Financing Training for Career Changes

With 14.6 million Americans unemployed and plenty of others dissatisfied with their jobs, many are heading back to school for retraining.

From the fall of 2007 to the fall of 2009, enrollment at community colleges jumped 16.9 percent, to 8 million, according to estimates by the American Association of Community Colleges. About 16 percent of community college students are age 40 or older.

Schools are putting extra effort into attracting older adults. A pilot program at 13 colleges, called the American Association of Community Colleges Plus 50 Initiative, has boosted enrollment of students over age 50 almost fourfold.

A big problem for these students is paying for further education.

"The reason it's so much harder for older people [is] because they have other responsibilities," says Sandy Baum, an independent policy analyst for the College Board and a professor emerita at Skidmore College.

Problem of Living Expenses

According to the American Association of Community Colleges, the average annual tuition and fees for a public community college is $2,544. The average cost of a public four-year college is $7,020.

Americans can be awarded scholarships or take out subsidized student loans at any age. Often, Baum says, "the issue is not so much how am I going to pay for college but how am I going to live while I'm in college."

Steven Droll, a 56-year-old former chief financial officer, is seeking his doctorate in business at Georgia State University at the same time that his two sons are in college.

Unemployed since the telecommunications company he worked for was acquired three years ago, Droll says of his decision to go back to school: "I needed to find a way to differentiate myself." He is job searching and pursuing the degree at the same time, hoping to attract corporate employers now, while also preparing himself for a second career in academia later.

Grants and Other Aid

The good news for prospective students is that, despite fiscal problems, the federal government and many state governments are still giving out plenty of help. In the 2008-09 school year, Federal Student Aid delivered about $113 billion in assistance, including $18.4 billion in Pell Grants. In 2009-10, the maximum annual Pell Grant rose from $4,731 to $5,350.

"The program is booming, and that's partly because of people coming back to school," says Justin Draeger, president of the National Association of Student Financial Aid Administrators. If someone recently lost his job, his past year's income might not reflect his current need. Draeger says student aid administrators have the authority to take that into account in aid awards.

Adult students might qualify for more financial aid if other family members—such as their children—are going to school at the same time, says Fred Amrein, principal at Amrein Financial, a financial advisory firm in Wynnewood, Pa.

It's rare, however, that financial aid will cover all the costs of education. That leaves older students with three options: working while in school, dipping into savings, and borrowing.

Experts differ on the ideal mix while acknowledging that the right way to pay for education can vary based on circumstances.

Don't Stay Unemployed

Bedda D'Angelo, president of Fiduciary Solutions in Durham, N.C., advises people to work while they study. It's advice she has followed through several career switches, from being a flight attendant to stints as a broker, a banker, and then a financial planner.

Too often, she says, "a degree is just procrastination with respect to getting a job." The solution to unemployment isn't staying unemployed while in school, she says. "It just prolongs the problem."

Baum, however, notes that part-time students are much less likely to finish their degree programs. "If you work full time, it might be much more difficult to get through school quickly—or get through school at all."

Savings are a great source for tuition, but many unemployed don't have savings or have it tied up in retirement accounts. Students can use individual retirement accounts, or IRAs, for certain educational costs without penalties, but financial advisers generally don't recommend it. That's money you will need eventually, says Warren Ward, a financial planner at Warren Ward Associates in Columbus, Ind. "I've never had a client retire with more money than they need."

Droll, the former financial executive seeking his doctorate, says he's leaving his retirement nest egg "totally untouched." Instead, about half his tuition will come from student loans, he says.

Loans That Dog You Forever

Unlike many private loans, federal student loans are forgiven (and not passed onto your estate) if you die, says Draeger. But otherwise, "federal loans are pretty inescapable"—meaning you could end up paying them back well into retirement.

Droll figures he could have at least 15 years of income to pay off the loans, including an academic teaching career that could last into his 70s.

One of the cheapest ways to borrow for education is to take out a second mortgage on a house, Ward says. Getting a second mortgage these days, however, can be difficult, especially for someone without a job.

In any case, borrowers need a "plan for paying it back," Ward says.

Because education can be so costly—and because they will have fewer working years to reap the returns on their investments—older students need to do serious research before signing up for classes, Amrein says.

"People have to look at what the payback of the education is," he says. Talk to people already in the profession, and look at state labor statistics to see their average salaries. "What's the income [that career] is going to generate? Often we don't do the research."

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