that she is living on campus. How about switching to a school that she can commute to? What about her decreasing her course load to be able to work more? That might mean graduating in 5 or 6 years instead of 4 but if it results in a lot less debt, it could be worth it. Could she get any credits through online courses (just make sure those credits will transfer)?

Has she looked into scholarships? Sites like Fastweb.com list hundreds of scholarships. She won't qualify for all of them but there will be a lot that may apply to her. It's worth putting in some time and seeing if she can get any money that way.

Bottom line is there is no way I would go $700/month into debt or stop funding my retirement in order to put my kid through college.

[asdf]

I agree with Steve. I would also add that if your daughter wishes to truly devote herself to her current institution, she's going to have to take on the loans to go there herself. It's admirable that you want to help her out, but she is an adult and is capable of taking on her own responsibilities.

[Gary905]

Thanks for the suggestions guys. She's definitely staying at her current school due to the quality of the program and how well she fits there ... she's doing great. She came home from school with mono that led to hepatitis this past summer so earnings were impacted, but yes, increasing her earnings will be a focus,as will more effort toward getting some scholarships. Appreciate the advice.