How advisers are helping clients rethink their kids’ college experience

Attending a university is about more than taking classes, earning a degree and launching a career. It’s also about campus life serving as a gateway to adulthood.

This rite of passage is being upended by the coronavirus pandemic. Almost all schools shut down last spring when COVID-19 spread throughout the country.

Some schools didn’t let students return this fall, opting to offer only online courses. Many allowed students back but operated in a hybrid format that still depended heavily on teaching over the internet. A few tried to reset to life as normal.

While the way education is delivered is changing during the pandemic, the cost remains high — tens of thousands of dollars per semester, even at some state schools.

“You hear the regret, anger, frustration,” Kerrie Debbs, a partner at Main Street Financial Solutions, said of clients when it comes to discussing college planning. “They feel they’re not getting their money’s worth. They’re not enjoying this remote learning environment.”

Parents and students are rethinking the enormous investment in higher education if it occurs online without all the extracurricular activity that can make college a seminal moment in a young person’s life.

“They’re valuing the college experience more than they value the education,” said Ross Riskin, an associate professor of taxation at the American College of Financial Services. “That’s why they’re pushing back on the price.”

The pandemic has planted the seeds for a reevaluation of the four-year college as the best way to gain the skills needed to launch a career. 

Options like starting at a community college, taking a gap year or having students earn college credit during high school are being weighed seriously.

“This is going to make people consider alternatives that they may not have historically thought of,” said Daniel Crosby, chief behavioral officer at Orion Advisor Solutions. 

“It breaks the spell of one right path,” Crosby said. “People are going to think a lot more expansively than that.”

Post-high school education remains essential for long-term career prospects. But how to attain it in the midst of the uncertainty caused by the pandemic is making financial advisers more important in the college planning process.

“There’s a question out there as to whether the traditional college or university experience is going to remain the dominant outlet for educating our young people,” said Martin Schamis, head of wealth planning at Janney Montgomery Scott. “We’re seeing a widening in terms of what parents and grandparents are [considering] as viable alternatives for their children or grandchildren.”

Clients are turning to advisers not only to figure out how best to finance college but also to help determine what kind of school their children should attend, which one might be the best fit and even what they should study.

COMMUNITY COLLEGE

While the pandemic is roiling four-year campuses, there’s a benefit to starting off at a local community college for some classes. Nicole Corning, managing partner at Buckman & Corning Financial Strategies Group, is seeing that shift in thinking begin to take hold among her clients.

“Let’s look at options where our children might be able to stay home until there’s a meaningful uptake with a vaccine and life returns to some semblance of normal,” Corning said. “These aren’t courses that are going to change the trajectory of your child’s life.”

Beginning coursework at a community college is also a path Kerrie Debbs recommends that her clients consider — especially if their child is not sure what he or she wants to study or where. They can get an introduction to college in a lower-pressure and less costly way.

“By the time you’re spending the big bucks on a university, you’re doing it with more of a purpose,” Debbs said.

GOING PUBLIC

Advisers also are encouraging clients and their children to look closer to home if they plan to embark on the four-year route to a degree. 

State schools can be a cost-effective way to attain a degree that’s looking more attractive at a time when the pandemic is causing economic disruptions that can affect education financing.

The investment in a state school can bring a greater return than much higher spending on a private school, Corning said.

“There’s no need to pay an exorbitant amount of money,” she said. “It doesn’t give your child any more advantage than going to a state school.”

It’s not just people in the middle-income or mass-affluent category who are looking to reduce costs when the value of a traditional college path is being reexamined.  

“We’re seeing even high-net-worth families consider alternatives,” Schamis said. “What we’re seeing is an increase in the flexibility of these plans.”

Just as important as deciding where to start — or complete — the higher education journey is figuring out what the end result will be. Clients are turning to advisers to help their children research different kinds of degrees.

This an opportunity for advisers to demonstrate their value by helping prospective college students understand the potential job prospects in a profession, the typical salary and the best schools for that field, Riskin said. An adviser also could introduce a client’s child to people in the adviser’s network who have jobs in the field.

Helping clients and their children get a handle on what a college degree can buy in terms of a career gives them context for the costs of earning the degree.

“That kind of insight is important,” Riskin said. “We have to get granular because families are so much more focused on that ROI.”

The pandemic is turning attention to potentially lucrative degrees such as science, technology and business, and dampening enthusiasm for philosophy, history and other liberal arts majors. There’s more of a bottom-line orientation toward education, Debbs said.

“The pandemic has taken away a lot of the fun of the college experience,” she said. “Now, the focus is more on what kind of degree am I getting and what kind of job am I going to get when I graduate.”

529 PLANS THRIVE

One thing the pandemic hasn’t changed about college planning is the importance of saving money to pay for higher education — and starting early. One of the most popular vehicles for doing so — tax-advantaged 529 plans — are continuing to thrive.

Sales of 529 plans totaled $33.9 billion from the third quarter of 2019 through the third quarter of this year, according to ISS Market Intelligence. That compares to sales of $31.6 billion for the previous year.

Capital Group has seen similar results with its 529 product, CollegeAmerica. The fund’s assets, which total about $68 billion, are up roughly 1% from last year while sales have increased by about 3%, according to Russ Tipper, Capital Group senior vice president.

“Clients for the most part are staying the course,” Tipper said. “A 529 plan does give you that flexibility for qualified educational expenses.”

A 529 plan is basically built for a time of uncertainty like the pandemic because it can be used to finance an array of educational costs.

Parents have always been able to tap 529s to pay for college tuition and room and board. Recent legislation has added other types of expenses for which the vehicles can be used, such as funding K-12 education, making payments on student debt and financing vocational education.  

A 529 plan can come in handy during the pandemic because families can use it pay for books, supplies and equipment, such as buying a more sophisticated computer with a larger screen for online courses.

The more adept advisers are helping to apply a 529 plan to a range of post-high-school educational paths, the better they can guide clients, said Paul Curley, director of savings research at ISS Market Intelligence.

“It’s helpful for advisers to educate their clients” on the latitude they have with 529 plans, Curley said. “It’s a much broader, holistic approach. Financial advisers have an opportunity to add increasing value to clients by helping families plan to and through the current market environment.”

And that could be an adviser’s biggest added value as clients struggle with college planning.

“People are in a very raw emotional place,” Corning said. “In general, it’s a more emotional, hand-holding conversation I’m having with my clients.”

The anxiety may stay high as the pandemic could remain unpredictable through next fall, when another college year gets underway.

“There is a lot of uncertainty,” said Brett Danko, managing partner at Main Street Financial Solutions. “That is the key ingredient to all of this.”

Related Topics: College planning, COVID-19