College Funding Concepts - FMICollegePlanning.com

Brandon and JoAnne owned their own business, with an annual income of $65,000. Their assets included $90,000 in home equity, $110,000 in a retirement account, $140,000 in business equity, and $9,000 in savings. Their consumer debt totaled $15,000. Their son Bryce had an additional $8,000 in Certificates of Deposit (CDs).

Goal: Brandon and JoAnne wanted to maximize Bryce's eligibility for financial aid and establish residency at a $24,000-per-year public university in another state.

Plan: To maximize Bryce's eligibility for financial aid, Brandon and JoAnne followed the recommendation of their college financial planning advisor and repositioned certain assets. They also employed specific tax strategies to lower their business income.

Result: Brandon and JoAnne saved $17,500 a year for Bryce's college and increased his financial aid eligibility by $7,500 a year. A well-planned series of steps helped their son establish residency in the state where he attended university, which reduced the cost of attendance by $10,000 per year.

John and Michelle had an annual income of $75,000. Their assets included $80,000 in home equity, $95,000 in retirement assets, $6,000 in mutual funds, and $8,000 in savings. The couple had a consumer debt of $14,000.

Goal: Steven would enter college in 10 years and his parents wanted to provide him with the best college education possible. They wanted to establish a college fund to save $80,000 for future college costs but did not want the fund to reduce Steven's future eligibility for financial aid. Finally, they wanted to ensure that the money was available for Steven's college education, even if one or both of them were disabled or died.

Plan: A college financial planning advisor helped John and Michelle develop a strategy to move some of their investments to a college fund that would not affect Steven's eligibility for financial aid. This would enable their son to attend college even in the event of parental disability or death. In addition, this investment strategy would allow them to save for college expenses automatically.

Result: John and Michelle accumulated the $80,000 for Steven's college without paying taxes on the earnings. In addition, the fund had no effect on their son's eligibility for financial aid.

Wanda, a divorced mother, had annual income of $80,000 from her marketing job and alimony. Her assets included $55,000 in home equity, $140,000 in qualified retirement accounts, $129,000 in investments, and $36,000 in cash. Her daughter Nicole had $24,000 in a 529 qualified tuition college savings plan.

Goal: Nicole was about to enter a private college that cost $32,000 per year, but she was not awarded any financial aid. Wanda sought the best way to pay the college expenses.

Plan: The college financial advisor created a plan showing Wanda how to pay for college and still preserve her non-retirement assets. The advisor also shared tips to boost her retirement savings as well.

Result: Nicole was able to attend the private university without using the family's assets. At the same time, Wanda was able to increase her retirement funding.

Michael and Brandie had an annual income of $40,000. Their assets included home equity of $80,000, retirement accounts of $65,000, and savings of $15,000. They had no consumer debt.

Goal: Cameron was to attend the private university from which his father graduated, which cost $36,000 per year. Michael and Brandie needed a plan to pay for Cameron's tuition and expenses.

Plan: Following the advice of their college financial advisor, Michael and Brandie obtained a home equity line of credit and paid down their mortgage with some of the cash they had in savings. They also filed the required federal financial aid forms and applied for a state education grant.

Result: Cameron received a college grant for $11,000, federal grants for $5,800, and a state grant for $5,000, a work-study program stipend for $2,100, and a federal subsidized loan for $2,600.

Jim and Nancy had a student in their second year of college and a junior and a freshman in high school. They have incomes of $180,000 and they're paying for college from cash flow. They own income real estate and have equity in their home of $150,000. Qualified retirement assets are $310,000; investment assets are $33,000, and a savings of $9,000.

GOAL: Jim and Nancy want to send their children to a private university, but are not sure how to fund three kids in college at the same time.

Plan: Jim and Nancy's college advisor developed a plan showing them how to make the best use of different savings options and then projected the best way to pay for college utilizing their assets in their home and protecting their current assets while continuing to contribute to Jim's pension at work.

Result: Jim and Nancy have a plan to pay for college that can be updated as the kids enter college. At the same time, they are able to continue to fund retirement while reducing their overall taxes and maintaining their established lifestyle.