Bogleheads® Conference 2023 - Ann Garcia on Paying for College
00:00:00.000 | [ Applause ]
00:00:05.300 | >> Our next session here at Boglehead's conference is going to be by Anne Garcia.
00:00:12.060 | She's going to be talking to us a little bit about saving for college.
00:00:15.940 | She spent a dozen years as a financial advisor, but that is not her only professional interest.
00:00:22.220 | She also has an interest in wine, as an importer and distributor of wine.
00:00:28.360 | She holds a CFP designation.
00:00:30.280 | She graduated from Berkeley and is the author of How to Pay for College.
00:00:34.480 | She's a member of Phi Beta Kappa and of NAPFA, which is a leading association
00:00:40.600 | of fee-only financial advisors.
00:00:42.080 | She hails from Portland, where she lives with her husband and their twins,
00:00:46.840 | who just graduated debt-free from college.
00:00:49.680 | So this is not only theoretical, but practical knowledge.
00:00:54.480 | And spends her evenings and weekends exploring Portland's food scene, running on the Wildwood Trail,
00:00:59.220 | or coaching, playing, and spectating soccer on the pitch.
00:01:03.260 | Anne Garcia, thank you for being here.
00:01:04.620 | [ Applause ]
00:01:13.000 | >> Jim's taller than I am.
00:01:15.800 | Thank you so much, and thanks for having me.
00:01:18.680 | Can everyone hear me?
00:01:22.340 | Yes, okay.
00:01:24.060 | So as Jim mentioned, I'm a financial advisor, and I'm from Portland, Oregon.
00:01:27.800 | It's a great place to live.
00:01:28.920 | It's a great place to raise kids.
00:01:30.140 | But it's not where I'm from, and it's not where my husband is from,
00:01:32.960 | and it's not where we went to college.
00:01:34.400 | I'm from California, he's from Michigan, and that's where we went to school.
00:01:38.660 | And frankly, we both think that we went to the world's best colleges.
00:01:42.860 | And only one of us is right, but we can both continue to think that.
00:01:49.220 | We feel like our colleges were not just great places to get an education,
00:01:53.920 | but great places to become adults.
00:01:55.520 | You know, we've made friendships that have lasted a lifetime.
00:01:58.480 | We learned all sorts of skills and knowledge that have made us successful
00:02:03.240 | in our professional careers, and that was really what we wanted for our kids.
00:02:09.420 | So from a very early age, we started indoctrinating them in all things blue and gold.
00:02:16.080 | Here's another thing.
00:02:17.960 | We hate the Oregon Ducks.
00:02:22.700 | And so, I hope I'm among friends and I can say that.
00:02:26.340 | So, you know, we took them to visit our schools, we bought them all the gears.
00:02:31.340 | We even got our dog in on the action.
00:02:33.960 | Now, I bring this all up not because it matters where I went to college
00:02:40.120 | or that I have a dog or anything like that,
00:02:42.460 | but because it's usually not homo economicus who's thinking about college.
00:02:49.220 | It's us as parents looking back at a really amazing time in our lives.
00:02:53.780 | It's us as parents doing that most human thing we do, which is wanting the best for our kids.
00:03:02.020 | It's not that rational thought of college is expensive and how do we make it a good investment.
00:03:10.800 | So if that's not how you're thinking, you're normal and that's okay.
00:03:15.900 | But that's not how we're going to go forward.
00:03:19.200 | Because as Jim mentioned, my kids just graduated from college.
00:03:22.420 | From these pictures, you'd think they were 10 years old.
00:03:24.740 | And actually, I did not stop taking pictures of them when they were 10 years old.
00:03:29.300 | It's just that when they were about 10, I looked up what it would cost
00:03:33.260 | to send them to either Berkeley or Michigan.
00:03:35.220 | And that was when we stopped buying all the t-shirts and all the gear.
00:03:38.980 | Because much as I love my kids and much as I love my college,
00:03:44.060 | $65,000 a year times four times two kids was completely out of the question for my family.
00:03:50.640 | And I realized as I started thinking about why I wanted them to go to Berkeley,
00:03:55.380 | that it was about things like all these brilliant professors
00:03:59.180 | who were just eccentrically fascinating on odd topics.
00:04:03.540 | And it was exposure to different people.
00:04:06.540 | And it was, you know, learning how to clean the lint screen out of the dryer.
00:04:09.980 | And all of that seemed like it was going to be available at a lot of places.
00:04:14.000 | And I realized if we stopped thinking about which college we wanted them to go to
00:04:18.340 | and started thinking about why we wanted them to go to college, we opened up all kinds of doors
00:04:24.960 | and provided great opportunities for them to get great educations
00:04:28.940 | at prices that worked for our family.
00:04:31.540 | And my story has a happy ending.
00:04:35.700 | Both my kids found a great college, and neither of them is a duck.
00:04:40.820 | So before we get too far into this, because I know there's tons of numbers,
00:04:45.300 | and you want to hear about the FAFSA and how you do better on it and whatnot,
00:04:48.660 | really important piece of college planning, it's equal parts financial planning and parenting.
00:04:54.620 | So you could have the greatest plan in the world, like when you do your retirement planning,
00:05:00.160 | you can plan out the dollars exactly.
00:05:02.440 | But when you're making a college plan, it's not for you, it's for them.
00:05:06.560 | So you have to do the parenting work.
00:05:09.900 | You have to be talking with your kid about what your expectations are, what your goals are,
00:05:14.400 | what your budget is, why you're doing this in the first place.
00:05:18.300 | Because if you're not doing that, the greatest plan in the world will go completely sideways
00:05:22.660 | because they will be hearing about it from their friends and their friends' older siblings
00:05:25.980 | and from colleges and from all those beautiful brochures.
00:05:29.060 | So here's my agenda, but I want to leave plenty of time for Q&A, so I'm going to take a vote.
00:05:40.260 | Of what we want to spend the most time on.
00:05:41.820 | Who wants to talk about saving for college?
00:05:43.880 | Excellent.
00:05:46.780 | Who wants to talk about how much college costs?
00:05:48.920 | Alright. How about scholarships and how to get them?
00:05:53.040 | Yes. FAFSA?
00:05:55.240 | Alright. How about the actual mechanics of paying for college?
00:06:00.760 | Okay. So, and sorry you don't get to skip the messy parenting stuff.
00:06:07.340 | So let's blow through the savings part.
00:06:10.260 | Saving for college is the ultimate moving goal post-school.
00:06:13.040 | I just had to show that because my husband loved that slide.
00:06:18.360 | Please use a 529 to save for college, not a 401(k) loan, not life insurance, not annuities.
00:06:28.740 | I will say Secure 2.0 lets you roll over $35,000 unused education dollars in a 529.
00:06:36.700 | So do not choose not to save because your kid might not go to college.
00:06:41.540 | Your 529 is your child's launch fund, regardless of what they ultimately end up doing.
00:06:48.320 | Okay. So fun fact about saving.
00:06:54.300 | If you increase your monthly 529 contribution by $5 a month every year
00:07:01.000 | on your child's birthday, you would have $20,000 more for college than if you didn't.
00:07:05.860 | So that's an easy, easy flex on your savings.
00:07:09.840 | But let's talk about what college actually costs.
00:07:15.700 | So obviously list prices, $82,000 and up for private schools, $25,000 and up for public.
00:07:22.920 | Here's the crazy thing.
00:07:24.580 | While the average tuition inflation rate for list prices has been over 6% for the last 25 years,
00:07:32.960 | the net price that people actually pay has hardly budged
00:07:36.520 | since the financial crisis in 2008-2009.
00:07:39.440 | The average tuition discount is over 50% right now.
00:07:44.020 | Not only that, but there are tons of other pathways through college.
00:07:48.460 | Dual enrollment, getting college credit through AP and IB courses.
00:07:53.120 | It's not necessarily a four-year, $80,000 a year proposition to go to college anymore.
00:07:57.740 | In fact, college is available at whatever price you're willing to pay.
00:08:02.760 | My son has a friend who graduated from college for $0.
00:08:06.180 | She did two years of free community college, and then she worked at Starbucks,
00:08:09.740 | and Starbucks has a partnership program with Arizona State.
00:08:12.240 | Arizona State let her go online for free for two years.
00:08:17.200 | So she literally paid $0 for a four-year college degree, and her diploma looks exactly the same
00:08:23.360 | as everyone else's from Arizona State.
00:08:25.840 | In fact, she walked across the stage on graduation with all the rest of them.
00:08:29.820 | So whatever price you're willing to pay,
00:08:32.660 | there is a college out there that will charge you that for it.
00:08:35.720 | Here are some of the things that drive college cost.
00:08:40.500 | I mean, we talk about, you know, lazy rivers and dorms.
00:08:43.360 | We talk about declines in state funding.
00:08:45.760 | The reason that the list price of college has gone up is that people are willing to pay it.
00:08:50.920 | Every year, the top colleges, the Ivy Leagues, the Ivy Pluses, the public Ivys,
00:08:56.920 | turn away 100,000 or more people who are willing to pay full price.
00:09:01.540 | They have no incentive to drop that price.
00:09:03.660 | However, lots and lots of people aren't able to pay that price,
00:09:07.620 | and so they do discount that tuition.
00:09:11.000 | So that's the thing that drives college costs up.
00:09:15.120 | Other things drive it down.
00:09:16.680 | Selectivity, for example.
00:09:18.120 | The most selective colleges, part of the reason why they're so selective is
00:09:22.180 | that everyone who's accepted says yes.
00:09:24.860 | Part of the reason everyone who's accepted says yes is they're typically the most generous ones.
00:09:29.900 | So if you have high financial need, don't shy away from the Ivy Leagues.
00:09:33.980 | They're probably going to give you the best price there is.
00:09:38.160 | My daughter's second cheapest college choice was the most selective school that she got into.
00:09:45.260 | She went to the University of Chicago, which is the most expensive university on earth,
00:09:50.860 | and her only cheaper choice was the University of Oregon
00:09:53.840 | where she received a full tuition scholarship.
00:09:55.740 | So don't let selectivity scare you away because that tends
00:10:02.180 | to be where you get the best deals.
00:10:04.640 | U.S. News and World Report rankings, you need to use these the opposite way.
00:10:11.020 | People, there's so much, you know, pearl clutching around ranking colleges,
00:10:14.780 | but college rankings are the best tool for parents who want to save money on college.
00:10:20.820 | You know what the cheapest colleges are?
00:10:22.500 | The college ranked 26, the college ranked 51, the college ranked 101.
00:10:28.140 | Because you know how they get up to be a top 25 or a top 50 or a top 100 school?
00:10:33.280 | They enroll students with higher GPAs and test scores.
00:10:36.520 | And how do they do that?
00:10:37.720 | Well, they give those students scholarships.
00:10:39.900 | So pay attention to the rankings, but not for the reasons you've been told
00:10:45.760 | to pay attention to them.
00:10:46.840 | The other thing is local cost of living.
00:10:49.600 | You know, I'm from the West Coast.
00:10:51.480 | University of Utah is so much cheaper than UCLA.
00:10:56.060 | Why? Because housing for a year there is $10,000 instead of $18,000.
00:11:01.820 | So all kinds of factors go into the cost of college, and many of them are within your control
00:11:07.040 | and available for you to research.
00:11:11.300 | One of the really important things to do as a family is just come
00:11:16.580 | up with what your baseline college budget is.
00:11:19.640 | And this doesn't have to be fixed for your lifetime, but you should understand well
00:11:26.620 | in advance what it's going to cost to educate your kid.
00:11:29.160 | So look up what your in-state schools cost, look up what scholarships they offer,
00:11:34.860 | look up what pathways they offer.
00:11:36.860 | You know, is this a four-year thing?
00:11:38.720 | Is it a two-year thing?
00:11:39.680 | Is it a three-year thing?
00:11:40.860 | Who gets scholarships?
00:11:43.860 | Because the great thing about scholarships is most of them, most public colleges,
00:11:51.200 | virtually every public college offers merit scholarships to good students.
00:11:55.560 | They want to keep the good students in their state in-state.
00:11:58.220 | So find out what those scholarships are and what your actual cost is, and then monitor
00:12:03.140 | and adjust as time goes on, you know.
00:12:05.040 | Is my savings budget tracking to a college pathway that I'm okay with?
00:12:12.940 | This is just an example from the University of Arizona.
00:12:15.340 | I chose this one because it lays out well on a slide.
00:12:18.220 | You can see annual cost, $33,000 on campus, $30,000 off campus.
00:12:23.780 | Newsflash to parents, it used to be cheaper to live in the dorms than off campus.
00:12:29.100 | Dorms are now a big profit center for colleges, so do be mindful of that.
00:12:35.300 | These are their scholarships they give.
00:12:39.240 | You can get a scholarship with a 2.75 high school GPA.
00:12:45.060 | You can get a merit scholarship at the University of Arizona.
00:12:48.240 | And with a 3.75 GPA, you get a big scholarship at the University of Arizona,
00:12:55.940 | and you'll get those scholarships as an out-of-state student as well.
00:12:59.120 | So this is normal for public schools.
00:13:01.600 | You also can get credit for your AP and IB classes.
00:13:06.680 | So, you know, take those classes, and maybe you can graduate in three years.
00:13:12.440 | Look at all the other pathways that are out there, too.
00:13:15.220 | Dual enrollment, where you're simultaneously enrolled in community college
00:13:19.040 | in either high school or your four-year college.
00:13:21.140 | Getting credit for college-level coursework you do in high school.
00:13:25.560 | But the important thing is if these are your pathways, make sure that you're looking
00:13:29.360 | at four-year colleges that will take those credits
00:13:31.980 | and give you credit for what you've done in high school.
00:13:35.400 | Does your state offer free community college?
00:13:37.740 | If that's one of the options, definitely look into it.
00:13:40.140 | What kind of employer support do you have?
00:13:42.160 | You know, my son's friend who worked for Starbucks got free tuition from Starbucks,
00:13:47.500 | but maybe your employer offers scholarships.
00:13:49.660 | There are loads and loads of companies that offer support either for their employees
00:13:53.800 | or for the employee's children that can be built into your budget or into your college pathways.
00:13:59.240 | So, like I said, just looking at this example, with no scholarships, $32,000 a year,
00:14:07.820 | with a reasonable, you know, scholarship that's within reach, that's $24,000 a year.
00:14:12.340 | Is it a four-year or a two-year path?
00:14:14.200 | Maybe that's your baseline, that's your baseline cost that you're aiming for.
00:14:18.140 | Of course, people talk about, you know, having, you know, you have to have the cost
00:14:25.500 | of college saved before your kid is 18.
00:14:27.440 | Actually, you don't, and very few people do.
00:14:30.760 | Most people do a combination of paying from savings, paying from their income,
00:14:35.080 | having their student contribute something, maybe grandparents are gifting,
00:14:39.580 | maybe you're eligible for the tax credit, you're willing to take out a student loan.
00:14:43.900 | But start doing your budget projections early so that you have an understanding.
00:14:48.120 | Am I, you know, are we on track for a college experience, you know, a college pathway
00:14:53.940 | that we're going to be happy with, or do we need to readjust, whether it's adjusting our expectations
00:14:58.840 | or adjusting our budget, but the sooner that you can start getting your arms
00:15:03.820 | around those numbers, the sooner you can be guiding your child's choices towards colleges
00:15:10.940 | that will work in their budget.
00:15:12.740 | All right, so let's talk about scholarships.
00:15:17.920 | My two kids went to what, you know, when I tell people where they went to school,
00:15:22.100 | their common reaction is, oh my gosh, that sounds really expensive, because, yeah,
00:15:25.100 | my daughter went to the world's most expensive private university,
00:15:27.780 | and my son went to an out-of-state public school.
00:15:29.840 | His school was actually cheaper than staying in-state, because the University
00:15:36.040 | of Arizona is more generous with scholarships than University of Oregon,
00:15:39.480 | and the cost of living is cheaper there.
00:15:41.200 | His apartment was $200 a month cheaper than any of his friends who went to Oregon,
00:15:44.700 | so $2,400 a year times four years is a lot of money.
00:15:50.400 | Every college offers scholarships, every student is eligible for scholarships,
00:15:54.720 | but not every college is going to offer scholarships to every student, so you need to think of,
00:16:01.860 | you need to look for the scholarships that, look for colleges
00:16:06.460 | that offer scholarships that you are eligible for.
00:16:08.920 | The good news is, it's very simple to apply for scholarships, you just apply to the college
00:16:14.540 | and file the FAFSA and the CSS profile if it's required.
00:16:18.060 | That will get you in the running for the vast majority
00:16:20.860 | of scholarships that your college offers.
00:16:25.020 | But most important, if you want to get scholarships, you have to apply to colleges
00:16:29.760 | that offer scholarships to students like you.
00:16:31.900 | So, there are three big types of scholarships, there's financial aid,
00:16:37.060 | there's institutional merit aid, and then there are outside scholarships.
00:16:42.660 | Need-based aid, financial aid, is scholarships, grants, and loans that, and work study
00:16:50.140 | that fill the gap between your ability to pay as calculated by the FAFSA and the CSS profile
00:16:54.680 | and the cost of, and the cost of college, the cost of attendance at a specific college.
00:16:59.820 | So, you may or may not be eligible for financial aid at a college,
00:17:03.200 | you may be eligible at some and not, and not at others.
00:17:06.740 | Typically, an institutional financial aid package will combine the college's own dollars
00:17:12.140 | and then federal funds like Pell Grants, student loans, and work study.
00:17:17.120 | But that's an award that's recalculated every year with each year's new FAFSA.
00:17:22.280 | And so, your cost can vary from year to year,
00:17:25.080 | particularly if you have variable income from year to year.
00:17:28.420 | Really important to remember is that not all colleges meet financial need
00:17:33.620 | and even less meet 100% of need through grants and loans.
00:17:38.140 | The ones that are the most generous tend to be, tend to be the most selective.
00:17:42.060 | All colleges are required to have a tool on their website called a net price calculator,
00:17:46.160 | and that lets you punch in your financial information and see what students like you get
00:17:50.500 | as, as scholarships in every, in every year.
00:17:56.240 | Really important, again, financial aid is allocated by the colleges.
00:18:01.120 | Your eligibility is calculated by the FAFSA, but it's the school itself
00:18:04.660 | that decides what to do with that number.
00:18:06.560 | The next big category of scholarships is what's called, what's called merit scholarships.
00:18:14.000 | And we often think of student athletes as being the ones who get the big scholarships,
00:18:18.720 | but it's really the mathletes that clean up.
00:18:21.100 | And why is that?
00:18:22.020 | Well, because colleges want to move up in the U.S. news rankings.
00:18:25.320 | And the way they move up is by admitting and enrolling better, better students.
00:18:30.520 | But there are loads of merit scholarships for all kinds of different things.
00:18:35.260 | You might be the only student from a certain state that's applying to a small college
00:18:41.120 | that wants to say we have students from all 50 states.
00:18:43.900 | You might be the only cellist, and they need one in, in the orchestra.
00:18:49.600 | My son had a scholarship for playing video games, so that is a real, a real thing.
00:18:54.500 | You, you can choose to share or not share that with your own teenage boys.
00:19:00.900 | But typically, merit scholarships are awarded to students who are in the top 20 to 25%
00:19:06.120 | of the incoming, of the incoming class, and good news,
00:19:10.100 | they're offered by both public and, and private schools.
00:19:13.300 | You can just Google the college name, like I said, on the slide,
00:19:16.780 | and you will see what scholarships are, are available there.
00:19:19.520 | The great thing about merit scholarships is they are typically guaranteed for all four years
00:19:24.440 | as long as you meet certain criteria.
00:19:26.540 | And typically, that's a minimum, a minimum GPA and, and course load.
00:19:30.300 | So it's easy to keep your merit scholarship, and your,
00:19:33.040 | your cost of college becomes very predictable with, with merit scholarships.
00:19:38.060 | Now, more than 50% of students receive some form of scholarship on, to, to go to college.
00:19:47.480 | So, so this is not like, you know, when I went to college, scholarships were for, like, you know,
00:19:54.280 | basketball players, football players, and, and maybe a handful of academic superstars.
00:19:58.360 | Kids today can get scholarships, every kid can get scholarships if they're just willing
00:20:03.720 | to look for the schools that, that offer them.
00:20:06.060 | A great resource in looking for scholarships is the website CollegeData,
00:20:10.640 | and that's just collegedata.com.
00:20:12.880 | You can look up any school there, look at its financials tab,
00:20:16.880 | and it will tell you what financial aid form they use.
00:20:19.360 | Is it the FAFSA or the CSS profile?
00:20:21.080 | It will tell you what percent of students had need and got scholarships,
00:20:26.500 | what percent of need was met, and what percent of students
00:20:28.660 | without need got a merit scholarship.
00:20:30.560 | So, super helpful when you're shopping for scholarships.
00:20:33.900 | Net price calculators are a tool to help you see what scholarships you'll get at a college.
00:20:40.240 | Every college is required to have one, and you punch in your data, and that shows you what students
00:20:44.800 | like you are getting in, in the current year.
00:20:48.720 | The great thing with net price calculators is they can only show gift aid.
00:20:52.100 | So, colleges can include student loans and work-study in their aid packages,
00:20:56.460 | but those cannot be shown on, on net price calculators.
00:21:00.420 | Some of them include merit scholarships, some, some don't.
00:21:04.100 | So, the third big type of scholarships are what's called outside scholarships,
00:21:08.960 | and that just means that it's a scholarship offered by someone other than the college.
00:21:13.700 | They can be offered by your employer, they can be offered by local civic groups.
00:21:18.080 | A lot of the activities your kids participate in offer, offer scholarships.
00:21:22.620 | I would say, you know, key points about them, don't overlook them,
00:21:27.660 | but also don't overestimate them.
00:21:29.300 | They tend to be in the four-digit and below numbers, where institutional aid tends to be
00:21:35.400 | in the five-digits and, five-digit numbers.
00:21:39.380 | The other thing is there are great big websites like FastBetWeb and the College Board
00:21:44.920 | that have tons and tons of outside scholarships you can apply for.
00:21:47.940 | I think you're best off looking closer to home.
00:21:49.980 | Your high school's college and career center will have a whole list of scholarships.
00:21:53.640 | Many of them are only open to students at your high school or students in your local community.
00:21:58.540 | Our high school had a scholarship for the tennis team.
00:22:01.260 | I mean, there's like 12 people on the tennis team, and they're not all seniors.
00:22:04.260 | So, your odds of that one are a lot better than, say, the duct tape prom dress scholarship
00:22:10.240 | that, and you don't have to wear a duct tape prom dress to school.
00:22:13.940 | Student outside scholarships do get added into the financial aid formula.
00:22:19.260 | So, for a student who has high financial need,
00:22:21.720 | it is really not worth applying for small outside scholarships.
00:22:25.980 | On the other hand, there are great ones out there that have tons of benefits.
00:22:30.120 | My daughter had an outside scholarship that was $5,000 a year plus $1,000
00:22:34.260 | for technology purchases, plus a corporate mentor
00:22:37.040 | who helped her find an internship that led to a full-time job.
00:22:39.760 | So, definitely don't overlook them, but they are not the thing that's going to close the gap
00:22:45.360 | between a $10,000 a year college budget and an $80,000 a year college.
00:22:49.320 | So, the FAFSA is your ticket to need-based financial aid.
00:22:57.820 | It is the free application for federal student aid, and the data that you put
00:23:02.420 | in there calculates a number called your student aid index.
00:23:05.440 | It used to be called the expected family contribution, but much has changed
00:23:08.540 | with the FAFSA this year, including the name.
00:23:11.660 | Normally, it comes out on October 1st.
00:23:14.160 | This year, because of all the changes, it's delayed, and it's coming out sometime in December.
00:23:18.520 | Odds are the favorite dates are the 31st and the 30th and the 32nd of December.
00:23:27.580 | It has to come out.
00:23:28.320 | It has to be out before January 1st, but it gets filed every year for every student.
00:23:35.760 | The thing about the FAFSA, I think there's a common misperception that it's the tooth fairy.
00:23:40.260 | Like, I filed a FAFSA, and I'm eligible for aid.
00:23:42.500 | Therefore, I can apply to any college I want to, and it will cost me, you know,
00:23:45.980 | the $15,000 that my student aid index is.
00:23:48.600 | That is flat-out wrong.
00:23:50.460 | It is up to colleges to decide what financial aid you get.
00:23:55.360 | So, every college uses the FAFSA, and they use it as a tool to evaluate all students' ability
00:24:02.260 | to pay on a consistent set of metrics.
00:24:04.420 | What they do from there depends on the college.
00:24:07.140 | The only thing that the FAFSA guarantees is access to federal aid dollars.
00:24:11.640 | That is Pell Grants, direct student loan, and work-study, if you're eligible.
00:24:17.860 | So, if you are eligible for financial aid, you need to apply to colleges that give it.
00:24:25.720 | There's an additional aid form called the CSS profile that's used by about 250 private schools,
00:24:30.400 | but the vast majority of colleges use the FAFSA.
00:24:33.400 | There are four buckets of financial information that go
00:24:40.100 | into the FAFSA's calculation of your student aid index.
00:24:42.980 | Income and assets from the parents, and income and assets from the student.
00:24:48.100 | People talk a lot about assets, and what do I do about my assets?
00:24:52.180 | You know, oh, I should buy this life insurance policy instead
00:24:55.380 | of having a 529 because it won't be an asset.
00:24:57.660 | But really, parent income is the biggest factor in it.
00:25:03.320 | And you don't want to give up your income for the sake of financial aid.
00:25:06.940 | I can tell you that.
00:25:08.640 | How is it calculated?
00:25:10.400 | Well, it's your total income from your tax return, not just your AGI.
00:25:14.220 | So, any untaxed income on your tax return gets added back.
00:25:18.760 | If you're making IRA contributions, they get added back.
00:25:21.540 | If you're self-employed and contributing to a SAP or an individual 401(k), that gets added back.
00:25:26.540 | Your payroll contributions to your employer's 401(k) don't get added back anymore.
00:25:31.180 | They used to.
00:25:32.380 | And they do still get added back on the CSS profile.
00:25:35.560 | You get subtractions for your family size and your tax liability.
00:25:39.380 | So, one of the FAFSA planning tools that you can do is to pay more taxes
00:25:45.840 | in years when your income counts on the FAFSA.
00:25:49.940 | Every incremental dollar of income is assessed at 47 cents.
00:25:54.700 | So, that is a big number.
00:25:56.940 | Parent assets are the ones that people pay the most attention to.
00:26:00.660 | And, of course, you do have more flexibility about your assets.
00:26:03.320 | What counts is all of the assets that the parents own, except for retirement accounts.
00:26:08.700 | So, it's your 529s for all your kids, if they're owned by the parents,
00:26:12.700 | not if they're owned by grandma, grandpa, aunts, and uncles.
00:26:14.820 | Investment properties, second homes, whatnot, and adjusted value of your business.
00:26:19.960 | But all of your assets are only assessed at 5.64% of their value.
00:26:25.100 | So, while people freak out about, you know, how do I get rid of this $500 in my bank account?
00:26:30.740 | You know, that does nothing.
00:26:31.960 | Just waste your time.
00:26:34.160 | Student income and assets are another piece of it.
00:26:37.680 | For the vast majority of students, income doesn't come into play at all
00:26:40.880 | because they can have $9,400 of income before anything counts against them on the FAFSA.
00:26:46.560 | But where students do get hung up is on their assets,
00:26:49.880 | especially right now because wages are so high.
00:26:52.080 | Students' assets are assessed at 20% of their value, so much higher than parent assets.
00:26:57.140 | So, and particularly now, you know, kids are earning a lot of money.
00:27:01.640 | They're earning a few thousand dollars in their summer jobs,
00:27:04.860 | and that can add a lot to their ability to pay for college.
00:27:08.360 | So, I always recommend that parents, you know, if that money is for school, move it into a 529.
00:27:13.780 | If it's not for school, open a Roth IRA, but, you know,
00:27:17.720 | don't have them sitting on tens of thousands of dollars.
00:27:21.940 | So, just so you can see, the impact of $1,000 depends on what $1,000 it is.
00:27:28.760 | If it's income from the parents, it's $470.
00:27:31.780 | If it's assets from the parents, it's only $56.
00:27:34.240 | Student income, only if they have a lot of it, doesn't matter at all.
00:27:39.880 | But if it's a student asset, it's $200.
00:27:42.520 | So, really, your income is the thing to think
00:27:45.080 | about when you're thinking about planning for the FAFSA.
00:27:47.120 | I always think it's important to have a slide with lots of small numbers on it.
00:27:52.060 | So, here we go.
00:27:54.480 | You can download this.
00:27:55.520 | This just shows when different things count for the FAFSA.
00:28:00.060 | The FAFSA uses what's called prior-prior year income.
00:28:02.460 | So, when you're filing the FAFSA in the fall,
00:28:04.260 | you're using your previous year's tax return data to file it.
00:28:08.720 | Your assets are on the day that you file.
00:28:11.240 | So, as you go through the years, these are the dates to pay attention to.
00:28:15.920 | So, there's your first income year starts January 1st of sophomore year of high school
00:28:20.580 | and ends December 31st of junior year.
00:28:23.240 | Your assets count on the day that you file it.
00:28:28.200 | And if you ever want to see how different things impact your ability to pay,
00:28:36.560 | there's a tool on the Department of Education website,
00:28:38.980 | which is studentaid.gov, called the Student Aid Estimator.
00:28:41.580 | It doesn't work right now because of FAFSA simplification, but it is normally there.
00:28:45.320 | And you can play around with that and see, okay, if I do this,
00:28:48.500 | what's the impact on my student aid index?
00:28:50.340 | Or if I do that, what's the impact?
00:28:54.200 | Big changes came this year, a few of them.
00:28:57.260 | First and foremost, one of the biggest changes is your expected family contribution used
00:29:02.760 | to be divided by the number of students in your family.
00:29:05.280 | The student aid index is not divided anymore.
00:29:08.480 | So, students coming from big families, that's going to have a big impact
00:29:13.100 | on your eligibility for financial need.
00:29:17.420 | If you have a student in college right now and this impacts you,
00:29:21.760 | reach out to the Financial Aid Office and find out how that's going to be treated.
00:29:25.080 | The good news is many colleges will continue considering that.
00:29:31.600 | I know my daughter's school, as soon as this change was announced,
00:29:35.000 | they have a supplemental questionnaire that you fill out and they added a question
00:29:39.000 | about how many college students are in the family.
00:29:40.900 | So, many colleges will continue offering what's called the sibling discount.
00:29:44.780 | But that's just a question that you need to ask.
00:29:49.160 | For students whose parents are divorced, it used to be that this parent
00:29:52.780 | that the student lived with filed the FAFSA.
00:29:54.460 | Now it's the parent who provides the most financial support.
00:29:57.160 | It's also now your income from your tax return only.
00:30:00.740 | It used to be W-2 income as well.
00:30:03.200 | So, that's something that helps a lot of people.
00:30:05.020 | You know, if you're making 401(k) contributions, that'll bring down your income
00:30:09.680 | because you no longer add those back.
00:30:12.540 | A nice change for parents, for students who have grandparents who are helping pay
00:30:16.440 | for college is that they no longer have to report distributions from 529s
00:30:20.860 | that aren't owned by their parents on the FAFSA.
00:30:23.840 | And then there have been a number of tweaks to the formula.
00:30:26.640 | So, I know that first thing is a big one for a lot of families,
00:30:30.380 | but a lot of the other changes really mean that the majority
00:30:33.940 | of students will be eligible for more financial aid, not less going forward.
00:30:38.700 | Even some students who have siblings in college.
00:30:42.520 | There are issues because of the simplification.
00:30:47.160 | You know, the delayed FAFSA means delayed student aid estimator,
00:30:51.000 | inaccurate net price calculators, and there's going to be a huge scramble
00:30:54.840 | when colleges get all these FAFSAs in January and have to process them where they're used
00:30:59.920 | to having all fall to do that.
00:31:02.780 | I still think net price calculators are a good tool.
00:31:05.800 | They'll give you a sense of, you know, how does the college award aid?
00:31:09.600 | Do they meet need or do they not meet need?
00:31:14.200 | The College Board also has a tool called an EFC estimator on its website, and you can use that,
00:31:21.640 | you know, you can use that in the interim.
00:31:25.980 | So, CSS Profile, again, is a second financial aid form.
00:31:30.760 | It's used by a small number of colleges relative to the universe of colleges.
00:31:35.400 | It's a superset of FAFSA data, so it includes W2 income.
00:31:39.880 | It includes assets like your home equity, insurance, other things like that, all the 529s.
00:31:46.240 | And if you're divorced, both parents are required to use it.
00:31:52.000 | The thing about the CSS Profile compared with the FAFSA is that colleges have a lot
00:31:55.880 | of flexibility in how they use it.
00:31:57.200 | Home equity is one good example.
00:31:59.720 | You know, you may -- colleges might exclude that completely.
00:32:03.400 | They might take the full value of your home, or they might cap your home equity
00:32:08.400 | at a multiple of your income.
00:32:12.160 | Any grandparents here?
00:32:14.920 | All right, so grandparents wanting to help.
00:32:18.600 | Opening a 529 or contributing to the student's 529 is a terrific way to help.
00:32:24.440 | There are a lot of estate planning advantages of opening a 529.
00:32:27.720 | You know, it removes those assets from your estate to the extent that that's a consideration.
00:32:31.480 | Like, if you live in Oregon where we have a state tax.
00:32:35.400 | If the student is eligible for need-based aid and you intend to contribute large sums
00:32:39.560 | of money, then open your own 529 and fund it.
00:32:45.120 | If you're not making large ongoing contributions, you know, if it's birthday money
00:32:50.120 | or holiday money, then just contribute it to the parent's account.
00:32:54.840 | It's one less thing to think about, and it just makes sure that the parents have access
00:33:02.440 | to that money when the kid comes -- when the time comes for the kid to go to college.
00:33:08.360 | I always think the parent -- so with the 529, you have an owner and a beneficiary,
00:33:12.440 | and then you have a successor owner.
00:33:14.320 | If you're a grandparent setting up a 529, name one of the parents as the successor owner.
00:33:21.200 | If you just look at the timeline of life, something that we see all the time is grandparents
00:33:26.000 | set up a 529, the parents know about it but don't necessarily know why,
00:33:30.520 | and now the grandparents are either having cognitive issues and they don't remember
00:33:36.640 | where it was, or they've passed away and there's a lengthy process of getting access
00:33:42.680 | to those funds because they haven't named a successor owner.
00:33:46.320 | So you're doing your grandkids a favor by making the parent the successor owner of your 529.
00:33:55.520 | So college -- we spend a lot of time talking about how to save for college.
00:33:59.880 | You actually have to pay for it, too, and there's better and worse ways to do that.
00:34:04.880 | So college costs typically when you accept -- so colleges send out acceptance letters
00:34:09.920 | in the spring, May 1st is acceptance day, and that's why May 1st you see all those
00:34:16.280 | Instagram posts of kids and their college acceptances.
00:34:20.720 | You will pay a deposit at that point.
00:34:22.400 | It's usually a couple hundred dollars.
00:34:24.800 | It's nonrefundable, and it is credited against your cost of college.
00:34:30.760 | All of your other direct billed expenses, so tuition, fees, on-campus room and board,
00:34:36.040 | are typically due at the beginning of the academic term.
00:34:40.080 | One of the difficulties about paying for that is that financial aid doesn't often get added
00:34:44.720 | until right before the term starts.
00:34:49.040 | Your loans and your outside scholarships get disbursed directly to the college as well,
00:34:53.120 | so it takes a while before you see, you know, before you see what you actually have to pay.
00:35:01.680 | Most colleges do offer payment plans.
00:35:03.400 | Sometimes there's a cost associated with them.
00:35:05.960 | So just know as you are thinking about that, a $75 fee for a payment plan is cheaper than
00:35:14.400 | taking out a student loan because you don't have the cash up front, but if you're just
00:35:18.200 | taking money out of your 529, you're probably better off just paying it all up front.
00:35:26.480 | When you take money out of your 529, there's three places it can go.
00:35:30.360 | It can go to the account owner, it can go to the school, or it can go to the beneficiary.
00:35:36.880 | Important point about 529 distributions and super boring, so if you haven't fallen asleep
00:35:41.800 | now, hopefully you can bear with me through this one, the 529 issues a form called a 1099-Q,
00:35:49.800 | which is just like the 1099 that you get from a brokerage account or an IRA distribution.
00:35:55.120 | If the distribution goes to the student or to the school, that 1099-Q has the student
00:36:00.280 | social security number on it.
00:36:01.880 | Now the college issues a form called a 1098-T, and that is a tuition tax statement.
00:36:07.760 | That will only have the student social security number on it.
00:36:12.480 | If there is a matching 1098-T and 1099-Q with the same social security number on it,
00:36:19.760 | the IRS kind of just says, "Okay, this was paying for college."
00:36:24.560 | If there's a different number social on the 1099-Q because the distribution went to the
00:36:29.000 | parent, chances are good that over the course of four years, you're going to get a notice
00:36:33.720 | from the IRS that you took a non-qualified distribution from your 529.
00:36:37.680 | So even though it's horrifying to think of sending this money to your kid, that is usually
00:36:43.040 | the best way to do it, unless you like dealing with the IRS.
00:36:50.680 | So why would you do a distribution to your student besides that?
00:36:55.240 | Well, first of all, if your student's receiving need-based financial aid, picture the financial
00:37:01.120 | aid office in August or September.
00:37:04.560 | They're allocating all the money for the students.
00:37:06.520 | They're getting all these loan disbursements.
00:37:08.640 | They're getting outside scholarships.
00:37:10.160 | They're getting checks from 529s.
00:37:12.440 | It's easy to code some of those in the wrong column.
00:37:16.760 | And it's not at all unusual for a college to think that a distribution from a 529 is
00:37:20.800 | actually an outside scholarship, and they will then readjust the student's aid package.
00:37:25.320 | And then you have to go back and track down your very busy financial aid office to get
00:37:30.920 | that rectified.
00:37:34.120 | And furthermore, if your student moves off campus, you're going to be probably taking
00:37:38.000 | distributions to pay for room and board.
00:37:42.160 | And so you're going to have to get the money to someone other than the college anyway.
00:37:47.440 | I think the best practice is set up a bank account in the student's name that's linked
00:37:51.000 | to your own.
00:37:52.000 | It's really easy to do that with an online savings account.
00:37:55.600 | And then you take the 529 withdrawal to that account, and then transfer over it to your
00:37:59.360 | own, and then pay the bill that way, or transfer it to your student if they're paying rent
00:38:03.680 | and buying groceries and whatnot.
00:38:07.160 | You don't have to time your distributions to college bills.
00:38:10.200 | So you could take out an amount or pay the bill out of pocket and then reimburse yourself,
00:38:16.280 | or do whatever is convenient for you.
00:38:19.000 | Your 1099Q is only going to show the total amount that you took out, not when it came
00:38:23.520 | out.
00:38:32.360 | So can't talk about college without talking about student loans.
00:38:36.000 | Reading the news, you would think that student loans are a one-way ticket to the poorhouse.
00:38:39.880 | But in fact, for many students, that is the difference between going to college and not
00:38:43.640 | going to college.
00:38:45.280 | There's three groups of people who struggle with student loans.
00:38:48.360 | Those are people who get graduate degrees, particularly in areas that are not as high-paying
00:38:54.940 | as, say, medicine and law.
00:39:00.120 | There are people who attend for-profit schools, like cooking schools, massage therapy, things
00:39:04.960 | like that.
00:39:05.960 | And students who don't graduate.
00:39:07.040 | The cohort default rate among people who take out the direct student loan only as an undergraduate
00:39:12.880 | and graduate is very, very low.
00:39:16.660 | So that is a good best practice for planning for college, is limit your borrowing to the
00:39:22.440 | direct student loan.
00:39:23.680 | I know that people always say, well, limit it to the amount that you're likely to earn
00:39:27.800 | your first year.
00:39:29.640 | Here's the thing.
00:39:30.640 | The majors with the highest attrition rates in college are the highest-paying ones.
00:39:36.240 | So a lot of students go in expecting to be engineers and come out as philosophers.
00:39:43.440 | And that's a lot of, maybe a little bit more debt than the philosopher might have wanted.
00:39:51.080 | Finally, the parenting piece of it.
00:39:55.560 | Save the best for the last.
00:39:57.400 | Age-appropriate college conversations are super valuable to have.
00:40:02.640 | So many parents wait until the kid actually gets acceptance letters from colleges to talk
00:40:08.320 | about how they can't afford what the child has applied to.
00:40:11.280 | I think there are great conversations to be had at every age.
00:40:14.680 | Young kids, talk about how college enriched your life.
00:40:17.600 | Talk about friends you made in college.
00:40:19.480 | Talk about aspirations you have for them as a college student.
00:40:23.880 | Hey, I never knew about thunder and lightning.
00:40:26.720 | Listen to this.
00:40:28.320 | I never knew how this happened until I took a meteorology class in college, and it was
00:40:31.440 | so interesting.
00:40:32.680 | Or my friend Kelly and I, we do all this great stuff together.
00:40:36.720 | Well, we met in college.
00:40:38.960 | There are also tons and tons of on-campus activities at your local college that are
00:40:44.200 | appropriate for every age.
00:40:46.640 | So take them to a sports event, take them to one of their on-campus programs.
00:40:54.360 | Loads and loads that you can do.
00:40:56.400 | Once they get to middle school, absolutely appropriate to start talking about money.
00:40:59.760 | And usually, your kids will have some friends who have older siblings where you can talk
00:41:04.760 | about, hey, look at the difference between Gonzaga and Oregon State where Jack is applying.
00:41:11.960 | Once they get to college, it's time to talk about your budget and talk about appropriate
00:41:15.680 | pathways.
00:41:16.680 | I think the best way to do that is by being goal-oriented.
00:41:20.000 | And so goal-oriented means, my goal is that you can get through college without any student
00:41:26.840 | loan debt or with only taking out the direct student loan.
00:41:30.280 | And we've been saving diligently, and we know that you can do that at our state schools.
00:41:34.800 | There are probably other schools that you can do that as well, and we will absolutely
00:41:38.880 | support you in finding them.
00:41:41.520 | That's a lot better message than, we can only afford for you to go in-state, so don't bother
00:41:47.400 | looking anywhere else.
00:41:48.960 | Really important is that you be your student's ally and their partner and their guide, and
00:41:52.760 | that you set the parameters of their search, and that you do it, like I said, before they
00:41:57.640 | start getting acceptance letters.
00:42:01.640 | It costs about $100 to apply to each school.
00:42:04.760 | So that's a lot of budget to spend on applying to colleges that no one's ever going to go
00:42:11.200 | to because you can't afford.
00:42:15.280 | So I will -- oh, more questions, all right.
00:42:21.360 | So I will try to get through as many of these as I can.
00:42:24.800 | Does a 529 plan make a student ineligible or reduce scholarship?
00:42:29.200 | So a 529 counts as an asset on the FAFSA.
00:42:32.320 | It counts at 5.64% of its value.
00:42:35.000 | So it will -- so every $1,000 in your 529 plan will reduce your eligibility for financial
00:42:41.840 | aid by $56.
00:42:44.800 | So that means that you are $944 ahead by saving in a 529.
00:42:51.720 | So if people tell you don't save for college because you'll get more scholarships if you
00:42:55.880 | don't, that is -- there's just, you know, a tiny grain of truth in that.
00:43:02.140 | Saving for college gives you lots more choices.
00:43:05.200 | And really what we want for our kids is good choices.
00:43:08.840 | And so by not saving, you are limiting their choices.
00:43:12.400 | Let's see.
00:43:14.760 | What is the difference between the Student Aid Index and the EFC?
00:43:22.000 | So the Student Aid Index is the new name for the EFC starting this year on the FAFSA.
00:43:27.280 | The CSS profile is still calling it the Expected Family Contribution.
00:43:31.740 | But it used to be that the number that the FAFSA calculated was also called the Expected
00:43:35.380 | Family Contribution.
00:43:36.500 | Now it is called the Student Aid Index.
00:43:38.820 | It will still be a number, you know, if your student aid -- if your EFC was, you know,
00:43:44.280 | $22,000, your SAI will be $22,000 or, you know, some other amount based on the slightly
00:43:49.780 | different calculation.
00:43:52.020 | How you interpret that is that number shows are you or are you not eligible for financial
00:43:58.720 | aid.
00:43:59.920 | So let's say, for example, your Student Aid Index is $35,000 and your in-state school
00:44:05.660 | costs $30,000.
00:44:07.280 | You are not eligible for aid at that school.
00:44:10.000 | But you're applying to a private school that costs $75,000.
00:44:12.840 | You are eligible for aid at that school.
00:44:15.840 | It does not guarantee that you're going to get that aid.
00:44:18.100 | And that's why it's important to not just do the Student Aid Estimator and not just
00:44:21.680 | file the FAFSA, but do the Net Price Calculator at the college, because that will tell you
00:44:26.560 | is this Student Aid Index likely to get me a scholarship or not.
00:44:34.820 | Is the CSS profile going to follow FAFSA and not including 529s of the siblings?
00:44:40.480 | And will CSS follow the FAFSA change in not adding back 401ks?
00:44:44.780 | So so far the CSS profile has not said that they have any intention of stopping considering
00:44:52.460 | siblings or that they're not going to include financial W-2 information.
00:45:01.980 | Here's the thing with the CSS profile.
00:45:04.020 | The whole point of the CSS profile is to collect more financial information about you than
00:45:09.460 | the FAFSA does.
00:45:10.860 | If the CSS profile was going to do everything the same as the FAFSA, it wouldn't exist.
00:45:14.900 | So my guess is they will not stop collecting this information.
00:45:20.140 | Now it's up to schools what they actually do with this information.
00:45:24.900 | And there are ways that the FAFSA changes can still impact profile schools.
00:45:29.580 | For example, a student with two siblings in college may have been eligible for a Pell
00:45:34.860 | Grant under the old FAFSA formula.
00:45:37.540 | And many colleges have additional grant funds that are automatically given to Pell Grant
00:45:41.900 | recipients.
00:45:42.900 | That student, when you stop dividing your student aid index from the FAFSA by number
00:45:48.500 | of siblings in college, is no longer Pell eligible and they may be losing out on grants
00:45:54.060 | that way.
00:45:56.140 | But now for the first time, historically you've always had a higher expected family contribution
00:46:01.820 | on the profile than on the FAFSA.
00:46:03.980 | And for many students that won't be the case.
00:46:05.940 | But again, because the whole purpose of the profile is to collect more financial information
00:46:11.340 | about you, I don't foresee that changing.
00:46:17.020 | Let's see.
00:46:18.020 | I am saving for an out-of-state online university, tuition is $9,000 per year, tax advantage
00:46:29.500 | of pre-tax money for education.
00:46:33.060 | So using pre-tax money for education -- so a 529 is like a Roth IRA, you know, it's after-tax
00:46:47.660 | money going in, tax-free coming out.
00:46:51.140 | And that's usually your biggest tax advantage.
00:46:54.400 | Now one thing to keep in mind, if you are eligible for the American Opportunity Tax
00:46:58.060 | Credit, which is an education tax credit for dependent students whose parent's adjusted
00:47:04.460 | gross income is $160,000 or less, you do need to pay for a portion of your tuition from
00:47:11.340 | something other than a 529.
00:47:16.140 | So you don't necessarily want to have the entire cost of college in your 529.
00:47:23.060 | But the best way to get tax advantage dollars into education is through a 529.
00:47:30.580 | Or if you have an employer tuition matching program.
00:47:36.860 | Who can contribute to a 529?
00:47:39.100 | How many people can contribute to a single 529?
00:47:45.540 | And how much can each contribute to a 529?
00:47:47.960 | So the great thing about 529s is the contribution limits are immense.
00:47:54.300 | They're set by the state, but they're typically in the hundreds of thousands of dollars.
00:47:58.040 | So you can keep contributing until you have about $400,000, give or take, in your 529.
00:48:05.060 | Now a contribution to a 529 is treated by the IRS as a gift for tax purposes.
00:48:10.840 | So you are limited to the annual gift tax exclusion amount, which is $17,000.
00:48:18.820 | So two parents can contribute $34,000 without filing any tax documentation.
00:48:25.160 | You can also do what's called super funding your 529, which is where you make five years'
00:48:31.420 | worth of contributions in a single year.
00:48:33.780 | And then you file that as a pro rata contribution over five years.
00:48:42.820 | But anyone can contribute to a student's 529.
00:48:46.000 | So everyone who wants to give money to the student's college doesn't have to have their
00:48:49.220 | own 529.
00:48:51.180 | Almost every 529 has a tool called a gifting page.
00:48:54.060 | And this is one of the great things about a 529.
00:48:57.360 | If you've ever said, stop giving my kids toys, give them the gifting link to your 529, and
00:49:03.920 | they can contribute directly to your account that way, and it'll be invested according
00:49:08.080 | to your investment choices in the plan.
00:49:11.720 | So when parents own a 529, the grandparents, aunts, uncles, friends, anyone can contribute
00:49:16.120 | to that 529.
00:49:17.960 | Students can put their own money into the 529.
00:49:20.060 | And in many cases, they can take the state tax benefit for doing so.
00:49:23.500 | So for example, in Oregon, we have a refundable tax credit for 529 contributions.
00:49:28.440 | So a student can put $170 into their 529, file an Oregon tax return, and get $170 back
00:49:35.400 | from the state.
00:49:36.400 | So it's a great way to teach kids about how tax incentives work.
00:49:42.920 | So I hope I answered those questions.
00:49:46.920 | Is it possible to get tuition discounts at a selective school if you are wealthy with
00:49:51.960 | a high income?
00:49:54.520 | So this is a great question.
00:49:56.280 | It depends on the selective school.
00:49:58.660 | The Ivy Leagues do not give merit scholarships.
00:50:01.680 | Being eligible for merit scholarships elsewhere is how you get into an Ivy League.
00:50:07.920 | So you are not going to get merit scholarships there.
00:50:10.920 | If that's you, then you want to have your student apply for outside scholarships.
00:50:15.520 | That's going to be their best path to get there.
00:50:18.840 | However, you may think you're wealthy and private schools may not agree with you.
00:50:26.000 | You may think you're poor and private schools might not agree with you too.
00:50:29.160 | So it's always worth doing the net price calculators.
00:50:32.720 | Many families are eligible for more need-based financial aid than they think.
00:50:37.760 | But the very upper echelon of schools does not give merit scholarships.
00:50:44.920 | It's kind of the next tier down.
00:50:47.080 | But there are fabulous, fabulous schools in that category.
00:50:52.360 | There's been so much research done about the benefits of college.
00:50:56.660 | And unless you want to be a hedge fund manager, it really doesn't matter where you go to college.
00:51:03.360 | It matters how you go to college.
00:51:05.740 | So there was a study done called the Purdue Gallup Poll where they surveyed adults who
00:51:09.120 | are successful in life, trying to tie that back to their college experiences.
00:51:13.040 | And they found it had nothing to do with public versus private.
00:51:15.720 | It had nothing to do with large versus small, urban versus rural, selective versus not selective.
00:51:20.840 | They found it had to do with a set of specific experiences that people had in college.
00:51:25.400 | And that was being able to apply classroom learning to a job.
00:51:29.200 | That was feeling like professors cared about you.
00:51:32.080 | That was participating in extracurricular activities.
00:51:35.640 | It was working on a project that lasted a semester or more.
00:51:39.440 | All of those are available at loads and loads of schools.
00:51:42.020 | You do not have to go to a highly selective school to become a functioning adult.
00:51:46.720 | I'll say, too, as a parent, one of my kids went to a single-digit acceptance rate school.
00:51:52.520 | The other one went to a sign-up-and-go school.
00:51:56.280 | And both of them graduated this spring and have identical jobs.
00:52:01.400 | You know, same salary, same basic functions, same type of company.
00:52:05.880 | It has -- you know, the one at the more selective school is not better off
00:52:10.980 | than the one at the less selective school.
00:52:16.440 | Is it better to have grandparents, uncles, or aunts have a 529 instead of a parent or a student?
00:52:22.880 | So I feel like the impact of assets on the FAFSA is really negligible.
00:52:29.400 | So unless a grandparent or aunt or uncle intends to give vast sums of money
00:52:35.560 | and wants the tax credit and wants to retain control over those dollars,
00:52:40.440 | it's usually better to just put the money in the parent's 529.
00:52:46.000 | But if it is tens of thousands of dollars that they're planning to give,
00:52:50.040 | if they're superfunding a 529, then it can make sense.
00:52:54.760 | Superfunding is doing that five-year contribution in one.
00:53:00.000 | Then it probably makes sense for them to have their own account.
00:53:03.720 | The thing is, the schools that tend to be the most generous with financial aid tend to be the ones
00:53:08.360 | that take the CSS profile, and the CSS profile requires you to report all of the 529s
00:53:13.480 | for which your student is a beneficiary.
00:53:15.720 | So it's not going to get you around the Ivy League's barriers to contributions.
00:53:23.960 | And it does make it a whole lot easier, you know, if it's a couple hundred dollars at a time,
00:53:29.080 | it makes it a whole lot easier to just have it in the parent's account where you know
00:53:33.240 | where it is.
00:53:36.120 | Any thoughts on prepaid college trust versus 529 plans?
00:53:40.040 | So there are two types of 529 plans.
00:53:42.520 | There are college savings plans and prepaid tuition plans.
00:53:45.880 | Most prepaid tuition plans are run by a small number of states, and so they're only open
00:53:51.600 | to people who are in -- who live in those states.
00:53:56.680 | Those, I think, can be a great late-stage college planning tool.
00:54:01.800 | So typically what happens in those is you're buying tomorrow's tuition at today's prices.
00:54:06.600 | So if you contribute $10,000 this year and the cost of tuition is $20,000,
00:54:12.600 | you've bought half a year of tuition, regardless of whether it costs $50,000
00:54:17.600 | or $100,000 when your kid goes to college.
00:54:21.480 | Most state school tuition inflation rates aren't that high.
00:54:26.400 | So, you know, three years ago when interest rates were low,
00:54:29.600 | those were a great late-stage planning tool if you lived in one of those states.
00:54:35.760 | Now when the FDIC insured piece of it makes, you know, makes 5%,
00:54:42.400 | it makes a lot less sense to lock up your money that way.
00:54:45.240 | Those can also only be used for tuition, and there's often a limited universe
00:54:49.440 | where you get a lower inflation crediting rate when you -- if you go out of state.
00:54:57.680 | So that would be my two cents on those.
00:55:01.960 | And Jim's here, so I think we're out of time.
00:55:04.440 | [ Applause ]
00:55:07.440 | Thank you so much.