Tips For Your Tots

Tips For Your Tots
College Financial Planning Advice

Beginning next fall, Westchester Chapter member and proud father of three Howard P. Klein will have 11 straight years of higher education to bankroll.

It was this sobering realization, combined with an eye-opening presentation he attended last year at Blind Brook High School in Rye Brook, which first piqued Klein’s interest in strategic college financial planning.

“I learned about how the college savings process works and the common misconceptions about it like, for example, how most people living in this area figure they make too much money to get any financial aid,” said Klein, a managing partner at Eisner Zucker Klein & Ruttenberg, LLP in White Plains. “Now, this may be true for need-based aid, but there are many other ways to pay for college.”

“You can take advantage of a loan or a scholarship or merit-based aid,” he said. “There are many opportunities out there that people seem to be missing.”

Planning is Half the Battle

Difficult but doable, paying for college does not have to be an insurmountable challenge, and in order not to miss the boat, simply mapping a plan far enough in advance is actually half the battle.

Syracuse Chapter member Gary E. Carpenter, executive director of the National Institute of Certified College Planners, cannot overstress the need for a forward-looking attitude.

“With my clients, one of the major hurdles is putting a plan together,” said Carpenter. “Today, too many families start to think about college late in the game when the child is a junior or a senior in high school.”

“Really,” he said, “They should have been thinking about this when the child was born.”

With college tuition prices on the rise and no sign of leveling any time soon, it’s vital for parents and their children to be pragmatic about their choice of school and not to be seduced by name or prestige.

“When the child is 16 or 17, the first thing I do with clients is ask them where their child will be going to school and if it’s a realistic place for them to go,” said Carpenter. “I ask what the child’s going to do with the degree once they graduate.”

“For example, I had a client who wanted to go to the College of William & Mary for a degree in social work. After graduation, they would likely be employed by a county in New York State making $40,000 or $50,000 a year,” he said. “At the same time, they will have amassed a college debt of over $80,000.”

“Considering the major, she could have gone to a state university for a third of the cost and still gotten a good degree,” said Carpenter. “Many people don’t think of it this way because they get caught up in the name, but some of the best schools in the state are SUNYs.”

What’s In a Name?

According to Al Hoffman, Education Services Manager at Successful Educational Solutions, a White Plains based strategic college financial planning company, a 1999 study conducted by Princeton University economic professor Alan Krueger examined the post-college success of Ivy League students versus students at less exalted institutions and found that regardless of the school they attended, students of the “same caliber” were, on average, tied for income 10 years after graduation.

Taking Krueger’s findings and the high cost of college into consideration, said Hoffman, it is important for the family, and not just the often financially naive student, to be involved in the college selection process.

“College selection is a family decision and in my family, I’m not going to allow a chemically imbalanced carbon-based unit make a $200,000 decision,” said Hoffman, who often speaks about college planning to audiences of parents. “That one always gets a good laugh at the seminars and presentations.”

“When I was in college, I was able to pay for room, board, tuition and books myself if I saved money from a summer job and got a half-decent part-time job during the school year,” said Hoffman. “Today, that’s ‘mission impossible’ unless perhaps the child is going to a junior college.”

“Parents making a $100,000- or $200,000-decision will almost always consult a professional for advice,” he said. “Don’t ignore the kid’s wishes, but you have to look at cost. The parents have to be part of the decision-making process here if they also want to retire at some point in the future.”

Consider Funding Sources

The golden rule in college financial planning for parents, said Carpenter, is to never take money out of your retirement account to pay for college. Though it is possible to borrow to finance education, he said, there is no bank in the world that will lend money to subsidize retirement.

“[The parents] don’t usually put the money back, so those funds and the earnings on those funds, which had been tax free, are lost,” said Carpenter. “My goal with families is for them to have, after school is over and the last kid has graduated, the same amount of assets or more that when they started the whole process.”

Though there is no “silver bullet that takes care of college costs all in one shot,” said Carpenter, it’s all about careful, smart and early planning. He advocates “putting together all of the little pieces” like deductions, loans, grants, scholarships, education tax benefits, etcetera.

Both Carpenter and Klein stress the value of filing the Free Application for federal Student Aid (FAFSA) form, despite a family’s income. The family should also make sure to communicate with the grandparents to make sure that they aren’t planning at cross purposes.

Research and elbow grease, said Klein, are the tickets to successful planning.

“College financial planning is not an area that the public hears enough about,” he said. “People talk about estate and financial planning all the time – but there is something you can do about saving for college too.”

“Other than buying a home, paying for college is likely the second biggest expense of your life,” said Klein. “But there is a lot of money out there if you would only do your due diligence.”

Gary Carpenter can be reached at 315-487-4567 or gec@collegeloanevaluator.com.

Howard Klein can be reached at hklein@ezkrcpa.com.

Allison Schiff can be reached at aschiff@nysscpa.org.