Beth Greulich, financial adviser at Abacus Wealth Partners, has seen parents' joy at having their child accepted to Brown University or the University of Southern California quickly turn to anxiety.
"Our child is in ecstasy, but where is the money going to come from?" Ms. Greulich said, recounting conversations she's had with clients. "It terrified me when I saw these families and the position it puts them in."
The solutions can cause pain. The difficult choices for financing college range from taking equity out of a home to significantly tightening the family budget. The other area that can take a severe hit: plans for retirement. Visions of beach homes and other amenities quickly fade.
"Many of these dreams are gone because they would rather help their kids with their own financial stability," Ms. Greulich said.
Burgeoning student loan debt often brings to mind 20-somethings putting off marriage, buying a home or starting a family because they are struggling under the weight of loan obligations as they begin their careers. But when undergrads pile up debt, parents — and even grandparents — often jump in to help, putting their retirement security at risk.
Sometimes, it's not just the dreams of retirement that go by the wayside — retirement itself is put in jeopardy when college bills are due.
"I have two clients who have completely sacrificed their retirement for their kids' college education," said Jeffrey E. Edwards, president of Atlas Financial Planning.
The student debt crisis has become a structural weakness in the United States economy, and it's having a profound impact far beyond the young people at its core.
"Student debt is such a significant problem that it has reordered life for middle-class families," said Caitlin Zaloom, a cultural anthropologist at New York University and author of the forthcoming book "Indebted: How Families Make College Work at Any Cost" (Princeton University Press, 2019). "It is one of the central issues facing parents when they think about raising children and helping them succeed.
"They experience a powerful tension between their kids' futures and their own futures," Ms. Zaloom said. "That's a tension that didn't exist before the 1990s, because college education was much less expensive then."
The price of college has skyrocketed. Tuition at a public, four-year school averaged $10,230 annually in the current academic year, up from $3,360 in 1988-89, according to the College Board. Private school tuition this year averaged $35,830, compared to $17,010 — 30 years ago. And there are living expenses, books and other costs on top of that.
The magnitude of student loan debt is staggering, reaching $1.6 trillion at the end of 2018, according to the Federal Reserve. The Wharton School of Business at the University of Pennsylvania has tallied 44 million college graduates with student debt that averages about $37,000.
A national survey by College Ave Student Loans in April 2018 of 3,510 parents showed 36% would help their children pay back all or some of their loans. And debt levels don't include what parents had already pitched in from their own savings to cover costs.
A survey of 2,015 U.S. students, former students and parents released last week showed 31% of parents with children in school or recently graduated would have to work longer because they're helping pay for the kids' college. The study, commissioned by Discover Student Loans, also found that 31% of parents may not save as much for retirement as they had hoped to because of it.
Soaring college costs have become one of the biggest threats to financial well-being just as clients are reaching their peak wealth-accumulation years. As children graduate from college, parents are often within a decade or so of retirement. The time lost in savings and compounding is difficult if not impossible to make up.
"If I do 10 financial plans, in four to six of them there will be some aspect of student loan planning," said Sidney Divine, owner of Divine Wealth Strategies. Worries about how to finance higher education rank "pretty high up there. I would say a close second to retirement," he said.
Scott Snider, owner of Mellen Money Management, said student debt is "at the top of the list of pain points" for many of his clients.
"It's preventing them from accomplishing other things financially," Mr. Snider said. "They're going to have to wait until they're 69 or 70 to retire because they've taken on a Parent Plus loan," referring to federal loans parents take out to cover the difference between the cost of attendance and the amount of financial aid granted. The loans have a fixed interest rate of 7.6%.
Advisers step in
The extent to which financial advisers can help families cope with student debt depends in part on when they are brought into the picture.
If the kids are in college or entering soon, advisers urge clients to establish realistic budgets to increase cash flow.
Mr. Divine guided a client toward reducing annual dining-out costs from $20,000 to $8,000, and paying down credit card debt.
"I feel my job is [telling] them, 'Yes, you can do it; here's how you can do it,'" he said.
Ms. Greulich convinced one client with kids heading to expensive schools to cut back on vacation expenses. Going on more modest trips actually helped build family cohesion.
"It's about sharing experiences as a family rather than living a charade of a lifestyle they can't afford," she said.
Michael Troxell, financial planner at Modern Financial Planning, has advised clients helping their kids with student loans to work longer, delay taking Social Security, do a reverse mortgage and even move to a lower-cost area.
"But it's hard to tell somebody to move to Texas when their family's here" Mr. Troxell said, referring to his home base of Oakland, Calif. "There are only so many levers you can pull."
Karl Leonard Hicks, owner of Leonard Financial Group, said he has advised clients to take out a second mortgage and even loans from their 401(k) accounts to help their children pay for college. But there's no set formula.
"It comes down to looking at specific circumstances of the child and parent," he said.
Financial advisers can be more helpful if families start planning for their kids' education earlier. Of course, investing in tax-efficient 529 college savings plans is something parents can start when the child is born.
But thinking about where kids can afford to go to college is a process that should start in the eighth or ninth grade, Ms. Greulich said.
"It needs to involve setting proper expectations," she said. "Take off the rose-colored glasses and realize what's best for your child and your family as a whole. Kids don't have to have a private education. They can be just as successful anywhere. It's not about the status of the school."
Amelia Thomas, managing partner at Empire Capital Ventures, helps clients map out tuition and other costs to see what levels are reasonable. Most of her clients are African-American and have hopes of sending their children to historically black private colleges, such as Tuskegee University or Spelman College.
But the more cost-effective route could be to send the kids to state schools.
"We're looking at majors and also the viability of the student being able to secure a job upon graduation," Ms. Thomas said.
What's the ROI
Parents and students need to better calibrate the cost of a college and what the experience there will mean for their career and life trajectory, said Douglas A. Boneparth, president of Bone Fide Wealth.
"Parents and students fail to understand how to calculate a return on the investment," he said.
Mr. Boneparth said this estimate involves considering the total cost of the college education, the amount that would have to be repaid each month, the student's job and salary prospects after graduation, and the cost of living where the graduate's job is located.
Students also need to better understand just how big a commitment going to college is and why the investment makes performing well in one's studies so important. Dropping out is the equivalent of losing a lot of money.
"I have clients who want me to speak to their children about the value of a dollar," Mr. Hicks said.
But in the end, parents usually will do whatever will help their kids the most — even if it calls for a financial sacrifice.
"I've never met anyone who regrets funding education, but it can definitely leave you behind," Mr. Troxell said.
This is why sound advice to help parents manage the sacrifice is vital.
"There is no student loan program for retirement," said Adam Cmejla, founder of Integrated Planning & Wealth Management.