By Brock Jolly
The College Funding Coach
For most high school graduates, a college education has become an expectation, rather than an option. For many families, the exorbitant cost of higher education has made paying for this rite of passage more like a PhD in microeconomics.
The good news is that there is a solution.
As a financial advisor, I see many families with varying degrees of wealth. The majority of these families have their money in two places — their home equity and their qualified retirement plans, including IRAs and 401(k) plans.
When it comes time to pay for college, neither of these two resources is particularly liquid. In many cases, the family finances look great for retirement; but parents still have to get over the hurdle of paying for college education for their children at a cost of $20,000 to $40,000, and for exclusive private schools that amount can hit $60,000 per child, per year.
Little-Known Secrets of Paying for College
While it’s true that for most of us, our homes are one of our most valuable assets, we are generally given 30 years or more to pay it off. For college, though, you’ll have to pay those huge costs over a four-year period, or face a lifetime of student loan debt.
Educating people about the best approach to college savings, therefore, has been an area that I’ve focused on since 2002. That’s when I created a class for parents called, “Little-Known Secrets of Paying for College.”
It is specifically geared toward teaching parents the rules of the game when it comes to paying for higher education. It is taught through the adult education program in many counties, and the goal is to help parents understand the rules of qualifying for financial aid — and to create strategies for paying for college with minimal out-of-pocket expense.
Separating myth from reality
Many parents believe that, because of their net worth or income, there is little chance of qualifying for need-based aid. Other parents mistakenly presume that aid is plentiful, and they shouldn’t have to worry about paying for college.
The key is to have and execute a strategy.
1. First and foremost, parents need to know the formulas for determining aid to draw the proverbial “line in the sand.” Armed with this knowledge, parents can determine their likelihood of garnering need-based assistance.
2. If your chances of getting money for school are good, it’s important to develop strategies for qualifying for the maximum possible award. However, if the Expected Family Contribution (EFC) result is higher-than-anticipated, we help families develop strategies for maximizing their wealth and creating sustainable long-term strategies for paying for college.
3. Ultimately, the strategies vary depending upon the financial circumstances of the family. Keep in mind that it’s possible to legally shift assets into non-assessable accounts in order to qualify for a higher level of aid.
4. It’s also possible to implement strategies to help a family receive a tax deduction of up to $8,000 per child per year. When I am working with a business owner, one approach is to shift income from the parents’ higher tax bracket to the child’s lower bracket, ultimately giving them more liquidity to pay for college.
The bottom line
Because my goal is to help families make their college dreams significantly more affordable, in the upcoming issues of Be Inkandescent magazine, I’ll provide more detail about these strategies to help parents better understand the rules of the game. Talk to you next month.
About Brock Jolly
Columbus, Indiana native Brock Jolly has been a financial planner at Capitol Financial Partners since 2001. He holds a certification in Long-Term Care (CLTC) designation, and since 2006 has had a Certified Financial Planner (CFP®) designation from the American College in Bryn Mawr. Brock was a Qualifying Member of the prestigious Million Dollar Round Table that year.
Brock specializes in creating long-term relationships with clients and their families. He has also worked with numerous employers to provide both core and voluntary benefits packages to their employees, including 401(k) retirement plans and unique strategies for implementing health insurance benefits at manageable costs to employers.
Brock’s focus today is on adult education to help families save for college. His course, “Little Known Secrets of Paying for College,” teaches parents how to finance a college education without jeopardizing their own retirement savings.
Brock Jolly is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, Inc., member SIPC. Supervisory Office: 1410 Spring Hill Road, suite 425, McLean VA 22102.