It was about 2 a.m., and SAS Becker was having one of those moments familiar to any parent facing the specter of paying for a kid’s college education. She was on her computer, searching for ways to ensure that their two children wouldn’t accrue enough debt to cripple themselves and the family. Becker’s search led her to Judy Sciaky, founder of Montgomery County-based AP&G College Planning. Sciaky helped clarify the process for the Beckers, giving them some commonsense strategies. This fall, their daughter will be a sophomore at McDaniel College in Maryland. Meanwhile, their son—a junior at Conestoga High School—is just kicking off his search.
Becker is a self-employed photographer, and her husband is a seventh-grade science teacher in the West Chester School District. Right now, they’re managing college payment obligations without taking on a mountain of debt. They expect the same thing when their son heads to college. And because she’s learned so much, Becker has become something of a resource for friends. “A lot of people now come to me for consultations,” she says.
From building supplies and homes to cars and produce, prices are going up—and cost of higher education is truly soaring. According to CNBC, it rose more than 25 percent from 2009 to 2019. In 1978, the average private institution set parents back the current equivalent of $17,680. Forty years later, the tab is $48,510. In 2021-22, a student attending Princeton University will pay $77,690, all in.
The good news is that not everyone is going to Princeton. Its enrollment is about 8,600, and its acceptance rate is just under 6 percent. There are about 4,000 colleges and universities in the U.S., and their prices vary widely. So do their aid packages. Plan well, manage your finances carefully, save assiduously and find a landing spot that allows for maximum financial assistance during a four-year stay, and you can get your kids through college without significant pain.
But it requires plenty of planning, intelligent choices and an ability to steer clear of the status-symbol game. “I say to parents that they shouldn’t worry about their children going to Harvard, Yale, Princeton or Penn,” says Sciaky, who started AP&G in 2011 and is the widow of Philly radio legend Ed Sciaky. “Those are fabulous schools, but there are other schools out there that can offer people as much as they can.”
Parents need to begin early, though simply starting a 529 plan and throwing whatever money that can be spared into it on a semi-regular basis isn’t usually enough—or necessarily the right move. A more holistic strategy should include smart financial planning and tax prep, a set of reasonable expectations for what’s possible, and the ability to let children choose a place where they’ll be happy and successful. Put it all together over a period of 15 or so years, and you should be OK.
That level of planning was key for the Becker and her husband. “When you’re a public-school teacher and an artist, you better be looking at the bottom line,” she says.
David Kozak is founder and owner of Elite College Planning, part of Chester Springs-based Paradigm Financial Group, and CEO of the College Planning Group, a national concern. He’s been guiding families through the process for 10 years. “The first question I ask is, ‘Do you have your house in order, in terms of debt, cashflow and earning potential,’” he says.
But Kozak also understands that, unlike retirement, college usually comes with a hard-and-fast deadline. “You know that when your child gets to 18 years old, you’re going to have to put out a chunk of change,” he says.
In early 2013, Ann D’Antonio’s son was a junior at Bishop Shanahan High School in Downingtown and just starting his college search. “We had a little bit of sticker shock,” his mother says. “We were thinking that we were OK and would be able to figure things out, but we realized we didn’t have a plan at all. After some sleepless nights worrying about how we’d do it, we decided to do something.”
With help from Kozak’s firm, the D’Antonios were able to put something together late in the game. It wasn’t easy. They had some debt issues to work out. They didn’t have a mountain of savings, and they were living almost paycheck to paycheck. Given that, they expected to incur some debt to pay for college. Kozak convinced them otherwise.
They did refinance their mortgage “several times,” taking advantage of lower rates to lower payments and gain capital to put toward college expenses. They got rid of all but one credit card, which they used to purchase everything they needed and take advantage of cash-back opportunities. They also paid off the entire balance every month. One of the biggest changes the couple made: assessing every expense they might incur. Before, they didn’t think about it too often. Now, they were saving by deciding what was absolutely necessary and what wasn’t. It wasn’t a short-term program, but Kozak convinced them that it would serve the D’Antonios’ college needs, their day-today lives and their retirement planning.
Both of their children graduated in four years from Catholic University, a private institution in Washington, D.C. The couple had both of them take out small loans so they’d have the impetus to succeed in the classroom and find jobs after graduation. “We’re miraculously debt-free, and we paid for our kids’ tuition in cash,” D’Antonio says.
Self-employed parents should consider funding a Roth IRA, which allows for retirement and college payments. A 529 plan offers tax-deferred investing, the ability to use proceeds of up to $10,000 annually for K-12 education and an opportunity to invest up to $75,000 per year. But the money invested and interest earned must be used for tuition and expenses. Also note that large 529 account balances must be divulged when families fill out federal FAFSA forms, which determine how much aid they can receive. The greater a family’s assets, the less aid they can receive.
Sciaky doesn’t have anything against 529s, but she warns against overfunding them. “When my daughter was at Northwestern, we’d planned and saved for her in a 529 plan,” she says. “We saved to the max, and we got no aid whatsoever.”
Kozak reminds families that there are many different vehicles available for financing college, including whole life insurance policies and trusts. “Plans have to be simple but sophisticated,” he says. “You need pivot capabilities.”
Of course Sciaky and Kozak want their clients to have some savings to pay for college. But they also want them to receive as much aid as possible. That means sheltering money properly, avoiding large purchases like second homes (which must be reported on aid forms) and making sure they don’t deplete their retirement savings to pay for college.
It’s also worth noting that a private education isn’t out of the question for money-conscious parents. When it comes to the ability to provide aid, non-public institutions have an edge. “It’s possible for a private school to cost less than a public school,” Sciaky says.
According to U.S. News & World Report, the full cost of Saint Joseph’s University is $63,630. But the average student pays $38,459. That’s not cheap, but it’s a considerable deduction for students receiving need-based aid. It isn’t much more than the full in-state cost of the University of Pittsburgh, ($34,877) for the 2021-22 school year, or Penn State’s main campus.
Those looking for financial aid should file their FAFSAs on the earliest day possible. Schools have finite amounts of money to give away, and the earlier a family is in and qualified, the better. Sciaky also cautions parents that changes are coming to the FAFSA program for the 2023-24 school year. The built-in discounts for families with multiple children in college will go away. That’s countered by an increase in income allowance. Beginning in 2023, those who previously didn’t receive aid because they made too much money could be getting some.
All of that makes tax planning vital. Because the federal return is the foundation of FAFSA, it’s important for people to shelter income and assets.
Sue and Gary Hughes had been saving for college—just not at the Cornell University level. With Kozak’s help, the East Coventry family handled the price tag in a responsible way, maximizing the amount of aid they received and knocking down their contributions to son Eric’s Ivy League education. “We didn’t want to compromise our retirement to pay for college,” says Gary Hughes. “We had a two-pronged plan that put our money in places that were good for retirement but also optimized what we received for college.”
Experts are almost universally united in the opinion that some form of correction to the market is on its way. For those who have all their college savings in 529 plans, that could mean trouble. “You never know when it’s going to happen or how big the correction is going to be,” Kozak says. “We have this economy that’s going up and up and up, with greed and greed and greed. People are reinvesting their dividends and think this will go on forever. It won’t.”
Diversification is important. So is protecting assets earmarked for retirement. “College is a family affair,” Sciaky says. “Kids have to understand that. Choosing the right college is critical. If they end up dropping out, it will be bad for the parents. It won’t be a five-figure mistake— it’s a six-figure mistake.”
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