Helping Clients With A Key Goal: Planning And Paying For College
“College education planning is always one of the top three planning objectives,” said Robert Cusick in an educational workshop here at the Society of Financial Service Professionals annual educational forum.
Cusick, who is president of Investment Insight, Ltd., Cortlandt Manor, N.Y., explained how important this goal is to his clients.
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“Theres tremendous emotional valuethe desire for their children to succeed is very important to them,” he said. “The key is to start early and have a plan.”
At the beginning of the planning process, its important to set quantifiable goals with your clients, he said. These goals should be discussed with other family members, including the grandparents. And, since the time horizon is usually shorter than other financial goals, it is extremely important to monitor the plan, he said.
“Every two years we take a look at the college plan–what are the goals and where are we now?”
In the later years of the college plan, it is important to fine-tune the strategy, assessing potential colleges early, evaluating the students goals and grades, and researching all available sources for financial aid. (See chart.)
Summer jobs, work study programs, grants, loans and scholarships are some of the ways Cusick said students can help pay for their education.
One of the latest ways parents are planning for their children’s education is through the use of section 529 plans. Cusick noted that while most people think of these plans as savings plans, section 529 also includes prepaid tuition programs. “529 plans are a broad brush.”
Prepaid tuition programs vary by state, Cusick said, and are designed to grow at the rate of inflation of the in-state schools tuition. The programs cover tuition, fees, room and board, transportation, and related expenses, he said.
Cusick explained that distributions from these prepaid tuition programs are free from federal income tax when used for qualified educational expenses.
He warned, however, that the plan balances for these programs have a dollar for dollar reduction in the amount of student aid available, having an adverse effect on the amount of aid a student may qualify for. “If youre going to go with a prepaid tuition program, youd better fund it well,” he said.