Are You Prepared For Your Children or Grandchildren’s College Education?

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August means back to school, and school is beginning earlier and earlier.

When I went to high school, the last day of summer was Labor Day and school began the following day.  Now, in most of California, high school will begin the 2nd week of August.

Are you the one who will pay for your teen’s college, or are you the one in a position of having an enormous impact on your grandchild’s future? If so, let’s discuss our current dilemma.

The costs of going to college have skyrocketed and they are growing almost at a double-digit rate of increase every year. According to US News and World Report, here are some costs you should familiarize yourself with.

All-In College Costs for Your Teen

This includes tuition, room and board, food and/or a meal plan, and miscellaneous costs such as laundry, supplies, medical costs, extracurriculars, seeing friends, and having your teen come home for weekends or vacations.

University of California BerkeleyIn-state $43,000
University of California Santa CruzIn-state $41,000
Santa Clara University $59,000
St. Mary’s College$61,000
Harvard University $67,000
The University of Nevada at Reno$56,000
University of Oregon$56,000
Chico State College$31,000

I think you get the idea here. It’s going to be way more expensive than you ever considered. 

So, what can you do? Have a 529 College Savings Plan set up.

With a 529 College Savings Plan, you and your spouse can contribute up to $32,000 per beneficiary (your teen) per year and this would be considered a tax-free gift. You could also contribute 5x of this every five years or $80,000 per person.

All of these monies would grow tax-free if used for post-secondary education purposes (buying a car doesn’t count) and you always own these assets just in case you wish to gift them to the next teen in your home, family, or use the unused portion for some other purpose (subject to tax/penalty implications).

Most colleges will count 529 savings as an offset to grants and scholarships for your teen should the parent own the 529. It is, however, far more difficult for colleges to track these down when owned by other relatives. I believe these actually work best when owned by grandparents with a parent being the contingent beneficiary, just in case.

Complete the FAFSA form in January.

Don’t wait!  This will set up your teen for receiving both subsidized and unsubsidized loans, with subsidized being better. It will also open the door to grants and scholarships. Check online with grant and scholarship organizations that make a living helping you find money and lower out-of-pocket costs for your teen.

Every hobby, sport, gender, race, and religion has associated scholarships and grants available each year for qualifying teens. I spent hundreds of hours looking for grants and scholarships for my three teens and found hundreds of thousands of dollars available.

Finally, understand the difference between “gross” and “net” costs to you. For example, it appears that the UC system costs less than private out-of-state schools. On the surface, this is true. But, I found that there were so few scholarships available in California with these public schools, but that my teen could receive more than 50% offset money from private out-of-state schools, making the “net” costs a fraction of the California costs.

We can help you with your education planning.

This is part of having a sound Financial Plan and we recommend this for all our clients. It rarely makes sense to borrow from your 401K to send your teen to college, but remember that when it comes to our children, we will do almost anything to help them.

Take the guesswork out of planning for college.

With 529 College Savings Plans, you’ll always maintain control with the flexibility to change beneficiaries as your teen’s education progresses. 

To learn how to fit this strategy into your Family Wealth Management plan – contact me today.

All my best,

Elliot Kallen


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