Boomers haunted by college debt

Here’s something baby boomers probably never envisioned: paying off college debt into their retirement.

But as the cost of a higher education has risen in recent years, so too has college-related debt, which stands at more than $1 trillion nationally. And, according to the Federal Reserve Bank of New York, the size of that debt is growing fastest among people age 50 and older.

Professional college planners say they think parental instinct is largely to blame: Too many moms and dads will do anything to assure their children are more successful than they were, even if it means borrowing big to pay college tuition.

Why do parents put so much stock in education? Again, it’s that idea of seeing your children better off than you are — and statistics show that schooling helps.

For instance, as of February, the unemployment rate for people without a college education is nearly double than those with a degree, according to a recent report from JP Morgan Asset Management. Average annual earnings are also higher for those with more education, the report showed, with high school graduates earning $32,630 on average compared to roughly $60,000 for those with a bachelor’s degree and $89,000 for those with an advanced degree.

Jim Femia, founder of Atlantic Investment Partners in Marblehead, recalled a client trying to figure out how she’d find some $80,000 total for her child’s first-choice school. She had cheaper options, he said, but — like many parents — didn’t want to disappoint.

“Their attitude in a lot of cases is, ‘We’ll figure it out.’ That’s very, very dangerous,” Femia said. “The last thing you want to do is jeopardize your own retirement.”

Yet, many are.

Since 2005, the number of people over 60 with student loan-related debt has risen from 700,000 to more than 2 million at the end of 2012, according to a report published last year by the New York Fed. Their average debt: roughly $19,500, up from nearly $12,200 just seven years earlier.

Meanwhile, in Massachusetts more than 200,000 people over age 50 had outstanding student loans balances at the end of 2012, with the average amount at $22,700, according to the New York Fed.

Another part of the problem: More people are going to college — nearly 20 million — meaning many more families were going into debt to pay for higher education.

Unless they have substantial savings, or earn enough to pay for college outright, Femia said, parents often rely on financial aid and loans to get their kids through college. Too few, he added, have put enough forethought and planning into how to handle that expense.

“It’s not unlike why we have rampant credit card debt,” Femia said. ”Some folks put more effort into trying to buy a pair of shoes, honestly, than they do trying to figure out how to put their kids through college.”

Others just start too late.

Lee McGowan, managing director at Monument Group Wealth Advisors LLC in Concord, recommends families start thinking about college early — when children are born or still relatively young.

“Don’t start planning their senior year of high school,” McGowan said. “It needs to start much younger.”

Starting a savings program, such as a 529 college plan, is key, McGowan said, as is discussing what you want out of a school, and being realistic about what you can pay for. Otherwise, boomers could find themselves saddled with debt and forced to delay retirement.

“For these folks in debt,” McGowan said, “that might be the only option.”

Stan Ezekiel said he had so little help figuring out how to pay for his kid’s college education 20-some years ago that he started a consulting firm called College Planning Group to help others avoid his angst.

“Part of what I do is help families make decisions by looking at what the colleges are offering, “ he said. “Sometimes we help them ask the colleges for more money.”

Ezekiel had some remarkably simple advice for families to keep the amount of college debt in check. “The way that a family can save money on a college education — and you’re going to love this — is to graduate in four years,” Ezekiel said.

That’s actually harder than it sounds, statistics show. While many students do graduate on time, a significant percent of student take five or even six years to get a four-year degree.

How can families overcome that hurdle? Again, Ezekiel kept it simple: “Make sure the child understands there’s a cost for college, and they may have to end up paying something.”