Baby Boomers Beware: Many Paralyzed by Burden of Student Debt; Parents Sacrifice Financial Stability in Down Economy to Support Children Pursuing Degrees

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Nearly two million first-year students will begin their college career this month, armed with a heady sense of independence and heavy educational loans. Meanwhile, their parents will have started years of gambling with their own financial security. In this release, CEO of Pathfinder Wealth Consulting offers insight and tips to reduce parent loan debt.

Faced with the certainty that higher education is a must in today’s fragile economy, numerous Baby Boomers are even sacrificing retirement “nest eggs” to assure their children’s future.

Nearly two million first-year students will begin their college career this month, armed with a heady sense of independence and heavy educational loans. Meanwhile, their parents will have started years of gambling with their own financial security.

The numbers are sobering. According to FinAid.org, parent loan debt has more than doubled over the last decade. In fact, the organization attributes 10% of all outstanding student loan debt to parents, many of whom are in so deep, they have little hope of surfacing in the near future. Faced with the certainty that higher education is a must in today’s fragile economy, numerous Baby Boomers are even sacrificing retirement “nest eggs” to assure their children’s future.

“Population increases and workplace competition have resulted in more demand for a college degree,” said Jason Wheeler, CEO of Pathfinder Wealth Consulting, an independent financial services company that specializes in the Baby Boomer market. “Regulation has made it easier to borrow and lower interest rates have made it cheaper to borrow, therefore putting more cash in the hands of those seeking a college degree.”

Of course, with the increased demand comes higher tuition and fees. The Congress Blog (http://thehill.com/blogs) reports that tuition has quadrupled at four-year universities in the past 30 years. Because their own families helped them, today’s parents often feel obligated to help their offspring shoulder the load, too.

“Baby Boomers graduated college – many being the first to earn a college degree in their family – in a time when the job secured after college matched the degree sought,” Wheeler explained. “Many of their parents helped pay for their education, but were subsequently compensated. These days, parents still feel a sense of duty to pay for their child’s education, but the environment is much different. Still, they are willing to fund the future of their children so they take on debt or borrow from their own retirement accounts – both huge financial burdens.”

Wheeler believes the hard reality of retirement timing provides a clear warning to parents. According to the Employee Benefit Research Institute’s retirement confidence survey, 40% of retirees left the workforce earlier than planned in 2010, leaving them less time to recover from any incurred debt.

“These parents, who are typically in their late 40’s or early 50’s, are justifying taking on college debt by thinking they will ‘just have to work longer’ or ‘just have to push back retirement’,” said Wheeler. “They’re misguided. Retirement is not always your choice. And in those cases, you’re stuck with debt and in a very difficult position to pay it off.”

Dire as the situation may be, Wheeler said both parents and students can improve matters by being proactive and realistic. To cut down on loan amounts, he suggests a collaborative approach:

  •     Students should enroll in general curriculum classes at less expensive two-year colleges before transferring to a university of choice.
  •     Families must conduct an exhaustive search of grant and scholarship opportunities.
  •     Parents should ensure the program the student is pursuing can accommodate the future debt burden
  •     The entire family should avoid credit cards, no exceptions.
  •     Most importantly, parents should confirm that their child is willing to contribute when paying for his/her education, even if it means balancing a job and school so that borrowing is minimal.

“A combination of the parents contributing from their income, the student contributing from income and the minimum amount of debt for both parties is sufficient to get a degree,” Wheeler said.

In short, Boomers need to get serious about their financial future and stop kicking the can down the road. “Sit down with pen and paper, complete your budget, make some future assumptions and get realistic about your financial future,” Wheeler said. If you are unsure of how to get started, have a tendency to procrastinate or simply value expert education and advice, then seek out a Certified Financial Planner Professional. You cannot simply wait and see what happens.

About Pathfinder Wealth Consulting
Pathfinder Wealth Consulting is a Wilmington, N.C.-based independent financial services firm that has assisted individuals throughout the United States to establish and maintain long-term financial goals since 1994. The firm is operated by Robert Penn, Jr., CRPS and Jason Wheeler, CFP, AIF, CLU, MBA through an affiliation with the Commonwealth Financial Network. For more information about Pathfinder Wealth Consulting, visit http://www.pathfinderwc.com.

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