5 ways to ease client concerns about paying for college

http://www.savingforcollege.com/articles/5-ways-to-ease-client-concerns-about-paying-for-college-763

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If you have clients with children under the age of 18, you need to be thinking about college. According to a recent Gallup poll, 73 percent of this group claimed they are 'very worried' or 'moderately worried' about how they will pay for higher education. And their concerns are warranted - tuition and room and board costs are rising at a rate of 4 percent annually, which means in 18 years a four-year degree at a public university for one child will cost over $200,000. Here are five ways where you, as an advisor, can provide tremendous value:

1. Set up a designated college savings account

   The first thing you need to do is encourage your clients to set up a savings account that is specifically for college. There are a number of different ways to save for college, including mutual funds, Roth IRAs or custodial accounts under UGMA/UTMA, but tax-free growth and favorable financial aid treatment make 529 plans the optimal choice for most families. According to this year's Annual College Savings Survey, 75 percent of respondents expect their children or grandchildren to go to college, but only 41 percent have actually a started saving. What's more, 49 percent of those who haven't started saving say it's because they haven't had time to research and understand the best options.

2. Help with school selection and choosing a major

   This may be new territory for some advisors, but according to a recent study by Fidelity, 22 percent of families surveyed said their advisor is already helping their child determine a college major. Instead of trying to come up with the funds to pay for expensive colleges, today's families want help trying to bring costs down and avoid student loans. This includes making sure the students get the best ROI from their college by researching graduation rates and starting salaries.

3. Find scholarships and grants

   Just because a student isn't a star athlete or academic genius doesn't mean they can't get a scholarship to college. Talk with your client about other possibilities - are they involved in any extracurricular activities? Does your company offer scholarships? Is the family part of a minority ethnic group? These are all common ways to find tuition money. And don't worry if you're dealing with an upper-income family. According to Sallie Mae's 2014 How America Pays for College report, high income families paid around 20 percent of their college expenses with scholarship money. What's more, 38 percent of scholarships were awarded to families with annual incomes over $100,000.

4. Increase financial aid eligibility

   Another way to help families bring down out-of-pocket tuition costs is to develop a strategy to get more financial aid. A good place to start is by finding ways to reduce the families' adjusted gross income (AGI), which is a key factor in calculating their Expected Family Contribution (EFC). One way to do this is by selling stocks or bonds that are in a down position, triggering a capital loss. Since the loss can be carried forward, your client can use it to reduce their AGI on the Free Application for Federal Student Aid (FAFSA) over the next four years. You'll also want to make sure your client avoids doing anything that will increase their AGI, such as converting a traditional pretax IRA to a Roth. Older clients may also want to delay taking social security payments to avoid having to report the additional income on the FAFSA.

15 facts about financial aid eligibility

5. Assist with filling out the FAFSA

   The federal government gives out over $150 billion in grants, work-study funds and student loans every year, but the only way your client has a chance of seeing any of that money is if they complete the FAFSA. Sounds simple, right? Yet according to NerdScholar, 47 percent of 2013 high school graduates didn't fill out the FAFSA, and as a result $2.9 billion in federal Pell grant money was left on the table. All of your clients should submit a FAFSA, regardless of their income. Remember, cost of attendance is considered in the EFC calculation so even a high-income family applying to an expensive school may still qualify for need-based aid.

   Many experts, including President Obama, agree that the process is just too complicated for many families to understand. The President is currently working on initiatives to solve this issue, but until then advisors should work with families to navigate through the financial aid process in an effort to maximize reward potential.