Intro
Welcome to the Paragon Podcast. A podcast focusing on the needs of high net-worth individuals and their families. We discuss the markets, tax strategies, and how to better manage wealth with the goal of living better for today while planning for tomorrow.

Elean
Hi everyone welcome to the Podcast and thank you for tuning in. This is Elean Mendoza and I’m here with Evan Shorten, firm’s founder and principal.

Evan
I hope you’re all doing well and staying safe. Before we begin, I just want to quickly ask that you to please subscribe to the podcast either on the Apple Podcasts App, Stitcher Radio, or by subscribing to our YouTube channel. This week’s episode is going to be great for parents whose children are just starting high school and who want to start getting prepared early for college planning. If you or your loved ones are in this situation and are just starting to think about college, please forward them this episode as it may provide a good starting point.

Elean
As Evan mentioned, this week’s episode is going to talk about college. This is going to be a great primer for parents who are just starting to think about their children’s college education and need a place to begin. Think of this episode an intro to college planning covering four high level items you should do in the four years before college.

So, to start things off, first you want to take stock of your current college savings and crunch some numbers.

Evan
Yes, and you want to make sure you do this early and review annually. The earlier you review your current level of college savings the more flexibility you’ll have down the road with respects to your finances. You want to be aware of how much you have saved up to this point? How much you plan to have saved by the time your child starts college? And if you can or should increase your child’s college savings.

This is when you want to look at your 529 college savings account, UTMAs, trust accounts, or perhaps any account setup by grandma and grandpa. Or perhaps this may be a wakeup call that it’s time to setup that 529 college savings account and get that savings into high gear.

Once you have taken stock of where your college savings stands, you should look a few college savings calculators to explore various saving scenarios; and don’t forget, you can still continue to save during your child’s college years.

Elean
Keep in mind there are various types of college savings calculators available that solve for different things and not all calculators use the same rate of inflation. One type of online calculator you’re going to want to use in your planning is a “net-price” calculator.

Evan
Yes and that goes with along with the second item you should review within the four years before college. You should get familiar with the financial aid process, and as you mentioned, net-price calculators. A net-price calculator will give you an estimate of your family’s out-of-pocket cost. Colleges differ in the amount of financial aid they offer and by running different net price calculators, you can get an idea of how generous a college might be based on your financial information and your child’s academic profile. And keep in mind that net-prices calculators are specific to the school or school system to which you’re applying for so it’s important to see the results for each school your child plans to apply to as each school may assess your family’s finances differently.

Elean
As a quick example, some schools consider the top end of “middle class” $120k family income, others $150k, and others $180k.

So that covers the first two items you should review, what’s the next one?

Evan
Third, you want to research schools wisely. If cost is a factor, and it is for many families, you’re more likely to get the best financial deals at colleges where your child’s academic profile puts them in the top quarter or the top third of applicants.

Elean
And as a side note, by financial deal, we really mean better financial aid terms.

Evan
Yes, and in fact there other factors that could help provide a better financial deal for your child such as extracurricular activities, athletics, and geographic location. It also doesn’t hurt to start your research with public universities in your state as they often have a lower sticker price.

Elean
I do want to add one caveat to that which I realized when I went to college. Depending on where you live and the cost of housing, a public university in your area might have lower tuition but have a significantly higher cost of housing. It’s not uncommon for public schools in California to have a higher total cost of attendance than an out of state school simply because the cost of housing might be double that of an out of state school.

Evan
Lastly, have a frank conversation with your child about college costs. Share your expected savings at the start of college and how much you can contribute during college. Look at a few schools that might be a fit and estimate how much borrowing would be required to attend each. Then show your child exactly what the monthly payment would be for each of these loan amounts after college using a standard 10 year repayment term to help them see the real financial impact. Perhaps they may not understand the true cost of a decade’s worth of debt, but having that conversation with them could help you in better explaining it to them.

With these four steps you and your child should be able to kick off the college planning process with confidence, but I do want to touch on one other item that is somewhat related to this.

If you’re finding a shortfall in your child’s college funding, it’s important that you do not touch your retirement accounts. I understand, we all want to help our children and we don’t want to see them graduate with a lot of debt, but a 22 year old graduating college with $30 or $40 thousand in debt has their entire lifetime to pay that back and most will pay it off within the first 10 to 15 years of their professional careers. You on the other hand may have a limited number of years left in your career or your physical ability to work. It’s much more difficult for a parent to make up a retirement shortfall than it is for their children to pay off student debt.

Elean
Ok well said. With that hopefully this episode provides you with an early starting point for the college planning process. If you know anyone who you think might benefit from listening to this episode, please forward it to them. Lastly, please don’t forget to subscribe to the podcast. Thank you very much for tuning in and we’ll see you here next time.