Back-to-school season is around the corner, and it’s not just for kids anymore. A growing number of older Americans are enrolling in college today, and their numbers are expected to increase further through the end of the decade. Financial advisors say it’s more important than ever for these students to head back to school with a financial plan as well as an academic one, or risk being saddled with debt into their middle age or even seniority.
Government data shows that in 2010, 43% of college students were over the age of 25, a 16% increase since 2007. This age group is projected up make up 28% of all full time college students by 2020.
“Older college students need to have a strategy in place just like the parents of the younger student,” says Zaneilia Harris, financial advisor and president of Harris and Harris Wealth Management Group.
Adult students almost always have more financial commitments and obligations, says USAA certified financial planner Scott Halliwell. A mortgage, car payment, retirement savings, college funds for your own kids — these are just a few of the likely demands. If you’re going to school full time, the prospect of giving up a job or cutting back on work hours can add to financial hardship and subsequent indebtedness.
Here are a few financial tips that “mature” students should keep in mind.
Determine your “debt ceiling.” Speaking of debt, are you going to need to take out loans in order to earn your degree? If so, financial advisors say you need to do both soul searching and number crunching before you commit to a degree program.
If you’re 18, taking 10 or 20 years to pay off your student loans might not seem like that big of a deal. If you’re 38 or 48, things are a little different. Americans over the age of 60 owe $36 billion in student loans, averaging $18,250 per borrower. About 20% of student loan debt is held by borrowers age 50 and older; roughly 17% of delinquent student loan debt belongs to people in this age group.
If you can’t eliminate any debts incurred in the pursuit of a degree within five years after graduating, look for a cheaper school or a more lucrative degree. And if possible, avoid debt altogether.
Look for alternative sources of funding. Older students may be able to get their employer to partially or wholly subsidize their education. “Research your current employer’s options or approach the employer regarding college reimbursement,” Harris advises, although she cautions that there may a commitment to stay with the employer a specific amount of years after completing the degree. She also suggests looking lower-cost community colleges and exploring scholarship opportunities within and outside the school.
Compare your potential earnings to the likely costs. You need to be realistic about how much your earning potential will increase with your new degree, says Halliwell. If you can’t realistically expect a significant bump in your income upon graduation, you might want to reconsider the investment in your chosen field. If you plan to leave your job or stop your retirement contributions to conserve cash and you’re currently receiving a 401(k) match from your employer, you need to factor the loss of that benefit into your calculations.
“You need to figure out how much it’s going to cost and what you’re going to get out of it,” Halliwell says. “In the past I think a lot of people were like ‘I’ll get the degree and see what happens.’ Today, you need a more thoughtful approach,” he says.
Make sure you’ll have health insurance. Aside from the cost, the other absolute dealbreaker is health insurance. If you’re losing your health insurance because you’re leaving your job or cutting back on your hours in order to obtain a degree, you need to find another way to get coverage. “If you can’t go into this with health insurance, I wouldn’t do it,” Halliwell says.
If you’re under 26, you can go onto a parent’s policy; other older students may be able to take advantage of a spouse’s insurance plan 41 offered to students by the school. Depending on the circumstances, you might be able to obtain COBRA benefits through your former employer, but this is an expensive option.
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Plan to reenter the workforce quickly. Older students also need to prepare for a much shorter on ramp back into the workforce after receiving their degree, Halliwell says. While it might be considered acceptable for a 22 year-old college grad to move back home with mom and dad and spend six months sending out resumes, older graduate don’t have that luxury.
“There’s a mindset you have to have,” Halliwell says. “‘Can I get an internship? Can I make contacts with employers?'” Don’t plan to look for a job after graduation; plan to graduate with a job, he says.
“They need to understand the world’s going to have a higher set of expectations,” Halliwell says. “18, 19 year-olds get a bit of a mulligan because they’re young. You go back to school at 35, you better have a plan.”