Saturday, October 23, 2021

Going Back to School as a Mature Student

Older clients forced into early retirement may trade in briefcases for backpacks.

Life is what happens when you’re busy making other plans, John Lennon sang in his song “Beautiful Boy.” One of the common occurrences related to that experience is people who start college but don’t finish in their early twenties. Maybe they’ve raised a family and put their kids through college. Maybe they even still have some debt related to their children’s education.

In fact, there are an estimated 36 million Americans with some college, but no degree.  And it’s estimated that 10% (over 3 million) of those students are likely to return and complete their degrees.

Some older adults go back to school to finish what they’ve started, like this 80-year-old. Others return to launch a second career (the one they always wanted to do!). Some are trying to improve their skills to become more competitive or to compete for a promotion.

But a growing trend is because they were forced into early retirement and aren’t ready to retire — financially or emotionally.

The increase in “mature students” really took off after the financial crisis in 2008. People who lost their jobs due to the economic downturn saw it as an opportunity to retool and re-enter the workplace with new and improved skills and a diploma to prove it.

Now the pandemic has created yet another wave of unwanted “early retirement” scenarios for older workers.

Pandemic Effect

According to a recent article in Rethinking65, which cited a study from The New School’s Retirement Equity Lab, early retirement was far more likely for Americans without a college degree than for those who were more educated.

“At the height of unemployment in April 2020, workers 55 to 64 without a college degree were 67% more likely to experience unemployment than college-educated older workers,” noted the New School’s Retirement Equity Lab study. High relative rates of job loss during the pandemic and poor employment prospects likely forced many older workers without college degrees into early and involuntary retirement.

The National Center for Education Statistics (NCES) projects there will be 9,670,000 mature students enrolled in higher education by 2025. Said another way, 42% of the total student body attending post high school institutions are older and considered non-traditional.

While some of these “mature” students are still in their 20s, I’d say we have an above average chance of having a client or prospect that will need help figuring out how to pay for more education. For many of them, retirement is just over the horizon and/or perhaps their own kids are enrolled in or just finishing college.

 Making it Work

According to a Champlain College Online survey, 75% of adult learners are concerned about taking on student debt and 70% are stymied by the affordability of continuing their education.

Paying for college is complicated regardless of age.  And, as a major capital purchase (defined as anything you buy that you don’t pay for fully with monthly cash flow), it should be financed. Leveraging OPM (other people’s money) for improving both current and future lifestyle is one of the better strategies we can help our clients understand.

Are there grants, scholarships, and financial aid for older students? Absolutely.

Applying for federal grants and loans is a great place to start. The Free Application for Federal Student Aid (FAFSA) has no age limits, so if a client hasn’t taken an undergrad loan before, they will be eligible for a direct student loan regardless of age or earnings prospects And a federal student loan comes with added piece of mind: Loans are discharged if a student passes away prior to paying off the loan, as long as proper documentation is provided. Clients who come to us for advice, however, may exceed the income thresholds in the federal formulas and find they don’t qualify for a lot of help.

There are a surprising number of scholarship opportunities for students returning to college after being in the workforce (See resources at bottom of article).  And like many programs designed to assist those in need, there’s a lot of “free money” available to women and minorities.

Most of the scholarships are smaller and non-renewable — designed to provide a “hand up” vs. a “hand out.” With that said these scholarships could play a vital role in online education that is far more affordable and results in an equally competitive degree or certification.

Senior Discounts and Tuition Reimbursement

Some colleges also offer significant discounts for mature students. A couple of examples include the University of Maryland Golden ID program for eligible seniors and the University of Delaware Over-60 Tuition-Free Degree program

Another meaningful source of funds includes employer reimbursement for education. Many companies encourage their employees to continue to grow in terms of skills and expertise and will pay for a portion of that through a qualified.

Federal tax law allows employees to get up to $5,250 in tuition reimbursement tax free from their employer every year. This means that up to that $5,250 cap, the employee doesn’t have to declare the tuition reimbursement on their federal income taxes, as long as his/her company has a written policy, and the policy meets all federal tax guidelines.  If a company reimburses an employee for more than the $5,250 (like an executive MBA program) the benefit would be considered taxable compensation and be reflected accordingly on the W2.

Our Value Proposition

In our role as an advisor, guiding clients through the decision-making process of making this investment – time and money – can be valuable because we are not emotionally involved in the outcome.  As a detached but interested third party, it easier for us to look at “going back to school” from an economic perspective. But we fall short of really helping our clients make an informed decision if we don’t understand that there are several funding sources for returning students to consider:

  1. Their employer. If there isn’t a formal plan in place it might be a worthwhile discussion in lieu of a cost of living adjustment to base pay
  2. The financial aid system. Loans and grants are available through the colleges and the department of education, regardless of age
  3. Scholarships. Time spent identifying and applying for scholarships (aka Free Money) is time well spent as more and more money is being made available for returning students due to demographic trends
  4. Online education programs. The cost of these programs is generally much lower than traditional courses and results in the same degree or diploma

As always, our value proposition continues to be making the complex simple!

Beth V. Walker is a wealth advisor with Carson Wealth Management and founder of Center for College Solutions, which is based in Colorado Springs, Colo. She can be reached at bwalker@carsonwealth.com or 719-522-2278.

Scholarship Sources For Older Students

https://www.jumpstart-scholarship.net/
https://ewiconnect.com/page/scholarships
https://www.geteducated.com/free-college-scholarships/20-distance-learning-scholarships/
http://www.collegescholarships.org/scholarships/adult-students.htm
https://www.aauw.org/resources/member/governance-tools/students-campus-professionals/local-scholarships/
https://rankinfoundation.org/
https://www.bnl.gov/bwis/scholarships.php
https://www.soroptimist.org/our-work/live-your-dream-awards/index.html
https://www.osherfoundation.org/scholars_list.html
Source: Beth V. Walker, Center for College Solutions

Latest news

Failing: Advisors’ Approach to College Planning

A paradigm shift is needed for paying for college, says this advisor. (By Beth V. Walker)

Not Your Typical Dividend Fund

Guinness Atkinson's active dividend ETF deserves more attention than it’s getting.

The Biggest Mistake Investors Made Over the Last Decade

It was getting out of high-yield bonds, says this Northern Trust manager, who makes a case for them now.

Prepare Clients Now for Possible Trust, Estate and Gift Tax Changes  

AICPA’s director of tax policy and advocacy dissects the recent House tax proposal and shares concerns. (By Eileen Reichenberg Sherr)