College is a major expense, especially at top-tier private universities costing over $280,000 for a 4-year degree. Even high-income families can struggle to pay full freight. Strategic planning allows you to minimize college costs and continue growing your family’s wealth. With specialized expertise guiding affluent families, advisors have helped save hundreds of thousands in college costs through personalized strategies.
The 3-Step College Funding Process
A holistic process helps high net worth families develop customized college funding plans aligned with their financial pictures:
Step 1: Get Organized
– Consolidate financial statements to evaluate total income, assets, and net worth
– Project future resources based on retirement plan balances, savings rates, etc.
– Detail expenses and cash flow needs for college and other goals
– List college options based on academic fit, financial fit, student interests
Step 2: Get Ahead
– Open tax-advantaged college savings accounts like 529s and Roth IRAs
– Invest savings strategically to balance college needs with overall growth
– Have your student focus on academics, test prep, extracurriculars for merit aid
– Research each college’s aid policies and merit scholarship offerings
Step 3: Get a Plan
– Submit financial aid forms and optimize your profile to maximize aid
– Compare grant and scholarship offers across colleges
– Model multi-year costs factoring in all available aid and savings
– Stress test with different college options, savings levels, and market returns
– Finalize an integrated plan addressing both college and retirement
This structured approach allows advisors to build fully customized college funding plans for high net worth families focused on education affordability, tax efficiency, and protecting family wealth.
Case Study: The Richards Family
Let’s walk through an example of how an affluent family developed a tailored college funding plan that saved them $35,000 per year on their preferred school.
The Richards are a dual-income household earning $250,000 annually. Their current retirement savings rate is 25% of gross income. Their daughter Emma is considering several private universities with annual costs ranging from $60,000 to $75,000.
By analyzing their financial profile, the advisor helped the Richards:
– Shift assets to qualify for need-based grants, lowering their out-of-pocket costs
– Have Emma take SAT/ACT prep courses, earning $10,000 in additional merit scholarships
– Use income tax losses to offset capital gains, creating funds to pay the family’s EFC
– Front-load 529 contributions and tap grandparent assets to accrue savings
These and other moves reduced the Richards’ out-of-pocket costs at Emma’s top-choice school from $75,000 down to $40,000 annually. This college savings allowed the family to maintain their 25% retirement savings rate throughout Emma’s 4 years.
Key College Funding Strategies
Here are some of the personalized strategies utilized to help high-income families fund college while protecting their wealth:
Merit Aid Maximization
– Invest in test prep, academics, extracurriculars tailored to the student’s strengths
– Target colleges where the student’s scores are within the top 10-25% of applicants
– Negotiate offers between comparable colleges competing for the student
– Shift college savings to student’s name to decrease aid impact
– Use income tax losses to offset capital gains, creating college cash flow
– Make lump sum 529 contributions in early years to front-load savings
– Draw grandparent-owned 529s first before parental accounts
– Fund 529s when claiming itemized deductions to reduce taxable income
– Use Roth IRA withdrawals (contributions then earnings) for college tax-free
– Take tuition credits like AOTC/Lifetime Learning on alternating years to maximize benefits
– Keep income level below financial aid cutoffs that can trigger huge aid declines
The personalized strategies contained in a comprehensive college funding plan allow affluent families to achieve their goals: securing their child’s top-choice quality education while responsibly saving for retirement and family wealth transfer.
Negotiating and Appealing College Aid Offers
Beyond applying for aid, proactively negotiating with colleges can result in increased scholarship and grant funding. With multiple acceptances in hand, you gain leverage to appeal offers.
For example, if your student is accepted to College A and College B:
\- Review the merit scholarship and need-based grant awards from both schools
\- Contact the financial aid office at College B, share that College A offered a higher scholarship amount, and ask if they can increase their offer
\- Colleges want to enroll top students, and may match or exceed a competitor’s offer
\- Use the new higher offer from College B to negotiate back with College A and so on
This back and forth negotiation can substantially increase your merit aid, often by thousands per year.
Case Study: $6,000 Increase in Annual Merit Aid
The Wilson family’s son, Alex, had a 4.2 GPA and scored a 1420 on the SAT. He was accepted to two comparable private colleges:
College A offered:
$5,000 per year merit scholarship
$2,000 need-based grant
College B offered:
$7,000 per year merit scholarship
$1,500 need-based grant
The family asked College A if they could match College B’s higher merit scholarship amount of $7,000. College A increased their offer to $11,000 in merit aid annually – a $6,000 per year increase!
By negotiating with real scholarship offers in hand, the Wilsons successfully increased their son’s annual merit aid from College A by $6,000 for all 4 years – that’s over $24,000 in additional funds.
Families should not hesitate to appeal and negotiate for more affordable college options. With strategic negotiation guided by a knowledgeable advisor, you can uncover opportunities to significantly reduce out-of-pocket college costs.
Why Work With a Wealth Advisor?
Affluent families have complex financial lives spanning investments, tax planning, estate strategies, and more. Successfully saving on college costs requires optimizing your entire financial picture in a coordinated way.
Experienced advisors take this holistic approach:
– Modeling college funding strategies together with retirement, tax and investment plans for fully integrated advice
– Providing objective guidance untethered from any one financial product or institution
– Uncovering savings on quality education you may miss trying to DIY with online tools
– Leveraging established relationships with financial aid offices for inside strategies
– Monitoring changing aid policies and regulations to identify planning opportunities
Look for advisors that offer initial consults to discuss college and retirement savings goals. Their specialized skills and experience can uncover opportunities to fund college while preserving wealth. Explore your options and please feel free to start with us.