Paying for college

Question: My question is this: I have the funds to pay my son’s entire college tuition when he graduates next year. Is it best to pay it all at once when he graduates, pay the balance now while he’s still in school or follow his pay back plan after graduation? Paying the entire balance after graduation would deplete my savings.
Margot, Santa Monica, CA

Answer: The only option I don’t like is paying it all off at once. It’s far too risky to deplete your savings in the current economy (or in any economy for that matter). However, since there is no prepayment penalty on any student loans–federal and private–you could plan on paying somewhat more than the minimum required payment during the year following you son’s graduates. This way you get some time to see how he is doing in the job market and you see how the debt payment is affecting your finances. Considering how many young college graduates are struggling with student loan debt burdens it’s wonderful that you’re both able and willing to pay for his college education.