How Co-Parents Can Develop a Plan to Get Their Child a Great Education at a Price They Can Afford

Join us as we sit down with Certified Financial Planner, Ann Garcia, to discuss how co-parents can work together to save for their child's future education. In this interview, Ann discusses the following:

 •    Identifying the right time to begin financial planning for college.
 •    Setting priorities for your student’s college choices.
 •    How to find the colleges most likely to give your child scholarships.
 •    How to find colleges that are good fits, not just financially but also academically and socially.
 •    Utilizing a 529 account or a savings account.
 •    How co-parents can set aside money for a college fund without ruining their retirement.
 •    How financial aid, merit aid, and scholarships work for co-parents.
 •    What co-parents should know about the FAFSA.
 •    How to think about college from the perspective of “why college” and not “which college”.
 •    …and much more!

If you would like to speak with one of our attorneys, please call our office at (503) 227-0200, or visit our website at https://www.pacificcascadelegal.com.

If you're interested in getting in touch with  Ann, you can do so by visiting her website at www.howtopayforcollege.com or by emailing her at hello@howtopayforcollege.com

Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.

Transcript

Intro:
Welcome to Modern Family Matters, a podcast devoted to exploring family law topics that matter most to you. Covering a wide range of legal, personal, and family law matters, with expert analysis from skilled attorneys and professional guests, we hope that our podcast provides answers, clarity, and guidance towards a better tomorrow for you and your family. Here's your host, Steve Altishin.

Steve Altishin  
Hi everyone, I'm Steve Altishin, Director of Client Partnerships here at Pacific Cascade Legal, and today, we have certified financial planner Ann Garcia to talk about how co-parents can work together to develop a plan to get their child a great education at a price they can afford. And that's a big deal. So Ann, how are you doing today?

Ann Garcia  
I'm doing well. How are you?

Steve Altishin  
I'm doing well. Do you want to talk a little bit about yourself?

Ann Garcia  
Sure.  I'm a certified financial planner family advisor here in Portland, Oregon. And our firm specializes in helping families balance competing financial priorities, whether it's college, retirement, divorce, you know, people who have a few things going on in their lives. And I'm also a parent of two college students. So I've gone through the college application and funding process myself, I realized early in my career that I was talking with a lot of parents who didn't understand how they were going to pay for college. And were really daunted at that prospect, as well as young adults who are coming out of college with such large student loan balances that they were struggling to do any of the basic building blocks of, of adult life, you know, having buying a home, saving for retirement, even in some cases, setting up an emergency savings account. And so I realized, if I could maybe help that first group, those parents who didn't know how they were going to figure out college, I could be talking with less of that second group, not that I don't love young adults, I do. But I love when they have more doors open than closed.

Steve Altishin  
I love that. And it's been a few years since I did the college application process for our kids. And one things I'm excited about is talking about that because I'm sure it's changed a lot. But even then, even then, it was starting when the kids I swear were, you know, barely in high school or before, it became this expectation thing. It's like, it's like, Okay, we got to do something, what do we do? We got to do something, this is gonna happen. And then of course, didn't do it. I'm kind of one of those people you're talking to, in some sense. So, but we're adding to that divorce a little and, you know, co parenting, and like you said, that can be really problematic and, and challenging, because there's now two households. You know, there were expectations before divorce, and expectations after divorce are different. And so I kind of just wanted to start with, you know, how co parents can even start to get their heads around planning for college?

Ann Garcia  
Yeah, yeah, it's a it's a great question. And it is a complicated topic, because so much of how co parents plan for it depends on how they relate with one another, you know? Is this an ex couple who is still on amicable terms or not? Do they have similar expectations for their student, for their students education. You know, oftentimes, even in the most solid parenting, you know, couple relationships, the parents have very, very different feelings about expectation of feelings about education, expectations about cost and cost sharing with their students. And so all of those really need to be ironed out so that the student has clear guidance over what paths they should be pursuing, how they should be looking at college, what types of scholarships they should be looking at. One of the, you know, one of the big considerations for families, for co-parents in particular, is which parents financial information is going to be used on the FAFSA. And up until this year, it has been the parent with whom this student spends the most time, but the FAFSA is changing this year, and now it'll be the parent who provides the most financial support who files the FAFSA for that student. And so that can have a really, really different impact on the student's eligibility for financial aid. And so that is something that that families need to be clear on. One of the things that I recommend families do is if they're, well, first and foremost, the Department of Education on their website has a tool called A student aid estimator and families can go in there and see what the federal needs analysis methodology says they should be able to pay for college. And do it based on CO parents can each parent can can do it. And that'll just give you a sense of whether the student is likely to be eligible for need based financial aid or or not. If the number that it generates is less than the cost of attendance at a college, you're eligible for need based aid, if it's higher than the cost of attendance at a college, you are not eligible for need based aid. That doesn't mean all hope is lost. Because there are also scholarships on the basis of merit. And so for, for families who, who don't want to pay the full price of college but aren't eligible for need based aid, merit scholarships are a great opportunity for those students. So just something for CO parents to to get their arms around is what types of financial aid are they going to be eligible for, so that when they look at their overall college budget, they know what what types of scholarships that school needs to be needs to offer for their student to be able to attend there.

Steve Altishin  
I love that. You mentioned FAFSA, and that that is new. I got that's interesting. I was new because I wasn't divorced. But it's, that's really interesting. But let's take a step back. And I'm probably people are listening who maybe don't know what FAFSA is, I gotta tell you, it was a battle just trying to learn. You kind of you figured out what it was, but what it does and why it's important. And in that whole thing, could you kind of give a primer on what the heck facet even is?

Ann Garcia  
Yeah, absolutely. So the FAFSA is the Free Application for Federal Student Aid. First of all, that's what that weird acronym stands for. It is the form that you fill out to be eligible for need based financial aid from the federal government, oftentimes from your state here in Oregon, that gives you access to Oregon aid grants, and many other states as well, as well as access to need based aid from the college. One of the big elements of the FAFSA, is that's also how you apply for federal student loans. So if the student or the parent is going to take out student loans, for college, they need to file the FAFSA, if they want to even be considered for need based financial aid, they need to file the FAFSA. And in many cases, Merit Aid Awards require the student to file the FAFSA as well. So plan that you're going to file the FAFSA every year. It's a kind of a complicated process, the FAFSA looks at looks at basically four different buckets of of resources that you have in order to calculate a number. That's currently called the expected family contribution this year, it's changing to the Student Aid index. But basically, that's the amount that the federal government says that your family should be able to pay for college every year. The biggest piece of that formula is the parents income. Now for CO parents, only one parent files the FAFSA and provides their information the other parents information is not included at all. And as I was saying previously, it has been the parent within the student spends the most time the fastest changing this year and going forward, it will be the parent who provides the most financial support. And there's there's a lot of gray area in there. So just the simple fact that one parent pays alimony and and child support and the other receives it doesn't necessarily mean that that parent is providing the most support because it may be that the one receiving all of those is paying for a larger house for example or covering more food costs or, or other things. However, if you have a situation where one parent works earns a high income, the other one has no income other than alimony and child support, then of course, it will be the one who's the one who's paying it. So the FAFSA is used by public colleges. And there's an additional financial aid form called the CSS Profile that's used by a lot of private colleges. And almost all private colleges require both parents to report their income and assets on on the CSS Profile. So you know, so for a student who might be eligible for need based financial aid on the basis of one parents income, it can be helpful to look for colleges that only require the FAFSA as opposed to the CSS Profile as well.

Steve Altishin  
And that, like you said, sort of get thing that let you know if you qualify, you know, and maybe how much for it and it sounds like a good start. And let's say I come in and I've done that. And and I, you know, and I said, Well, how do I, you know, how do I start to budget for this?

Ann Garcia  
Yeah. So there's multiple pieces of your college budget. And this is why I like for families to start planning for college before their student gets to high school. Because there's a lot more you can do if you have more time. So, so your college budget kind of looks like this? How much savings Do you have? Divide that by four? How much can you pay out of pocket, and in the case of CO parents is how much Can each of you pay out of pocket every year? If one parent is eligible for the education tax credits, specifically the American Opportunity Tax Credit, then that's another $2,500 a year in tax credit that the student can be eligible that the parents can be eligible for that can go into the into the college budget. And if you have anyone else who's helping you, you know, maybe grandparents are contributing, or another family member, the student could be contributing to their own education, the student might have an outside scholarship, which is a scholarship that just comes from someplace other than the college. So all of those go into your go into your budget. If you are the parent of a middle schooler, it's a really great idea to look at what you're doing now, where your savings are, how much you're saving every year project, what that will look like at high school graduation project, how much you could spend out of pocket at high school graduation, it's probably not a drastically different number than it is you know, then than right now, although maybe, you know, clubs, sports or guitar lessons or something like that goes out of the way and see, does that look like a budget that I'm okay with? Does that give my students the opportunities that I want them to have? The good news is, there are great college pathways. at every price point, my son has a friend who just finished up her education degree for free. She did free community college, and then she works for Starbucks. And Starbucks pays for tuition at Arizona State's online campus. And so she just got her college degree for exactly $0. There are other great pathways like getting AP and IB credits while you're in high school or doing early college program where you do some community college while in high school, and then you transfer to college and you don't go for four years, you're able to graduate in two or three years. Similarly, here in Oregon, we have dual enrollment, where you could go to Oregon or Oregon State, but spend your first two years at community college and meanwhile you live on campus and participate in campus life. Like any other four year student there. And then after two years, you're automatically enrolled at the at the four year college and you'll graduate with the same degree as as everyone as everyone else. So there are lots and lots of pathways through college. For parents, we need to be sure that the pathways that are available to our kids are ones that we feel good about. So if you have strong feelings about what your child's college experience should look like, then it's important to be pricing those out early and planning so that you're able to make those make those available. The good news is every college offers scholarships. The bad news is not every college offers scholarships to every student. So your student will be able to find colleges that offer scholarships to them. They may not be the colleges that are on your radar screen, or that you are interested in. And if that's you, I would point out the benefits of a college degree are massive. College graduates make about a million dollars more over their lifetime than non graduates. College graduates have less type two diabetes and heart disease. College graduates own homes at higher rates than non college graduates. College graduates marry at higher rates and divorce at lower rates than non college graduates. So it's not just the economic benefits of a college degree. You know, college confers a lot of benefits. Any college degree confers those benefits I did not say graduates of ivy League's have these better lives. They said college graduates have had these better lives. And in fact, a few years ago, there was a survey done called the Purdue Gallup index and they surveyed adults who self rated as successful to find out what about their college experience made them successful. And what they found was that it had no relationship To what type of college they had attended, it had no relationship to what types of colleges they had been accepted to, you know, it wasn't big or small, private, public or urban rural, it really came down to experiences that they had at a student and that I had as a student. And those were things like, feeling like professors cared about them. finding mentors, among faculty and staff, having opportunities to apply classroom learning to a job through an internship or, or summer job, engaging in on campus activities participating in, you know, working on a project that took a semester or longer to complete. So those are the commonalities of people who felt successful and well prepared by their colleges and good news, you can get those experiences lots and lots of places.

Steve Altishin  
I love that I always kind of felt that it is what you make out of the place you're at, and all colleges can be

Ann Garcia  
accessed. My philosophy is, when you're thinking about your college kids college experience and your goals for them, think about why you want them to go to college, you want them to have that education have that enrichment, has opened doors to their future. And and so if you're focused on why you're having them go to college versus which college you're having them go to, I think you'll find that you have loads and loads of good choices. And I will say to my family, we're a focus group of two I have twins who are graduating from college this year. One is at a highly selective, you know, less than 10% admission rate private college. One is at a highly unselective public college, you know, admits more than 75% of applicants, and they will graduate this year. And each of them has a job offer that is almost identical, but for the fact that they have different majors and there'll be different companies but same starting salary, same type of program, same stay on board for a couple of years and will pay for your MBA. And so, so yeah, and they're very different students, very different people, and two very different colleges prepared them for very similar opportunities.

Steve Altishin  
That's great news for people to hear. Because they think if we don't get this, then we we haven't succeeded. Yeah.

Ann Garcia  
In college, so you know, at some point in counterpoint, you know, anytime you say that people go, Well, if you want to be an investment banker, you need an Ivy League degree. Well, yeah, maybe but we don't want to be investment bankers. Yeah, we're or management consultants. And and yeah, there are certain career paths that want that. But you know, what college has the most fortune 500, CEOs amongst alumni. What do you think at Stanford?

Steve Altishin  
I would say, Yeah, you look at the Stanford or Texas

Ann Garcia  
a&m. Oh, my God, University of Kentucky has the same number of fortune 500, CEO, alumni as Stanford. So,

Steve Altishin  
I love that I love that idea of it's not necessarily which college but, you know, while you're going to college, so there's three things that I kind of wanted to talk about, that you've taught me hit. And when it now we're at, where do I put my money? You know, do I just pick up my bank account? Or what do I do? The other one is what you know, if I even with scholarships still need to be a joint loan, borrow, how do I borrow? And then the final one let's talk about is just how do I apply and how I apply make a difference. But to start really quickly, maybe with? Where do I put my money manager in grade school?

Ann Garcia  
Yeah, I think the best place to put your money is a 529 college savings plan. So these are state run, tax advantaged college savings accounts. You can invest in any state's plan and use any state's plan at any college. I think our plan here in Oregon is quite good. And you get a you get an income tax credit for contributions to the plan. The way a 529 plan works is you invest after tax money. It's kind of like a Roth IRA. You invest after tax money in many states, including Oregon offer a tax benefit for your contribution, and then your money grows tax free. When you take it out. When you're in college. You do not pay any taxes on that as long as you use it to pay for college expenses. 520 nights are really easy. They have different investment portfolios, you can choose where you can set up your own set of investments or you can choose what's called an age based or a target enrollment portfolio. In one of those you you basically say my kids going to start college this year, and they will allocate your investment portfolio in a risk appropriate way so that you'll have money available when they get to college and they will continually monitor that and re allocate it. What's great about 520 nines is you can set up an automatic monthly and adjustments so that it's very simple and seamless. And the money just comes out of your account before it even gets into your household budget, many of them take very small contributions. So even if you start really small, there's you can always have, you know, have money available there. Another interesting data point that I found is that students who have whose families have college savings for them enroll in and graduate from college at higher rates than those who don't, even if it's a very small amount of savings there, you can say there's probably some chicken and egg there. Because if I set up a college savings account, I'm probably talking to you about going to college and creating that expectation. In your mind. Nonetheless, having college savings produces college graduates,

Steve Altishin  
oh, Doug, like you said little bit little bit because especially when they're young, but

Ann Garcia  
you know, yeah, and that's, you know, the power of compounding, the sooner you start, the more work your money does, the later you start, the more work you do. The thing that's great about 520 nines is they all have what's called a gifting page, and a gifting page, lets other people contribute directly into your 529. So if you're, you know, if you're overwhelmed with all the toys your kids get, and you really mean it when you say don't give us any more toys, share that gifting page with grandparents, aunts, and uncles, you know, all those people who were who were, you know, dropping Legos on you. I love it.

Steve Altishin  
I love it. So to loan to borrow or not to borrow? That is the question.

Ann Garcia  
That is the question. And I think there's, you know, I feel like there's so much talk about student loans as kind of a one way ticket to the poor house and, and student loans can can have a reasonable place in in a student's college budget. So there are a few different types of loans available. There are the federal student loans, which you apply for through the FAFSA, and then there are private loans. Within the federal loan programs, there's the direct student loan, and then there's the Parent PLUS loan. The direct student loan is the only loan that an 18 year old can take out without a cosigner and without any credit history. It's there's an annual amount that they can borrow it's so it's it's capped the maximum amount a student can borrow over four years as $27,000. Now, if they were to take out that loan, and that's the only loan they have, that will translate into a monthly payment of about $325 a month for 10 years. And that payment is more than offset by the earnings increase that college graduates should expect. There are a few groups of people who are in trouble with call with student loans. By and large, it is not people who graduate with a bachelor's degree and only the direct student loan, you know, as their as their only debt. The people who are really struggling with loans are people who've gone to grad school, particularly if they had loans from their undergraduate years, because what happens is your loans get deferred while you're in grad school. So your balance grows, because the interest continues to accrue on them. And you're adding new grad school borrowing on top of that. So that's one group of people. Another group of people is is students who start their undergraduate degree program, take out student loans, and then don't graduate from college. So they've got the loan debt, and they don't have the earnings power to deal with it. And the third group is students who borrow to attend for profit colleges. So for profit colleges or all those kind of trade schools and you know, where you go to become a chef or a massage therapist, or, you know, there's it certain certification program type of things. Oftentimes, those degrees are not worth the paper that they're printed on. And yet students can take out can take out student loans to, to attend there. So those are the situations to avoid that. The other thing is for parents, particularly for CO parents, deciding whether or not you're going to take out parent loans versus versus student loans. I always recommend that families start with a direct student loan even if the parents intend to pay it back. And the direct student loan has the lowest interest rate lowest fees, and it can help your student build credit history. By having it not only that, but students incomes are usually lower, so they might get the tax deduction for the interest payment, which translates to about one month's payment every year. But for for CO parents one of the strange one of the weird things that I come across often is one parent files, the FAFSA, and the other plans to make their share of the college to bear their share of the college costs through Parent Plus loans. That is, that is actually how it works. It's still only the one parent filing the FAFSA. And then the other parent just needs to reach out to the financial aid office at the student's college to take out the Parent PLUS loan. I love

Steve Altishin  
it. I love it. Wow, we are zipping through. But I do want to talk just for a little bit about the whole application process can be crazy. And or maybe it isn't. People just anticipate that it's gonna be crazy. Can we talk just a little bit about some application hints? Yeah. And you know, what to face?

Ann Garcia  
Yeah, I mean, the application process can be really, really crazy. And I think one of the things that you forget about because it gets really exciting to start thinking about college and whatnot, and thinking that it all happens senior year. It is a it's a huge undertaking. And you and your student both also really want to be present for their senior year, senior year is challenging, you're academically fall, at a minimum fall semester still counts for college, they probably have activities they want to participate in, they might have a job, they might have friends they want to spend time with. And so layering college applications on top of that is, can be really challenging. The goodness as the common app makes it really easy to apply to colleges. The bad news is the common app makes it really easy to apply to colleges. So most colleges accept the common app. And that's a single application that the student fills out and submits to multiple colleges. However, it is not simply fills it out and submits it. Every college has their own set of admissions requirements. Many colleges just require the standard Common App transcript, test scores, if needed, FAFSA and the common apps standard essay, their statement statement of purpose. However, most private colleges have supplemental essays, and typically two additional supplemental essays. So for example, when my daughter was applying to colleges, she applied to eight colleges, to Republic six, we're private, some had scholarships that required an additional application, she had 24 essays she had to write. And there was some overlap, you know, where the typical one of the typically one of the essays for the private colleges is, why do you want to go here. And here's a pro tip, don't say because it's a good school, actually come up with something specific about that college that you are interested in and relate it to yourself. So my daughter is at University of Chicago, and they have a wonderful dean of admissions who's just the most entertaining guy. And he said, so they have us Chicago has three essays, which is pretty standard. And he said, here's what we want from each of them. So one of them is the common app statement of purpose. And he said, that's how we figure out who you are. So you need to show who you are. This is not just a resume, it's who are you? The second one is the why do you want to go here? And that's they use that to say, Are you a fit for our school or not. And the third one you Chicago is known for their wacky essays. So it's, you know, they have a variety of prompts. One of them is where's Waldo. Another is come up with a historical mashup. So one of my daughter's college classmates came up with Lebron James Madison, and wrote an essay about LeBron James maps. And he said, and that one is we want to see how you engage with the concept. So think of your essays that way. It's not just I want to go to your college, because it's a good college, and I'm a good student, you know, coming up statement of purpose. Here's a laundry list of everything I've done, and I'm a good student, too. And so think about what you want to do. I'm getting a little bit sidetracked in answering your question about the combination.

Steve Altishin  
Really good. That it kind of leads to, we talked about talked about, you know, loaning money or borrowing money, about investing in money about getting, you know, scholarships. Let's just talk for the last couple of minutes about spending money. And you know, you finally get to college. What can parents do to make sure the money lasts?

Ann Garcia  
Yeah, well, you know, one of the things that I find is parents consistently underestimate what college will cost. And it's not not knowing how much tuition and room and board are. It's not planning for things like Parents Weekend or study abroad or participating in the Greek system, or, Oh, actually, at this campus, you need a car. So So first and foremost, when your kid is accepted to a college, see if you can join that colleges, Facebook parents, group because Those parents are a fantastic source of information about what college actually costs and what additional things you should you should be be budgeting for as far as making the money last. So I families should plan that they're going to spend their savings down equally over four years, I see a lot of families spend all their savings, and then say, well, we'll just once we get through that, we'll just take out loans for the rest of it. If you do that, chances are that the direct student loan isn't going to be enough. And you're going to be taking out Parent Plus loans, the interest rate on Parent Plus loans is higher than on the direct student loan. So you will actually pay more by delaying and borrowing in Parent Plus loans than you will by starting out early and taking out direct student loans. I think another thing that's really important is to be clear with your student on what your expectations are, as far as who's paying for what, whether it's, you're covering 10% of the cost, whether it's your covering your personal expenses in your books, whether it's we've got tuition, you've got room and board, you know, make sure that that's clear. And not only that, that's clear, but that your student will have money available when they need it, whether it's from a student loan, or from something else. So for example, with room and board, oftentimes, especially if you live on campus, you're paying that money upfront with as part of your tuition payment. And there's there are fees for for getting on a payment plan for that. So unless your student makes enough money in their summer job to cover that, they will have a hard time having that money available when they need it. One of the really important things about paying for college that oftentimes parents don't realize is if they take out student loans, loans are dispersed directly to the college. And I've seen numerous parents who come to me after their student graduates, and they've gotten a notification that it's time to start paying on their Parent Plus loans. And they had no idea that they had taken out Parent Plus loans. But those were part of the student's aid package, the student accepted the aid package, the loan went directly to the college. And, and here we are. So that was I would say that's another thing you can do to manage the cost. Make sure you know what is in your aid package, because colleges do include things like loans and work study as part of the aid package. The other thing as far as managing costs is look at what your options are for expenses. You know, particularly for students who are living on campus, there are oftentimes different price points for housing. And for meal plans. Only one of them is reflected in your offer letter. And it could be the low one, it could be the high one, or it could be the medium one. So you know, make sure you really understand what you're what you're getting into as well. And then also look at what historical tuition increases have been because if tuition is $20,000 this year, and you're like I got it, I can pay $20,000 Every year, if it increases by 6% Every year, that's going to be quite a bit more than 20,000 By the time senior year rolls around. I love it. I love it.

Steve Altishin  
But we are out of time. But before we go, please let people know right now how they can get a hold of you. And that you wrote this thing. This was wonderful.

Ann Garcia  
Thank you. Thank you. Yeah, so my book is how to pay for college. It's available on Amazon and bookstores anywhere. My website is how to pay for college.com. So that's the easiest place to find me. And if you're a Facebook user, my I'm the college financial lady on Facebook, and you can follow me there as well.

Steve Altishin  
I love it. Well thank you. Thank you and for sitting down to talk today about just you know how parents and co-parent can work together to develop a great education plan for their kids and afford it. That is super important. It's one of the biggest things on, especially co parents' minds. And you made it understandable to even someone like me, that is a successful task. So thank you for joining us today.

Ann Garcia  
Thank you so much for having me.

Steve Altishin  
Oh, you bet. And anyone else. If you have further questions on today's topic, you can also post it here and we can help you get connected with Ann. So until next time, stay safe, stay happy and be well.

Outro:
This has been Modern Family Matters, a legal podcast focusing on providing real answers and direction for individuals and families. Our podcast is sponsored by Pacific Cascade Legal, serving families in Oregon and Washington. If you are in need of legal counsel or have additional questions about a family law matter important to you, please visit our websites at pacificcascadelegal.com or pacificcascadefamilylaw.com. You can also call our headquarters at (503) 227-0200 to schedule a case evaluation with one of our seasoned attorneys. Modern Family Matters, advocating for your better tomorrow and offering legal solutions important to the modern family.