What can financial advisors do to help clients save for their children’s’ college educations?

They can stop scaring them by asking they put away far more than they can afford and way in excess of what their youngsters will need, said Sheila Bair, who has the unique perspective of serving currently as a college president and formerly as a top bank regulator.

Since August, Bair, 62, has been the president of private, prestigious Washington College which recently held its 233rd commencement. Part of the prestige comes the fact its namesake, George Washington, sat on the institution’s board.

Bair chaired the Federal Deposit Insurance Corporation during the financial crisis.

In a interview Tuesday at the college’s Maryland Eastern Shore campus, Bair said she realizes the more financial advisors can get their clients to save, the more money they will make.

But she warned giving parents absurdly high estimates on what their children’s schooling will cost could scare them into complacency.

The Washington College president recalled once she talked to an alumnus who said her financial advisor told her she would have to save $1,800 a month for 18 years to pay for a four-year degree that would cost $750,000.

Bair called both numbers unrealistic. “Ask her to save $500 a month and she’ll do it,” said Bair.

The college president said the one change in college 529 plans that could help the most would be to eliminate the penalty to save.

Under the law, the amount of money a student can get in federal college aid is reduced if their parents have savings. “People should be rewarded for saving,” said Bair.

She called the college 529 plan a great program.

So great, she says, that she and her husband helped put their son through college with one and have another for their daughter who is a few years away from higher academia.

When asked about online degrees as a way of lowering the cost of a college education, Bair said she is not a fan of them. “For undergraduates, the best education is one delivered in person,” said the private college head, adding that the interaction between a student with professors and classmates and the greater opportunity to develop analytical skills and creativity in classrooms is invaluable. “A computer can’t give that to you,” said Bair.

Promoting her own institution, Bair lauded Washington for having undergraduates taught by professors who have PhDs and an average class size of 12.

When she talks to students, Bair said, she finds they don’t understand debt, compounding interest and the sizeable payments they will have to make after graduation to pay for their degrees.

As student debt mounts up to over $1.2 trillion (second only to home loans), the former bank regulator said it is taking a toll on families and the economy.

She said there is a need for more alternatives to debt in financing college educations, including raising more scholarships and holding the line on tuition.

Excessive consumer debt creates hardships on households, it wears on peoples’ mental states and it creates stress for families, said former FDIC leader.

At the same time, she warned easy access to student loans creates asset bubbles. “We saw that with housing prices and we see that with college costs now,” said Bair.