Get The Big Things Right – College Planning / Funding

The decisions around college can be emotionally charged.  It’s nearly always an expensive decision. The list price for top schools is now $350,000 for 4 years. Even In-state tuition for many flagship public schools tops $100,000 for 4 years. So how can you make good decisions that don’t saddle either you or your children with mountains of debt?  Getting the big things around college planning right can definitely help.

1) Know What You’ll Be Expected To Pay

The most important piece of the college puzzle is how much you’ll be expected to pay. This starts with the Free Applications for Federal Student Aid (FAFSA) and its result, the Student Aid Index (SAI) [new name for Expect Family Contribution (EFC)]. The biggest driver is parent income. At the highest level, that is assessed at 47%, meaning for every additional dollar you earn, you’ll be expected to contribute 47 cents to your child’s college cost. Non-retirement assets are also a factor, but they are only assessed at about 5%. Having an SAI less than the school cost doesn’t guarantee that you’ll get aid at every school. It will at least give you an idea of the minimum you’ll be expected to pay.

2) Understand The Different College Business Models

Colleges are businesses. Big businesses. They have different business models depending on the type of school. The top-tier schools, Ivy League and other highly regarded schools have their pick of students. Many of them also have HUGE endowments. They are “need-blind” meaning if they admit you, they will cover the difference between your SAI and the cost of attendance. But, they don’t provide any merit aid for high-achieving students because everyone they admit is high achieving. The next tier is private colleges that are competing to attract students. The competition is significant. Many will offer either need-based or merit-based aid. If your student has a GPA or test scores above their average student, there is a very good chance they may get merit aid. Finally, the state schools offer good deals for in-state students but expect to pay more if you’re not a state resident.

3) Build A Budget & Search For Schools Within Your Budget

Too many people I talk to search for schools without thinking about what they can actually afford. Their student falls in love with a college and the family decides that “if you get in, we’ll figure it out”. Those are the most dangerous words in college planning. Understanding your cash flow, savings, and scholarships are key to making a good decision. It shouldn’t be different than how you shop for a home or a car. The Ferrari is awesome, but if it’s not in the budget there is no reason to go look at it.

4) Save Early, Save Often

While savings are assessed within the FAFSA, they aren’t assessed at a very high rate. So the people that say you’ll get more aid if you don’t save aren’t really helping. Savings provide options. There are ways to save in tax-advantaged accounts like the 529. In many states, contributions can also qualify for state tax breaks.

5) Maximize The Value Of The GI Bill

I’ve written a full post about this, but I’ll summarize it here. You want to use the GI Bill when you get the maximum value. For those that have only 1 person (child, spouse, you) that’s planning to use it, that’s not too hard. One suggestion would be that if you are looking at private schools, make sure you look at the Yellow Ribbon Program to see if the school will make up any difference between the GI Bill and the cost of tuition. For those who are going to split the GI Bill, you’ll need to consider the Student Aid Index for each child, scholarships they might qualify for, yellow ribbon, and housing allowance to determine when it’s most advantageous to use it.

If you liked this article, check out this article (LINK) on how much is too much when taking out student loans.




  • Mike Hunsberger, ChFC®, CFP®, CCFC

    Mike Hunsberger, ChFC®, CFP®, CCFC is the owner of Next Mission Financial Planning located in Saint Charles, Missouri serving clients across the US and wherever the military takes them. After 25 years in the Air Force he started his firm to support military, former military, and retirees through values-based financial planning enabling clients to live their best lives.