Paying for college involves lots of moving pieces. What can parents do to make paying for college easier on their wallets now and their retirement dreams later? Parents of college-bound high school students are served better when they and their financial advisors get outside help from specialists. As noted in a previous post, getting help from a college financial planning specialist is not unlike doctors or lawyers referring to subject matter experts.
Moving Assets
You need to move your assessable assets into non-assessable accounts. This is what is called “parent asset positioning.” This strategy is key to receiving more financial aid than you may have thought possible. If your assets are exposed to either the federal or institutional methodology used to calculate your Expected Family Contribution, you are at risk of receiving less aid. You can reduce the amount you may have to pay by altering ownership or sheltering those assets into non-includable or non-assessable accounts.
Parents may have a variety of accounts in their names like:
- Mutual Funds
- Real Estate
- Stocks/Bonds
- Savings
- Money Market
- UGMA’s/ UTMA’s
Knowing how to turn these assessable asset accounts into non-countable assets may save you money in the long-run.
Be careful to properly and legally implement the available strategies. If you err here it could be very costly when you complete the financial aid forms like FAFSA. This is where you should seek the advice of a qualified college financial planner and financial aid consultant.
Plan for Cash Flows and Taxes
You need to develop cash flow scenarios. Convert short-term debt into long-term debt and take full advantage of low interest student loans. Take full advantage of strategies to deduct the cost of college on your taxes. To qualify for some of these benefits you may need to do some tax planning well ahead of April 15 especially if you are self-employed or own rental real estate. There are some creative strategies for tax deducting college costs that work for nearly everyone over and above the Lifetime Learning Credit, Hope Scholarship Credit and student loan interest deduction.
529 Plans: Worth a Look
You should evaluate the pros and cons of implementing a 529 savings plan or a prepaid tuition program. Sometimes these make sense even if your student is only a year or two away from entering college.
Get Expert Help to Navigate the Process
You should seek help from a college financial planner and financial aid consultant and assess the impact paying for college may have on your other Big Picture Goals like your ability to retire or pay off your house. If you have more than one child, you need to strategize now on how you’ll be able to send more than one child to college without going broke.
Learn the rules and regulations that govern financial aid. Learn how to use them to your advantage. Discover how to receive more free college scholarships and college grants so you’ll have fewer student loans to pay back. Become an informed consumer of the college funding process and you’ll be rewarded with a high return on your investment of time.
The sooner you start doing your homework and educating yourself about your options or using the college planning services of a qualified college financial planner, you’ll be able to implement cost saving strategies and create personal “tax scholarships” that will make paying for college easier on you and your family.
