With average student loan debt at an all-time high and families stretching their means farther than ever before to afford college bills, financial advisers are playing a bigger role in helping families make decisions about paying for college.
"My job is not to give them guidance on what college to attend, such as Community College of Allegheny County for two years rather than four years at the University of Pittsburgh," said Robert Fragasso, chairman and CEO of Fragasso Financial Advisors, Downtown.
"It's my job to say you can't afford to do four years at a top-level institution with the amount of money you have saved without incurring six figures of debt," he said. "My job is to show them the cost-benefit trade-off. Not to say they have to go either route, but to suggest that they explore them."
Financial planners say the choice of what college to attend, what major to pursue and how much to borrow, should not be made in a vacuum since it can have ripple effects on retirement planning, savings, taxes, gift planning and debt management.
"The [major expenses] used to be retirement and the house. But now education is right up there," said Eleanor Blayney, a Washington, D.C.-based certified financial planner. "Given that house prices have dropped and education has not, suddenly college costs have become a much bigger piece of the equation.
"There are so many people who are on the brink of retirement at the same time their kids are going off to college," Ms. Blayney said. "So, you see people taking money from 401(k)s and pulling equity from their house -- if they've got it. Families are pulling money out of other major assets to foot the college bill."
Student debt has become a fact of life for many Americans. Combined student loan debt recently hit a staggering $1 trillion, surpassing credit card debt to become the second biggest category of debt in the country, behind mortgages.
College costs have risen to a point where sending a child to college can be as expensive as buying a house, if not more so if two or more children are going to college.
"So where is the guidance by parents and high school counselors that allows a young person to make a whimsical college choice that is not based in reality?" Mr. Fragasso asked. "There is no way mathematically that a social worker can pay back $100,000 in debt on what they make and be able to live.
"As a financial adviser, I have the responsibility to counsel clients to give a good hard-nose, real-life look at what's being contemplated and if it doesn't make economic sense, we can see if there's another way to accomplish this. Maybe it's a different major."
The stakes are higher than ever when it comes to paying the college bill. The College Board reports that the average cost of attending a private college today stands at $35,492 a year and the average cost of attending a public in-state college is $17,131 a year.
Meanwhile, a report by the Project on Student Debt at the Institute for College Access & Success found that at the college undergraduate level, average debt for the class of 2010 ranged from $950 to $55,250 at the individual schools that reported student loan data.
The percentage of students who graduated from those individual colleges with educational loans ranged from 2 percent to 100 percent of the student body.
Not all financial advisers are willing to work with families to the extent of analyzing their college plans, especially if they are paid on commissions. Not all are even qualified. Families who need counseling on affording college are better off seeking an adviser who has earned the Certified Financial Planner designation because of the training they have.
But Mark Kantrowitz, a recognized authority on paying for college, is not convinced that most families need to hire a financial adviser for guidance on paying for college.
"The cost of an adviser will often exceed the value of the advice," said Mr. Kantrowitz, a Cranberry resident and publisher of two leading websites on planning and paying for college -- FinAid.org and Fastweb.com. "When you use a financial adviser it's more about hand holding than anything else.
"It's not rocket science," he said, though he added that if a family is already using a financial adviser to help manage their money, the adviser can help them make better decisions about planning for college. However, he wouldn't recommend families hire an adviser solely for college planning. "There aren't that many decisions a family has to make."
Mr. Kantrowitz says there are a few key things families need to do and should be able to do on their own: Save for college using a direct sold [as opposed to broker sold] 529 Plan with an age-based asset allocation; set it up for automatic monthly transfers; focus on plans with fees of less than 1 percent; and look for state plans with tax deductions offered by the state for contributions. Pennsylvania offers tax breaks for 529 contributions.
He cautions families, however, against saving money in a 529 plan in the child's name because the assets in the account will hurt a child's eligibility for federal financial aid, whereas if the assets are in the parent's name it will have less, if any, impact.
Some of Mr. Kantrowitz's rules of thumb for college costs are: Students should never accumulate more debt than their expected annual starting salary. Parents should not borrow more for their children's college than they could repay in 10 years or by retirement, whichever comes first. And only use free scholarship matching services.
He also has doubts about the popular cost-cutting method of spending two years at community college and two years at a four-year college.
He said studies have shown only 20 percent of students who start at community college intending to get a bachelor's degree get one in a six years compared to 66 percent of students who start at four-year institutions.
Mr. Fragasso said it is important to understand the financial implications of college planning.
"Just because you are an American doesn't mean you get to be anything you want regardless of the economic repercussions," he said. "You still have to be realistic."