By: Rob Schulz, CFP®
April 28, 2009
Gretchen, my oldest, is going off to college next year so I thought I would briefly share some thoughts on college planning with you.
- Enlist the help of your parents if they are willing and able. Several years ago, my mom expressed interest in helping with college so I set her up monthly deductions into a college account. Fast forward to 2009…..with four kids and the DJIA at 8000, I am glad we have the extra money. College funding is one of the easiest legacy gifting strategies available so take advantage of it.
- Keep your options open because you never know. I tell my kids all the time to work hard, make good grades, and keep their options open. Gretchen did work hard, and submitted difficult admissions requirements to top architecture schools across the country. It would have been more difficult for Shelly and I to encourage her dreams if all of our college planning had been done with the Texas Tomorrow Fund (best used for Texas public schools). I sometimes jokingly call Financial Planning “Financial Guessing”. Planning with respect to college is always a best guess so don’t lock yourself in.
- Take your deductions “above the line”. If you own a business you may be able to indirectly fund college with deductible business expenses. I call this an “above the line” expense because you don’t pay FICA or what is sometimes called self-employment tax. Sometimes we can use ROTH-IRA’s as the funding vehicle and achieve tax free earnings on top of the deduction! This is a highly customized strategy that takes careful planning and coordination with your tax advisor.
- It all hinges on entrance exams so take them seriously. Texas public schools use your child’s SAT or ACT score as their overriding primary, almost exclusive, determining factor for admission acceptance and merit scholarship awards. Private schools use other important factors in addition to the SAT or ACT, but still use it as a primary screening criteria. We decided to enlist Gretchen in one-on-one SAT tutoring. Tutoring was very expensive, intense, and time-consuming, but dramatically improved my daughters SAT score. She was able to gain entrance into a top-tier nationally recognized Architecture program, and was awarded $65,000 in merit scholarship funds. All of this for less money and trouble than a select volleyball season.
- Know your FAFSA score. FAFSA stands for Free Application for Student Aid. FAFSA is to needs-based scholarships what the SAT is to merit scholarships. All of the public and private schools use your FAFSA score to determine eligibility for government grants, loans, and needs-based scholarships. Go to http://www.fafsa.ed.gov/ and fill out the worksheet to get a rough estimate of your FAFSA score. Your score corresponds to your child’s annual college expenses. So, if the FAFSA score is 58,000 and your kid is planning on attending Texas A&M (annual expenses around $22,000), you are out of luck. Bottom line is that government assistance through grants, loans, and tax credits are drying up fast. Know your FAFSA score so you can plan accordingly.
I hope some of the information I have shared helps you with this important planning stage. If you have any questions or comments, feel free to email me or call.
Rob Schulz, CFP® is a Principal with First Texas Financial Services, Corp., and a Registered Representative through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. He is also an Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and FTFS are not affiliated. These are the views of Rob Schulz and not those of Cambridge, FTFS, or any of their affiliates.
Rob Schulz, CFP® is a Principal with First Texas Financial Services, Corp., and a Registered Representative through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. He is also an Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and FTFS are not affiliated. These are the views of Rob Schulz and not those of Cambridge, FTFS, or any of their affiliates.
By Rob Schulz
