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How To Pay for College Without Breaking the Bank

Amy Leis, Financial AdvisorAccredited Wealth Management Advisor®, Chartered Retirement Planning Counselor®

Janney Montgomery Scott LLC

© 2017 Janney Montgomery Scott LLC

We’ll Talk About

•Cost of College

•Financial Aid•FAFSA & EFC

•Funding Strategies

A Parenting Decision

•To Pay or Not to Pay?

•Not like when you went to college

•But keep in mind retirement

Tuition Inflation

Source: BLS Consumer Index, JP Morgan Asset Management. Data represents cumulative percentage price change from 12/31/82-12/31/16

Future Four-Year College Costs

Current Cost of Attendance (tuition, fees, room & board)

New Jersey

• Rutgers University New Brunswick

• In state: $32,191

• Out of state: $48,132

• The College New Jersey

• In state: $34,467

• Out of state: $45,896

• Seton Hall

• Private: $59,062

• Princeton University

• Private: $66,950

Pennsylvania

• Penn State Main Campus

• In state: $34,344

• Out of state: $51,572

• Temple University

• In state: $32,300

• Out of state: $44,060

• Villanova University

• Private: $68,232

• University of Pennsylvania

• Private: $68,600

Source: www.collegedata.com; www.collegetuitioncompare.com; updated 9-17-18

Community College Hybrid Programs

• Rowan College Burlington County• 3 yrs at RCBC, 1 year at Rowan

• Camden County College• 2 years at CCC, 2 years at Rutgers-Camden

• Passaic County Community College• 2 years at PCCC, 2 years at Rutgers, Fairleigh Dickinson, Thomas Edison

• Note: transfer agreement depends on major

• For more info: www.njtransfer.org

FAFSA(Free Application for Federal Student Aid)

• www.fafsa.ed.gov/

• Required by all accredited schools

• Determines a family’s Federal EFC

• Submission deadlines vary by school • 2 year lookback

(2016 data for 2018-2019 school year)

• Get FAFSA in early• October 2018!!!

Parents vs Kids vs Assets• Kids’ assets assessed: 20%*

• Parents’ assets assessed: 5.64%*

• 529s in kids name assessed at parents level• Multiple 529s roll up to oldest child

Parent: 5.64% of assets example:

$10k in savings = $564 added back in to expected contribution

Student: 20% of assets example:

$10k in savings = $2,000 added back in to expected contribution

* Under Federal Methodology

CSS Profile(Administered by College Board)

• www.collegeboard.org

• Used by over 200 private colleges and universities to award institutional money (the college’s own money)

• Deadlines vary by school• 1 year lookback (2017 tax returns and estimated 2018 income)

• Longer form than the FAFSA

Assessable vs Non-Assessable Assets

• FAFSA vs CSS• Retirement Accounts (must add back in prior year contributions)

• Home equity in primary residence

• Rental properties (LLC, cleaning, laundry)

• Mortgage, credit card debt

• Annuities

• Cash Value Life Insurance

• Trust Funds and UGMA/UTMAs

• Grandparent assistance

But There Are Scholarships, Right?

But my kid is super-gifted!

• Most schools offer merit (non-need based) scholarships(but not the Ivy League schools)

• Schools can base their awards on a student’s talents or skills, community involvement, geographic location, ethnicity, religion, etc.

• Non-traditional ideas• Head West• Play the tuba

But my kid is great at sports!

Are there any non-athletic scholarships?

•Financial Need vs Merit Based

•DO NOT PAY to apply to a scholarship!!!

•www.collegescholarships.org

•www.cappex.com

•www.petersons.com

•www.fastweb.com

•www.finaid.org

Funding Strategies

• 529 - More conservative asset allocation as student gets closer to college

• Roth IRA (but NOT your retirement assets)

• Whole Life Insurance

• Tax Credits

• HELOCs

• College Condos

529 Plans

•State specific?

•Taxation of assets?

•What about no college?

•www.collegesavings.org

•www.savingforcollege.com

Federal Loans: 2018-2019

•Subsidized Loans—5.05%

•Direct PLUS Loans (for parents)—7.6%

•www.studentloans.gov

•www.studentaid.gov

Education Tax Credits• American Opportunity Credit

• $2,500 tax credit, per student

• Lifetime Learning Credit • Up to $2,000 tax credit per return

• Tuition and Fees Deduction• Up to $4,000 taxable income reduction per year

• IRS Publication 970

Important—there are income limits and other variables that determine eligibility. Get advice on Tax Credits from your CPA.

Non-Traditional Strategies

•Roth IRA (but NOT your retirement assets)

•Whole Life Insurance

•HELOCs

•College Condos

Veterans Benefits

• Post-9/11 GI Bill

• Montgomery GI Bill

• Reserve Educational Assistance Program

• Veterans Educational Assistance Program

• Survivors & Dependents Educational Assistance Program

• Contact the US Department of Veterans Affairs for more info

The Three Types of Families

• Type 1: Families that will always qualify for need-based financial aid at any college.

• Type 2: Families that would not normally qualify for need-based aid, but with proactive planning, will qualify.

• Type 3: Families that will not qualify for need-based aid under any circumstances.

Type 2 Family Case Study - Borderline financial aid

• Andrew is a sophomore in high school– only child

• Parents have $2.5 million in assets (mostly annuities and retirement accounts)

• Andrew has $65k in his name—UGMA/UTMA and personal savings from summer job

• 529 has $25k

• Combined income is $160k (mom just retired to start small business)

• Wealthy grandparents

• They live in NJ

Solutions

• Spend down all $$ in student’s name & reduce his income

• Spend all non-retirement assets on first year of school

• Take out home equity line of credit

• Max out 401k, defer additional income if possible

• Grandparents pay for senior year of college

Type 3 Family Case Study - Does not qualify for aid

• Julie is starting Drexel Univ in the Fall

• She has 2 little sisters and works part time for her parents manufacturing business at $8/hr

• Business is very successful S Corp, parents have $1.1mill net income annually

• 529 is empty

• No additional assets other than several real estate holdings

• They live in PA

Employ Your Child

• Pay your child wages from your business or rental to reduce your income

taxes

• Not subject to Social Security taxes if the child is under 18 and paid from

a sole proprietorship

• Use retirement accounts such as a Roth IRA to reduce taxable income

Solutions

• Increase Julie’s salary significantly

• Put $$ through 529 straight to college and also put $$ in for sisters--get tax break

• Fringe Benefit Tuition Program

• Educational Assistance Tuition Program

• Whole Life Insurance

• Hire younger sisters & put $$ into Roth IRA

• Roth IRA conversion for parents

• College Condo

Questions?Amy Leis

Financial Advisor

Janney Montgomery Scott LLC

856-291-5011

aleis@janney.com701 East Gate Drive, Mt Laurel, NJ 08054

Need a speaker for your next meeting? Give me a call!

Member SIPC, NYSE, FINRA

Sources & Citations• JP Morgan Asset Management, College Planning Essentials, 2017-2018

• fafsa.ed.gov

• finaid.org

• irs.gov (IRS Publication 970)

• collegesavings.org

• savingforcollege.com

• Paying For College: Use Trump’s tax plan to pay $0 tax on $30,000 of capital gains, Troy Onink, forbes.com

• 2017 Guide to College Financial Aid, the FAFSA and CSS Profile, Troy Onink, forbes.com

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