In 1996, when Scott Moffitt formed Summit Financial Group Inc., he did so with the intent of focusing on the middle class.

As the years rolled by, Moffitt built a respected firm in Loveland, Ohio. Summit offered clients comprehensive financial planning, insurance and mortgages. Many of his clients were married couples in their 40s with growing families and, during client consultations, Moffitt heard a recurring theme.

“Scott,” the conversation would often go, “Suzy is going to college in two years and we really don’t have the money. What should we do?”

“I recognized two things,” says Moffitt. “One, I saw this issue as a trend. Two, I had to admit, I really didn’t have answers for them and realized they didn’t want to hear a lecture from me telling them they should have started saving earlier.”

Instead of staying in the dark on the topic, Moffitt studied the existing literature on college planning and was shocked to find very few advisors were doing extensive work in that field. “I found that college planning for parents with college-bound high school students was not only a glaring omission in my practice, but it was a glaring omission in our industry,” Moffitt says. “In many cases, people were putting their retirement plans at risk because of the ever increasing cost of college and large financial hurdles families had to clear.”

Related: Many would put off retirement to help pay for college

The debt epidemic

More than 40 million Americans have at least one outstanding student loan, according to U.S. Department of Education data, and the amount of college debt owed by student borrowers has increased from $260 billion in 2004 to the astronomical figure of $1.3 trillion today. In fact, college debt has become such an epidemic that it ranks second only to home mortgages among consumer debt sectors in America today.

A 2016 study by Fidelity Investments found that 70 percent of college graduates left school with college-related debt. More than 50 percent of those polled were surprised at how much debt they accumulated during their time in school and 39 percent say they would have made different choices about their education had they realized they were going to accumulate so much debt.

“This year’s study finds that on average, parents are on track to reach just 29 percent of their college funding goal by the time their child heads to campus,” says Keith Bernhardt, vice president of college planning at Fidelity. “Parents still need help identifying how to maximize opportunities to save while meeting other family financial demands, and how to invest that savings in order to help their college dollars grow.”

The college debt problem goes beyond the limited scope of higher education. It has a profound impact on today’s economy, limiting the purchasing power of college graduates — meaning the acquisition of fewer big-ticket items like the latest technology, vacations, cars and homes. The ripple effect also hinders parents who are working to grow their nest egg.

But Moffitt believes he’s found a solution.

“These statistics are absolute proof that too many families are simply not doing enough pre-college planning before making these costly choices,” he says. “Unfortunately for so many families it is only after the fact that they realize their plan, or lack thereof, may not have been the best. The good news is that it doesn’t have to be that way.”

The verdict is in: Too many American families are simply not doing enough pre-college financial planning. (Photo: iStock)

The verdict is in: Too many American families are simply not doing enough pre-college financial planning. (Photo: iStock)

Early days

One of Moffitt’s first steps was teaching courses in financial planning at universities in his community. After he realized the problem with last-stage college planning, he eventually reached out to guidance counselors at local high schools, offering to help parents understand their options in paying for higher education. Word got around, and pretty soon high schools throughout the region were contacting Moffitt to tutor student’s parents on college planning strategies.

See also: How to prepare your clients for life stages

“In a perfect world, you would love to tell everybody that when they start thinking about having kids they immediately start saving for their kids’ college,” says Moffitt. “The reality is the vast majority of people just don’t do that. Most people are getting to that freshman or sophomore year in high school looking up and going, ‘Oh my gosh, where did the last 15 years go? We thought we were going to be far more prepared and here we are already in high school thinking about college and we are not where we thought we were going to be financially.’”

Getting an early start and being consistent with saving can make a huge difference. Fidelity asked parents with kids in the 10th grade or above if, looking back, they could have saved more. Fifty percent of those parents said they could have set aside at least $50 monthly.

“For many families, finding an extra $50 or $100 per month may seem out of reach, but these extra dollars could potentially boost college savings by nearly $20,000 or even $40,000,” says Fidelity’s Bernhardt. “This potential could be a powerful motivator to consider strategies to carve out additional savings.”

Strategic visionScott Moffitt

In those early days, Moffitt, seen at right, and his team had to roll up their sleeves to develop a more holistic, integrated college planning strategy for families. “In evaluating different concepts, we started to develop a pattern of solutions,” he says. “The more we worked in this field, the more we realized the additional opportunities families could deploy or take advantage of, such as various financial instruments, the selection of school to attend and certain tax strategies.”

At that time 529 plans were the only financial tools considered as college instruments to help families pay for college. Moffitt and others leading the development of the late stage college planning charge began finding non-traditional designs with cash value life insurance to more effectively and predictably pay for college. In recent years, product redesign and developments such as Indexed Universal Life (IUL) have resulted in additional opportunities for families to be able to pay for college as well as fund retirement.

See also: 6 problems solved by life insurance

Funding the IUL then becomes a financial planning process, with Moffitt looking at a family’s comprehensive plan to find inefficiencies that could be better used in college planning. He might identify a 401(k) that’s been overfunded beyond the match from an employer. Other scenarios include: families overpaying on their house; a debt consolidation that frees up assets; or other efficiencies that you can find.

“Every family’s case is different,” says Moffitt. “But our role is to find solutions.”

When he meets with clients, often there’s a great deal of anxiety within the family as they struggle with the idea of how they’re going to find a balance. “Frankly, many times people come in resigned to what they believe to be their only choice, which is taking out loans in order to pay for college,” Moffitt says. He works to relieve them of that mindset by walking them through the process.

“First, we show them how they are not going to overspend for college. Second, we tell them we are not going to saddle their kids with a massive amount of debt. And third, we let them know this plan is not going to jeopardize their long-term financial goals.”

Financial preparations for a child's higher education should include a conversation about not overspending on college. (Photo: iStock)

Financial preparations for a child’s higher education should include conversations about how not to overspend on college. (Photo: iStock)

The holistic approach

For Moffitt, the college planning doesn’t work if it doesn’t fit into a family’s overall plan. Why rob Peter to pay Paul? It wouldn’t make sense to get the child through college if it wiped out a family’s nest egg.

“It all starts with clearly marking out a family’s priorities,” he says. After having the college talk with thousands of parents over the past two decades, Moffitt knows all too well that many of them will ransom their own future to see that Jimmy or Janey get into the best university. “The challenge comes from striking the right balance. In many cases the parents stop just short of jeopardizing their own retirement to fund their child’s college.”

One way to protect the nest egg is by looking at ways to drive down college costs. “In some cases it’s finding the proper college selection. In other cases it’s maximizing merit-based aid. In others, it might be through maximizing financial aid and taking advantage of tax issues. Whatever the case may be, we are going to drive that cost down to best protect the nest egg.”

Today, college planning takes up more than 50 percent of Moffitt’s business, but it has helped expand the other facets of his practice. After he solves the immediate problem of college planning, clients have a tendency to stay long-term and use Moffitt’s tax planning expertise. Later, as the clients age and their accumulation phase downshifts, they begin to look at the retirement options available to them as well.

But Moffitt never loses sight of where the majority of his new clients begin.

“We are in the business of helping families through the major life transition of sending their children to college,” he says. “For many, it will be the most expensive time of their lives and, if not handled properly, could cost them their retirement.” 

See also:

Indexed universal life as a college-funding strategy

17 unexpected expenses in retirement

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