When Rick Darvis hosts education planning seminars, he always asks participants how old they will be when their youngest child graduates from college.
“I see how many will be in their mid-50s, and some hands go up,” Darvis says. “I ask how many will be in their 60s, and I’m shocked by how many hands I see. Then I ask how many over 70, and there are still quite a few. I’ll be 83 when my youngest finishes college.”

Darvis, co-founder and director of the National Institute of Certified College Planners, confronts a growing problem: As Americans wait longer to start families, conflicts between saving for retirement and children’s education have increased.

“We have a retirement problem, not a college problem,” Darvis says. “Every kid in America can find ways to get to college; we don’t want clients saddled with educational debt going into retirement.”

According to the U.S. Centers for Disease Control, the number of women having their first child between the ages of 35 and 39 rose 24% between 2000 and 2012. For women age 40 to 44, the number increased 35%. The median age for mothers with a 17-year-old increased from 42 in 1980 to 45 in 2011.

At the same time, college costs have outpaced inflation. According to the College Board, the education lobbying organization, the average cost in 2014 dollars for tuition, room, board and fees at a public four-year school increased over 360%, from $2,505 in the 1971-72 school year to $9,139 in 2014-15. The costs for a four-year private non-profit school increased more than 290% in the same period.

“I have three families where parents over 60 have student debt from children; that makes planning tough,” says Joseph Orsolini, a certified college planning specialist and CFP at Glen Ellyn, Ill.-based College Aid Planners. “The alternate scenario, where kids have the debt, is preferable.”

These aren’t foreign problems: Orsolini, at 50 years old, has children in the first and second grades. Wakefield, Mass.-based CFP licensee Jeanne Gibson Sullivan gave birth to her sons at 36 and 38, and this fall the younger son begins his third year at the U.S. Naval Academy. Michael Garcia, a Dallas-based financial advisor with Merrill Lynch, was 42 when his twin daughters were born.

Calling on their own experience, these planners are countering the common assumption that most financial aid is based on academic merit. “Around 90% of college aid is based on adjusted gross income, not on the child’s talents,” Darvis says. “People think only smart kids get scholarships, or that if they have money, they won’t get aid, but it’s all about income, cash planning and tax planning.”

Schools determine need-based aid by subtracting an estimated family contribution (EFC) from the cost of attendance. Two techniques are used to calculate the family contribution, a federal method, using the Free Application for Federal Student Aid (FAFSA), or an institutional method.

The federal method doesn’t include qualified retirement plans when calculating the estimated family contribution. The federal student aid application counts most other property and money, including bank accounts, investment accounts, income from tax-exempt interest, cash and non-retirement tax deferred savings plans.

The application permits parents to shield some money outside of qualified plans through an asset protection allowance—the older the parents, the bigger the break.

In the 2015-2016 school year, a couple with a 45-year-old elder parent could shield $28,200 from the estimated family contribution. If the elder parent is 55, the allowance rises to $36,300, and it rises to a maximum of $48,100 when the elder parent is 65 or over.

“Over the past couple of years, those allowances decreased significantly,” Orsolini says. “There’s no rationale that I’m aware of, and those numbers aren’t good for older parents.”

The allowance for single parents is less than half that for two-parent households, says Ross Riskin, an Orange, Conn.-based CPA and certified college planning specialist. “It’s unfair to single parents,” Riskin says. “The differences between the ages aren’t realistic—the difference in asset protection between a parent that is 45 and 55 is less than $10,000. That’s not much protection.”

For the estimated family contribution, parents must contribute 5.64% of the non-retirement assets exceeding the protection allowance. The institutional method employed by some private schools uses the College Board’s “CSS Profile” (short for College Scholarship Service), which may consider retirement savings and the value of the parents’ home, small businesses or farms, and assets controlled by non-custodial parents. Schools may calculate the estimated family contribution differently depending on the student, Darvis says.

“It ends up being a judgment call, depending on how much they want the student,” Darvis says. “If private schools really want a student and aid is the difference between [his or her] attending and not attending, they may choose not to assess retirement accounts or equity in the parents’ home.”

The CSS profile and the free application for federal student aid provide snapshots of family finances during a base year—the spring of students’ junior year and the fall of their senior year of high school. “It is important to have income as low and assets as high as possible that year,” Riskin says.

While the federal student aid application doesn’t consider money already in qualified retirement plans, parents are required to report voluntary contributions during a student’s base year as untaxed income. “Ideally, you want that year to be optimized,” Orsolini says. “Max out the 401(k) and any IRAs, pay down the house and consumer debt before that base year.”

Early planning helps prevent tough decisions—but if a choice must be made, advisors prioritize retirement over education. “Kids have options in college,” Orsolini says. “You can take out college loans. There are no retirement loans. There’s no application for retirement aid. Put retirement first.”

The most recommended tool for education savings is 529 plans, which offer tax-free growth. “I like 529s because they come with tax benefits that help higher income clients as well as middle-income clients,” Riskin says.

The estimated family contribution assesses plans in a student’s name or established by any person other than a parent at 20% instead of the 5.64% parental rate. When possible, assets should be transferred to a parent’s name before the base year.

But 529 plans may come with drawbacks for older parents. “You can’t use them for emergencies or retirement without penalties,” Darvis says. “Some colleges treat distributions as income or resources and reduce aid on a dollar-for-dollar basis. [And] 529s can come with high fees. Withdrawals and some contributions are taxed. Worst of all, they have performed poorly. The last time I checked, 529 plans on average were off 40% from mutual funds.”

Parents close to retirement may be better served using traditional IRAs or Roths for educational and retirement savings.“I love Roth IRAs for all ages,” Sullivan says. “They aren’t included in the [estimated family contribution], and if you’re older than 59 and a half, you can withdraw at any time without penalty. Older parents need that flexibility.”

IRAs have stricter contribution limits than 529 plans, and lack some of the associated tax credits. “With 529s, distributions should be coordinated with tax credits,” Riskin says. “People often over-withdraw and negate the tax-free growth. If they take advantage of the American Opportunity and Lifetime Learning tax credits, 529s become the better deal.”

Darvis advocates whole term life insurance as a savings vehicle. “I tell clients that there’s three things that can prevent their kids from going to college: death, disability and lack of savings,” Darvis says. “The only instrument that covers all of those things is life insurance.”

But 529s have yet to catch on. According to the U.S. Government Accountability Office, less than 3% of families use the plans. In a recent Edward Jones study, 66% of respondents failed to identify 529 plans as college savings tools.

Sullivan says it’s more than a savings issue. “Parents and teenagers are making emotional decisions; it can lead to people bankrupting their future,” Sullivan says. “Clients have to think realistically about what can be afforded, and then they need to talk to their children.”

Advisors may have to temper clients’ lofty expectations.

“I ask clients to give me the names of three colleges,” Garcia says. “The first one would be the high-level, shoot-for-the-stars college. The second might be a favorite school of the family or the child. The third would be a local state school. I analyze the cost expectations on their child’s matriculation date. We ask, based on the analysis, which would be realistic. Then we shoot for that school.”

Orsolini retells a recent story about an Alabama student accepted by all eight Ivy League schools. “His sister is in school, he got some need-based money for the Ivies,” Orsolini says. “But his family realized that when his sister graduates, it would change the [estimated family contribution] formula and school would cost a lot more. So he ended up attending the University of Alabama. The kid is going to be fine no matter where he goes.”

No matter what age clients are when they start families, time heals most wounds. “In reality, there’s only three rules to successfully saving for children’s college: start early, start early and don’t forget rules one and two,” Garcia says. “If clients start early enough, they won’t have to worry about tapping their retirement accounts.”