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A Solid Retirement Plan Needs to Include Education Planning

Excited college graduate celebrating with family

The biggest deterrent to an on time and comfortable retirement is overpaying for college.  Retirement planning and education planning are inextricably linked. After all, countless advisors have seen retirement plans upended by families deciding to allocate future funds to pay for the rising cost of college. 

While this might seem like an understandable (if not generous) decision in the heat of the moment, borrowing from retirement to pay for college can have ruinous consequences.

If your college-bound families aren’t taking education planning seriously, grab their attention by turning the conversation to retirement. Point to recent statistics that illustrate how many families are draining their college savings to pay for college. 

According to a new study by Sallie Mae, over 70 percent of families used their current income to pay for college last year, and 14 percent withdrew from their retirement funds (up 9 percent from 2019). Overall, 35 percent of all college-bound families tapped their savings and investment accounts to help cover education costs. 

This is a concerning trend that must be stopped in its tracks. To that end, advisors must encourage college-bound families to maintain equal focus on both retirement and college funding.  Helping clients understand the tradeoffs they can make to ensure a comfortable retirement while at the same time help their kids get a great education at a price their family can afford.  Our advice needs to go beyond simply saving for college to focus on showing our clients how to actually pay for college without robbing retirement or amassing a mountain of student loan debt.  This is the help they are asking for and desperately need our help with.   

Here are three ways to strike the balance:

Broaden Your Clients’ Collegiate Horizons 

There are thousands of accredited institutions in the United States. While they might not realize it, families have incredible optionality in the marketplace and should shop for schools from a position of strength.

Unfortunately, most families hold rather parochial views about the colleges their child could attend. Beyond their own alma maters and the usual “name brand” schools, they might know about a few “off-the-beaten-path” institutions. Otherwise, most families are largely undereducated in the collegiate space. 

Because they only see a fraction of the landscape, the average college-bound parent ends up making dangerous assumptions about the true cost of education. They don’t understand the many components that go into the financial aid process, and they incorrectly assume that a big-name university is automatically more expensive than an in-state school. 

Advisors must change the conversation by helping families understand the vast range of colleges at their disposal.  

Here’s the good news: you don’t need to spend hours researching the college market. Instead, with College Aid Pro™ technology, you can generate all of this information in a matter of minutes. 

 Imagine helping your clients shop for colleges the same way you shop for an airline ticket on Orbitz!  You’ll not only identify a client’s Expected Family Contribution (EFC), but you can even use their specific college criteria to create a list of excellent schools within their set price range, distance, major, funding gap and more.  Even for high income families that will not qualify for financial aid, CAP has every scholarship available at over 3,000 institutions and will show you schools that will be the most generous with scholarships regardless of need.  

Increased optionality. Detailed statistics. Enhanced return on education.

Stay Future Focused

If your clients are forced to tap their retirement savings to pay for college, chances are they’re letting their child attend the wrong school.   All to often the adage is “if you get in we will figure it out”.  NO!  Proactively help your clients create and stick to a college budget that does not include retirement savings in it long before they go shopping and get seduced by the amazing college marketing machine that will convince them it is worth every penny.   

No college or university is worth the cost of retirement. 

That may sound presumptuous, but if you’re armed with the right statistics, it’s not . That’s why College Aid Pro™ prioritizes future-focused information. While revealing the up-front costs of college (as well as the expected monthly loan payments), our software is also designed to show the dollar-specific salaries by major and by school for graduates on a one, five, and ten-year basis. 

These aren’t generalizations. They’re specific reports derived by actual alumni earnings in each field of study. Finally, families can actually deal in certainties. They’ll more easily find the best schools for their profile, determine what it will cost to attend, and understand what their student will earn years down the line. 

These are the tangible facts that help families move past the seductive marketing campaigns, the sports teams, and the hype that surround many American schools. On that point, it’s a little-known secret that colleges and universities have spent between $730 million and $1.2 billion per year on advertising over the last decade.

Facts don’t lie, but more importantly, they empower your clients to ask the all important question: “Are the outcomes of attending school A — a “name brand” school — significantly better than attending school B (a smaller institution at half the cost of school A)?”

Put another way, parents will finally realize their child can actually get a great education (and build the foundation for a future career) without having to borrow from their retirement savings. 

This renewed perspective can also negate a hugely influential (but seldom discussed) component of college: the parents’ fear of disappointing their child. Such altruism comes from a loving place, but these sacrifices can lead to major financial troubles years down the line. 

However, once the parents can see the full picture of their college investment, they’ll have more confidence in managing their child’s expectations while making an investment decision that doesn’t threaten their financial future. 

Pursue Scholarships & Work Study

Encourage your clients to pursue scholarships and work study opportunities early and often. There are two benefits to this:

  • It will involve the student in the financial reality of college
  • It will create cash flow beyond the parents’ retirement reserves

At College Aid Pro™, we baked private scholarships into the heart of our software. In fact, families can easily access our database of over 10,000 scholarships and grants, then select and apply to their favorites. 

It’s a great way to save money and fuel family engagement all at once.

Secondarily, we encourage you to recommend work-study opportunities to your college-bound families. It’s another effective way for students to create income without jeopardizing their financial aid eligibility. 

To learn more about the federal work study program, click here.

Moving Forward

While the road to retirement may pass through college, it shouldn’t be defined by it. 

By leveraging College Aid Pro™ tools, you will be better equipped to help your clients make sound investment decisions today, tomorrow, and for years to come. 
To test drive our tools, click here!

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