Saving on the Cost of College with Brad Baldridge

Summary

Podcast Title: All the Hacks with Chris Hutchins
Episode: Saving on the Cost of College with Brad Baldridge
Release Date: November 27, 2024
Host: Chris Hutchins
Guest: Brad Baldridge

---

Introduction

In this episode of All the Hacks with Chris Hutchins, host Chris Hutchins welcomes Brad Baldridge, a seasoned expert in college financial planning. Together, they delve into the complexities of saving for college, exploring common mistakes, strategic planning stages, financial aid intricacies, scholarship opportunities, student loan considerations, and tax optimization strategies. The conversation is enriched with actionable insights and practical advice aimed at helping families navigate the escalating costs of higher education.

---

Common Mistakes in College Planning

Brad Baldridge opens the discussion by highlighting the biggest mistakes families make when planning for college:

• Starting Too Late:
  “Probably the biggest one would be starting too late and not realizing what they're getting into.” ([02:15]). Families often underestimate the time and effort required, leading to rushed decisions and increased costs.

• Underestimating Costs:
  Comparing his own college experience, Brad notes the drastic difference in tuition costs over generations. “When you're spending 25, 50, $100,000 or more per child to educate them, you want to make sure you're doing it right the first time.” ([04:55])

• Misguided Savings Goals:
  Financial advisors may overestimate the amount needed by focusing on list prices without accounting for scholarships. Brad emphasizes that saving based on inflated costs can deter families from saving altogether.

---

Early vs. Late Stage College Planning

Brad distinguishes between early stage planning and late stage planning:

• Early Stage Planning:
  Initiated when college is a future consideration, possibly when children are as young as four. Focuses on saving and investing, laying the groundwork for future expenses.

• Late Stage Planning:
  Engages families when children are in high school, involving:

  • College Visits: Assessing the right institutions.
  • Financial Aid Applications: Understanding need-based and merit-based aid.
  • Major and School Selection: Ensuring decisions align with financial capabilities.

Brad advises starting early to maximize savings potential and reduce reliance on loans. “It's important to look at what your state's rules are and that you are not required to use your state's 529.” ([07:52])

---

Saving Strategies and 529 Plans

A significant portion of the discussion centers on 529 college savings plans:

• Maximizing 529 Benefits:
  Brad discusses the importance of understanding state-specific benefits and selecting cost-effective investment options. “Now they're all small, relatively speaking...you need to be careful. There's lots of pros and cons when it comes to 529s.” ([08:58])

• Contribution Limits and Gifting:
  Explaining the generous limits of 529 plans, Brad notes that typical families don’t reach these caps. He outlines gifting strategies, including using the annual gift tax exclusion and leveraging five-year gifting rules.

• Impact on Financial Aid:
  Brad emphasizes that 529 plans generally have a minimal impact on financial aid eligibility compared to other savings vehicles. “Need based aid is based on income and assets of the parent and the student.” ([12:51])

---

Financial Aid and Scholarships

Understanding financial aid and scholarship opportunities is crucial:

• FAFSA vs. CSS Profile:
  Brad explains the differences between federal FAFSA applications and the more detailed CSS Profile used by elite institutions. “FAFSA is like 32 questions now, CSS profile is like 300 questions.” ([26:30])

• Merit-Based Aid:
  Discussing merit scholarships, Brad highlights that high-achieving students can secure substantial aid, reducing overall costs dramatically. “There are scholarships for the C student. That's the point I'm trying to make.” ([31:44])

• Scholarship Strategies:
  Brad recommends leveraging resources like tamingthehighcostofcollege.com to identify and apply for scholarships effectively. “A family filled out 41 scholarship applications and won seven for $39,000.” ([30:20])

---

Student Loans: When and How to Use Them

The conversation shifts to the role of student loans in college financing:

• Loans as Tools:
  Brad views student loans as a necessary tool for many families. “Student loans are just another tool in the toolbox.” ([42:48])

• Parent vs. Student Loans:
  Differentiating between loans taken out by students versus those co-signed by parents, Brad warns about the long-term implications of high debt burdens. “Loans in the student's name have better terms than the loans in the parents' name.” ([47:34])

• Loan Forgiveness Programs:
  While acknowledging the existence of loan forgiveness for certain careers, Brad cautions against relying on these as a primary strategy. “It could happen, but it's not a plan.” ([48:58])

---

Tax Optimization Strategies

Optimizing taxes can significantly reduce the cost of college:

• 529 Contributions and Tax Benefits:
  Brad reiterates the advantages of 529 plans in tax savings, including growth that is not subject to capital gains.

• Opportunity Credit:
  Families can utilize the opportunity credit, which phases out at higher income levels, allowing eligible families to claim up to $2,500 per student annually. “Up to four years, roughly $10,000 per student.” ([38:55])

• Strategic Retirement Contributions:
  Redirecting funds to retirement accounts can lower Adjusted Gross Income (AGI), thereby enhancing eligibility for need-based aid. “If we each put $30,000 into retirement, that's $60,000 off.” ([25:46])

---

Advanced Planning Techniques

Brad shares advanced strategies for families with higher incomes or complex financial situations:

• Income Management:
  Temporarily reducing income through sabbaticals or strategic retirement contributions can improve financial aid prospects. However, Brad notes the difficulty in sustaining this long-term. “You need a long sabbatical or a lot of times there's some dramatic changes.” ([17:50])

• Asset Management:
  Utilizing business holdings and non-primary real estate can impact financial aid calculations. Brad advises against setting up student-named accounts like UTMA, which can negatively affect aid eligibility. “The worst thing you can do is set up an UTMA account.” ([12:51])

• Tax Planning for High Earners:
  Families earning substantial incomes can benefit from tax planning strategies such as hiring their children in family businesses to shift income and eligibility for tax credits. “You have to be able to see a path that works.” ([39:45])

---

Practical Tips and Resources

To aid families in their college financial planning, Brad recommends several resources:

• Website Resources:
  Families can access tools and information at tamingthehighcostofcollege.com, including:

  • Scholarship Guide for Busy Parents: “Free video series available on YouTube.” ([32:00])
  • Financial Aid Calculator: Helps estimate need-based aid eligibility.
  • Email Newsletter: Updates on new scholarships and financial aid opportunities.

• Planning Early:
  Starting the financial planning process early allows parents to maximize savings and explore all available options without the pressure of impending deadlines.

• Avoid Common Pitfalls:
  Brad advises avoiding student-owned savings accounts and being mindful of how asset reporting affects financial aid.

---

Conclusion

Brad Baldridge and Chris Hutchins wrap up the episode by reiterating the importance of thoughtful, early planning in managing college costs. By understanding and utilizing tools like 529 plans, scholarships, financial aid, and strategic tax planning, families can significantly reduce the financial burden of higher education. Brad emphasizes that while not all strategies are applicable to every family, informed and proactive planning can lead to substantial savings and more manageable college expenses.

“The average family could save 10 to 30% off the cost of their college if they plan well.” ([51:54])

For more detailed information and personalized assistance, listeners are encouraged to visit tamingthehighcostofcollege.com and explore the available resources.

---

Notable Quotes:

• Brad Baldridge ([02:15]):
  “Probably the biggest one would be starting too late and not realizing what they're getting into.”

• Brad Baldridge ([04:55]):
  “When you're spending 25, 50, $100,000 or more per child to educate them, you want to make sure you're doing it right the first time.”

• Brad Baldridge ([12:51]):
  “Need based aid is based on income and assets of the parent and the student.”

• Brad Baldridge ([31:44]):
  “There's a place for everyone. There's scholarships for the C student. That's the point I'm trying to make.”

• Brad Baldridge ([38:55]):
  “Up to four years, roughly $10,000 per student.”

• Brad Baldridge ([51:54]):
  “The average family could save 10 to 30% off the cost of their college if they plan well.”

---

This comprehensive episode provides invaluable guidance for families aiming to navigate the financial challenges of college education. By implementing the strategies discussed, listeners can approach their college planning with confidence and clarity, ensuring a more secure and affordable path to higher education for their children.

Transcript

[Chris Hutchins]

Planning for college is more complex and expensive than ever. From saving strategies to understanding the ins and outs of financial aid and scholarships, there are critical decisions that can save or cost you thousands. Today, we're going to dive deep into the biggest mistakes families make when planning for college or student loans and how to avoid them. And then at the end, I'll share a few tricks I've been using to put 529 contributions on a credit card. So whether you're just starting to save or navigating the process with your high schooler, this episode will give you all the tools and tactics you need to do it right. I'm Chris Hutchins. If you enjoy this episode, please share it with a friend or leave a comment or review. If you want to keep upgrading your life, money and travel, click follow or subscribe now. Let's get into it right after this. This episode is brought to you by Maui Nui Venison and while our whole family loves eating their meat, seriously, it's the most delicious and nutrient dense meat out there. I also want to talk about mission because it's incredible. They exist to help balance the axis deer populations for the good of the environment, communities and food systems in Maui. And they've already provided over 160,000 pounds of meat to the Maui community. I love a company with a mission like this, but because they make delicious jerky steaks and ground meat that's easy to cook and that the whole family loves, even the kids. I knew I wanted to work with this company. Let's go back to those jerky sticks because they are a staple in our house and I take them on the road all the time. You get 10 grams of protein in just 55 calories which is 53% more than grass fed beef. It's not just me that loves it. So many longevity experts and professional athletes are adopting venison as their go to protein source. So here's the deal. Maui Nui Venison is offering our listeners 20% off your first purchase of practically everything from those delicious jerky sticks to fresh venison to bone broth and more while supplies last. Just go to allthehacks.com Maui Nui for 20% off or use the promo code allthehacks. Again, that's all thehacks.com Maui Newie M A U I N U I and the promo code all the hacks for 20% off the healthiest red meat.

[Brad Baldrige]

What do you think the biggest mistakes people make are when it comes to planning and paying for college?

[Unknown]

Probably the biggest one would be starting too late and not realizing what they're getting into. When I went to college, it was very simple. Your senior year, you visited a college or two, you took the test once and then you just signed up and off you went. And you didn't spend a lot of time and effort into the whole process. The next generation are going to spend a lot more time, a lot more effort. It's a bigger deal and also costs a whole lot more. I mean, I found my old act where it talked about the cost at some of the colleges I was looking at was $6,000 and the state school was $2,000. It was much more affordable and it wasn't a big deal because of it. Now when you're spending 25, 50, $100,000 or more per child to educate them, you want to make sure you're doing it right the first time. A parent hearing, you know, I didn't pick the right major, I didn't pick the right school, I need to start over, I lost a year or two is not something any parent wants to hear. I think that's the big crux of it is there's a lot you can do and most people need the time to figure it out and get involved.

[Brad Baldrige]

And how early should someone start thinking about this?

[Unknown]

Let's talk about the timeline because I like to divide things into what I call early stage planning and late stage planning. So early stage planning is college is someday, I've got a four year old, we've got some extra cash flow, maybe we should save and invest for college. But then we get to what I call late stage college planning. Now you've got a high school, sophomore, junior, senior, and you're there and you may have done a great job of saving a big pile of money, but you're still not done right. You've got a lot of work to do around visiting colleges, figuring out, just because I have it, do I have to spend it? Should I spend it? How much is a reasonable amount to spend for college? Are the privates worth it? Are the publics worth it? All that work that needs to be done, using loans to fill the gaps, filling out financial aid, that should start in my opinion, freshman, sophomore year, especially for your first, because it's a learning curve of, well, I need to understand, will we qualify for need based aid, will we qualify for merit aid? And that alone is a very loaded question because it can get complicated depending on the colleges you're looking at, your financial situation, academics of your student, right? If you've Got the academic rock star. They have a lot more options and can get a lot more scholarships at a lot more colleges. But if you have the B student or the C student, there's still colleges that are right and a good fit for your student. It changes though, from one student to the next.

[Brad Baldrige]

I would imagine that the early planning before that high school mark, the primary thing you can do is really think about whether you're going to save in a different way. Is there a lot more to do other than saving and deciding where to save?

[Unknown]

I think that's probably it. And then the amount that you need to save, right, Harvard is approaching $100,000 a year and the other elite schools are. But a lot of families don't pay $100,000. So a lot of financial advisors get this wrong, right? They look up the list price of a college and they say, okay, well, the list price is 75,000 DOL. So based on the math, you need to save 1200amonth for the next 18 years or something crazy like that. Then it turns out, well, actually you get a pretty substantial scholarship at some of these colleges. So 75,000 should have been 40. And of course, most people, when they hear that 1200 and they say, I've got three kids, that's 3600, I'm not interested anyway. There's a few that would do it, but most families are not saving like they're going to hit those goals and probably shouldn't be in a lot of cases.

[Brad Baldrige]

I think my personal strategy has been there's probably a really wide range of what college could cost. And tying up the low end of that range in an account like a 529 seems to make sense. But with a little bit of uncertainty on so many things, what does college look like? Does your kid go to college? How much does it cost in the future? I'm okay if there's a slightly less optimal tax outcome for some of the money I'm saving, knowing that I might not even need it for college. So if I backed into what does the most expensive college in America, adjusted for inflation, dated back to how much I need to put in each month, I don't want to over fund to the point that it might just be stuck there. And you probably know this better than me. What happens if you have a bunch of money in a 529 and you don't need it for your children? And, and let's just assume you're not at generational wealth level and want to save it for future generations. You usually have to pay a penalty to take it out. Is that right?

[Unknown]

Right. If you take it out for non education purposes, you have to pay some taxes and some penalties. So it's not advisable in those situations. There's ways to unwind it. You can take money out up to the amount of scholarships that your student receives. You can switch it from child to child within the family and it can get broader than just brothers and sisters. You could go to nieces and nephews. You can shift it into a Roth ira. Now there's some new rules for that. The account needs to be 15 years old. So there's lots of things you can do. Quite frankly, it's not a problem I deal with very often. Much more likely is we're coming in underfunded, not we've got so much money we don't know what to do with it.

[Brad Baldrige]

I think the fear a lot of people have is what if college isn't there? What if they're spending their days building things on ChatGPT and whatever the future of that looks like and. And they're worried not that they haven't saved enough, but that they just don't need it. And so it's good to at least understand, yes, there are taxes and penalties. You can roll it over to a Roth IRA, but I think it's capped at like $35,000. If they do get a scholarship, I guess you can withdraw that amount. So that's interesting.

[Unknown]

You still pay taxes, but you avoid penalties. So now it kind of shifts it to like a typical investment.

[Brad Baldrige]

Yeah. So it wouldn't have been better to do that in a 529.

[Unknown]

No, it just takes some of the pain away.

[Brad Baldrige]

I did an episode on tax advantaged accounts. I think we talked a bit about 529s where I'm doing mine. The only other couple things I'll add on 5:29 is it really varies depending on what state you're in, whether there are even more tax benefits. In California, the federal tax benefit of letting your investments grow and not being subject to capital gains on the growth is kind of consistent. But some states give you benefits on donations to your 529 or contributions. California doesn't. So I think one, it's important to look at what your state's rules are. And then two, you are not required to use your state's 529. So that doesn't mean that if Colorado has a tax benefit for state taxes, I could get that tax benefit using Colorado's 529. But it does mean that if I live in a state where the investment options are bad and I don't like them or the fees are high, I could use a Nevada or a Utah or another state's 529 in California. If I were in a state where there were great tax advantage, I might not want to.

[Unknown]

I mean, 20 years ago when 529 were just coming out of the gate, they were quite expensive, especially in some states, and it just wasn't worth it. And it made sense to forego the state benefits in order to get to a lower cost option. Now it's a much more mature industry and every state that I've run across has a low cost option or a reasonably cost option may not be the absolute lowest. But now we're talking, you know, this one's 40 basis points instead of 20 basis points. Whereas 20 years ago when I was first saving for my kids, it was like, this one's three and a half percent and this one's one percent. Oh, wow, that's a huge, huge difference and very substantial. Now they're all small, relatively speaking. And yes, it's half as expensive. You can get to 3 basis points instead of 6 basis points, but it's not material. So compared to the cost and the state benefits. So you need to be careful. There's lots of pros and there's lots of cons when it comes to 529s and you really want to understand what you're getting into and cuia, talk to an advisor or whatever you need to do so that this is not a recommendation for 529s per se. But yes, there's lots of great things you can do with them. And I do spend a lot of time working with families saying, well, these are the state benefits and we probably should take advantage of them and we should leverage it a little bit. Maybe we should make sure we get to the maximum contribution limit and then stop or even if we go over the limit again, I'm doing a lot of late stage planning, so I will have situations where, okay, we've decided that we're going to go to the more expensive school. So we're 100,000 short and we need to deal with that in the next four years. So we're literally going to start putting 2,000amonth away or 3,000amonth away. And then it's like, well, which 529? Or should it be a 529? And like that. And it becomes again, some optimization challenges.

[Brad Baldrige]

There are 529 limits, I believe right now it's $18,000, but you know, that's per kid, per giver.

[Unknown]

So you're talking about the gift tax rules where you're allowed to gift, but education is an unlimited exception to the gift.

[Brad Baldrige]

Okay.

[Unknown]

And 529 will allow you to do some five year gifting as well.

[Brad Baldrige]

Yeah, the super funding.

[Unknown]

And if you're a parent and you're paying for education for your own children, there's really no gifting going on. You're just paying a bill that you need to pay.

[Brad Baldrige]

But if you wanted to contribute to a 529 in those final years and you're $100,000 short, then the limit is.

[Unknown]

A half million dollars or so typically. So a typical 529 company says, what does it cost for one kid to go to the most expensive school we can find? That's the limit. So right now it's about 500,000. Most 529s will accept. So again, the limits generally are not what we're butting up against as people don't have that kind of money anyway.

[Brad Baldrige]

I have seen you talk a little bit about two things. One, where you put money may impact your eligibility for aid. And so if you were putting all of this money in a 529, while that could be more tax advantaged for paying for college, could it have an impact on your eligibility for aid over putting it in your retirement account? How do you think about those kind of decisions?

[Unknown]

Right. Well, that's why I enjoy working with late stage college planning, because I'm working with, you know, teenagers where we've only got a few years to go and it's relatively easy to look ahead and say, well, what will your income and your assets look like when you have a kid in college? Now, young people, I have a tough time giving them advice because it's like, well, your career takes off and your income climbs and now you're not going to qualify for need based aid anyway just because of your income. So don't worry about where you put your money or maybe you're a teacher or for whatever reason your income is a little bit lower and you will qualify. And now you wish you wouldn't have put as much money into the savings and so forth.

[Brad Baldrige]

So how does that work? What accounts matter towards qualifying?

[Unknown]

So need based aid is based on income and assets of the parent and the student and income is taken from your taxes, so it's typically your AGI and then they add back in some untaxed income sometimes. So there's a Couple of wrinkles in it. So one of the worst things you can do is to set up an UTMA account or some other account in the student's name. And we don't see it as often, but sometimes grandma and grandpa still do this where they're going to set up an account, put the kid's name on it. Well, now it's a student asset and they assess student assets more heavily than parent assets. So we want to avoid that. You know, if the parents earn a half million a year, they're not going to qualify for aid, most likely anyway, no matter where they have assets or what's going on. So it doesn't matter where you save it. From a financial aid standpoint, certainly if you're under 100,000, you will qualify. And if you're under 300,000, you might qualify at the right schools. And that's the other challenge is we don't have a hard cut off. It's a slippery slope similar to taxes, right? As your income climbs, you get less aid, but there's never an automatic zero. It just gets worse and worse and eventually you're not going to qualify.

[Chris Hutchins]

Today's episode is brought to you by Daffy. Let's take a minute to reflect on two things and how we can put them together to save on taxes. First, the market is up 26% this year, which is incredible. And second, it's a time of year to reflect and be thankful. And I know so many of you are making generous donations to causes you care about. So let's talk about how you can use a donor advised fund or DAF with DAFI to save on taxes. Let's say you have some stocks, ETFs or crypto that's up from when you bought them. If you just sold them, you'd pay capital gains tax. But instead if you donate them to a charitable organization, you get the tax deduction on the full amount. Then you can just rebuy them at today's price with the cash you would have otherwise donated to charity. So you make the same contribution you would have already made, except you've either reduced your capital gains tax or increased your cost basis. It's a win win for you and the charity. Unfortunately, it's not that easy to donate stock to every organization. And that's where DAFI comes in. Their app makes it so easy to set up a DAF and give to any charity across the US with just a few taps. I know because I've been using it for years. So if you want a better system for giving, head over to allthehacks.com daffy where you can get a free $25 to give to the charity of your Choice. Again, that's AllTheHacks.com Dafy for a smarter way to give this year I'm trying to level up everything and that includes my fitness routine and clothing. The routine does require a bit of willpower, but when it comes to the clothing, our sponsor today, Vori Making that so easy, Vuori makes performance apparel that's incredibly versatile. Everything is designed to work out in, but doesn't look or feel like it at all. And it is so freaking comfortable you will want to wear it all the time. I know because Amy and I are actually wearing Vuori all the time. I've long said the Sunday performance joggers were my favorite, but I wear my core shorts and Strato tech tees almost as much. But I really love that Vori keeps adding some amazing new collections of jackets, sweaters and more. Their products can be used for just about any activity, whether it's running, training, yoga, but they're also great for lounging and running around town. Honestly, I think Vuori is an investment in your happiness. And for all the HACS listeners, they're offering 20% off your first purchase, as well as free shipping and returns on US orders over $75. So you should definitely check them out at allthehacks.com Vuori Again, go to allthehacks.com V U O R I and get yourself some of the most comfortable, versatile clothing on the planet.

[Brad Baldrige]

And I assume someone who's been a high earner for their entire life, if they were like, oh my kids are about to go to college, now might be a good time to take a sabatical and not earn anything for a year. Is that a viable way to alter your income for these things? Or how far back are they looking and how much do your assets count versus your income?

[Unknown]

Right, so let's talk a little bit more about assets. Because your assets count against you, but they give you a pass on a lot of assets. So typically your retirement doesn't count. So anything that's a pension, profit sharing, 401ks, IRAs, all that stuff is not counted against you. For the federal method, the fafsa, your primary residence doesn't count. So your home, your home equity, your big mortgage, all that stuff just doesn't show up. So what does show up? Well, anything that's not retirement. So your savings, mutual funds, exotic investments, crypto, something like that, those are all assets you'd have to report those stock options at work that are not tied into an actual retirement plan would count. Real estate, that's not your primary residence. So if you have vacation land or property, if you have business property, farms, some of those things would count. And then the other big one is college savings. So your 529s would count and those types of things.

[Brad Baldrige]

What about if you owned a business, but it's a private business like a dental practice?

[Unknown]

There's a big change on the FAFSA. If it was under 100 employees. Businesses were out in the past, they are now in, which is a big change. But I've seen families, you know, you can have a million in assets and still qualify 2 million if your income is lower. But it's a combination of income and assets.

[Chris Hutchins]

Okay.

[Brad Baldrige]

And there's no hard rule, right? There's not a document that says if you have over $1.35 million, you're going to qualify.

[Unknown]

No, exactly. So the way it works is they take your income, your AGI, and let's say that's 200,000, and then they take your assets and they multiply it by a factor and then they add it to your income.

[Brad Baldrige]

Okay? So they're just kind of assuming your assets earn a certain amount.

[Unknown]

Exactly. So your million dollars, they apply 12%, so that's equivalent of an additional $120,000 of income. So now your $200,000 of income goes to $320,000, which reduces the amount of aid you're eligible for. And at a lot of schools, that might disqualify you. So that million dollars may hurt you. Now, you mentioned sabbatical. It only works for one year, unfortunately, it's a year by year thing for financial aid. As an example, if you have a senior right now that's going to graduate in 2025, you fill out financial aid right now nine months ahead of time, and you use 2023 taxes. You're going to do it all over again next year. And the next year, the next year using 23, 24, 25, and then 26 for that same student. So you need a long sabbatical or a lot of times there's some dramatic changes that families go through as well, right? A divorce, a death, a sudden unemployment, or tough times in the family business or something like that, where you take advantage of it where you can. And sometimes it lasts multiple years, sometimes it's a one year blip. And then even with planning, you might say, well, I'm going to alternate years. It's kind of like you do for some tax strategies. This is the year I'm going to have good income and this is the year I'm going to try and minimize it and then play some of those games. Start looking at this freshman sophomore year because I run into a lot of parents of seniors that say really it's going to be based on last year's taxes. Well I can't change last year's taxes. Exactly. Now if you have a sophomore or freshman, now we're talking about a 2027 graduate that's going to use a 2025 taxes and you can say oh, I actually can impact 2025 still. That's in the future. That's why I think some families need to start early because there are some things that you want to pay attention to. There's a couple of gotchas like a self employed individual who puts money into retirement may not get a benefit from that. It does bring your AGI down so it should help for aid, but they're going to add it back in if they can find it on your 1040. Whereas if you put the money into retirement at work where it just reduces your W2, then they can't find it and then they can't add it back in. So a self employed plumber who's married to a teacher probably should save in the teacher's accounts, not plumbers accounts because it won't show up, it'll bring your income down again. The big caveat of course is if it's going to matter, right? Bringing your income down from 400,000 to 350 may not make a difference.

[Brad Baldrige]

And when you go to fill out these forms you mentioned retirement accounts don't count. That means they're not pulling this data, you're self submitting it. So if you make the mistake of just listing your retirement account, are they going to say oh no, no, no, that doesn't count or do you have to remember to not put it on the form?

[Unknown]

You have to remember the other change that came is the FAFSA got quite a bit simpler now. So there's three questions. How much do you have in the bank? What are your investments worth and what are your businesses and farms worth? And then there's a little info button where you can read a little bit more. But that's it, right? You add up all your investments and you put it in the investment blank. There's no way for them to audit what you put in or anything they might audit in the future, but they're not going to Say, oh, no, it looks like you put in your 401k, you made a mistake. Nobody's going to catch that for you.

[Brad Baldrige]

And you listed three things, but you didn't mention debt. So if I have an auto loan, doesn't count. That doesn't count as a negative?

[Unknown]

Nope. The only debt that would matter is the net value of your business. If you had business debt or farm debt, those would offset. And I guess if you had debt on real estate that you're listing as well, that would offset.

[Brad Baldrige]

If I had some loans and I was thinking I wanted to lower my assets and I paid those loans off, that would work. That would change the situation.

[Unknown]

Absolutely. I always give this example. You had $50,000 in the bank and you have a bill on your desk for siding and windows. Well, you spend that 38,000 before you fill out the FAFSA, not after, because obviously it will bring down the assets that you list.

[Brad Baldrige]

Now, if you have $20 million in assets, probably doesn't matter, correct?

[Unknown]

Exactly right. So knowing where that line is, and the other thing we didn't talk about is there's something else called the CSS profile, which is the additional forms that many of the elite colleges use. So Harvard and Yale and Rice and Notre Dame and there's about 300 colleges. These colleges can be very generous. Stanford just put out a press release that said if your income is under $100,000, Stanford will be free. Zero tuition, zero room and board. If your income is between 100 and 150, then tuition will be zero and you still have to pay some or maybe all of room and board.

[Brad Baldrige]

You didn't mention assets. There doesn't matter.

[Unknown]

Now, I think there is an asterisk on that where you'd have to be within reason. So I don't know what they would consider within reason, meaning. Right. Certainly the multimillionaires that have the accountants that can drive their income to whatever they want, they're not going to get away with it. But if your income is a 98,000 and you happen to have $400,000 of investments, I don't think they're going to count those 400,000 against you. That's not unusual, right, to have a family that saved some money. But there is an asterisk on that chart that I was looking at for the FAFSA itself. There's also what we call the magic Pell numbers, and they're low numbers. Typical families that they can get their income below $75,000, they don't have to list their assets. I've been working with a few families that have inheritances, but relatively low income. And we don't have to list the inheritance if we can drive their income lower.

[Brad Baldrige]

You would have to list it if they had higher income.

[Unknown]

Correct. I mean, if you inherit Grandpa's house and you inherit grandpa's bank accounts and CDs, they're assets, and you have to report them. And then if you sell the house, well, you don't have to report the house, but now you have a pile of cash. So same problem.

[Brad Baldrige]

But similarly, if you sold a house and you know you're going to owe the IRS a lot of money that year, but you haven't paid those taxes yet, you don't get to count your future tax bill. So pay those taxes before you fill out the form.

[Unknown]

Absolutely. And if you've got a little time, Right. If you've got a high school freshman, you can say, well, I can max out. And this is some of the things that we're doing right. It used to be I couldn't afford to put all $30,000 into my retirement and my spouse put another $30,000 into their retirement and max the HSA and do Roth IRAs. I mean, who has that kind of cash flow? Well, you just inherited $300,000. You don't need the cash flow anymore. You've got the money to get it done. And a lot of times that's what you could accelerate doing that type of thing. And that, of course, helps you manage your AGI as well, which now makes it more likely that you can qualify. My income is $110,000, and my target is $75,000. Well, if we each put $30,000 into retirement, that's $60,000 off. That will bring us down and we'll have a shot at it. Yeah, but if I put all my money in retirement, what do I live on? Well, you live on your inheritance, which has the added benefit of, well, now those assets go away. Your retirement grows dramatically, your other assets shrink dramatically, which is good for financial aid. And your income is low, which is good for financial aid.

[Brad Baldrige]

Could you just replace inheritance with savings? In this case, any pile of money would work.

[Unknown]

Right. So if you just happen to have about half a million dollars in the bank for whatever reason, whether it's inherited or whatever, and you want to make that shift, perhaps you could. Or 100,000. It doesn't have to be big numbers. It could be smaller numbers.

[Brad Baldrige]

So if you're in the financial independence, retire early and you've saved up enough money to Retire before your kids go to college, you can drive your income to $50,000. You'd be in a pretty good space for FAFSA. There are schools that can ask for other information. So that doesn't mean you're good for every school.

[Unknown]

Exactly. That CSS profile that we mentioned earlier, that's additional information that the colleges want because they're so generous. Right. If we're going to give out 40,000, 50,000, $90,000 scholarships, we want to have more information than what the FAFSA provides. So they use the CSS profile. FAFSA is like 32 questions now, CSS profile is like 300 questions. I mean they get every detail. What do you have in every account?

[Brad Baldrige]

An example someone gave me was that they might ask what kind of car you drive. And maybe this was for private school. I'm not sure. They're looking for people who can't afford college. If you say, gosh, I don't have any income this year, but we drive two Ferraris, they're like know about that, like so they can look at a lot more things.

[Unknown]

And they will also ask for copies of your taxes. They'll ask for copies of your business taxes. Again, they'll just dig a little deeper because Harvard and Yale and some of these high end schools, they've got a lot of customers, so to speak, who have the high powered accountant that can make their taxes say whatever they want. They don't want those people gaming the system when in fact their goal is to help people that really need it.

[Brad Baldrige]

Yeah, and I don't think most of the people listening here are sitting with hundreds of millions of dollars and have super high powered accountants and don't have to work and can play this. So let's dial back in. So on the need based aid, you can fill out these forms. But I think some people might think there's financial aid at the university, but that's not the only source of financial aid, right?

[Unknown]

That's correct. So financial aid is very broad and it would include work and loans and grants and scholarships. Big sources would be the colleges themselves, but also the federal government. The federal government has Pell grants and certainly lots of student loans. And it can be doled out either merit based or need based. So figuring out, well, does my student qualify for merit aid? And I think there's a challenge, right? You take a rock star student that can get into Notre Dame, let's say, but just barely, you know, just barely getting into Notre Dame, you're still a really strong student. Now that student could Go to some local university and maybe get the top scholarship and get a $30,000 merit scholarship. And they also might be able to go to another university where they're the presidential scholar that gets the full ride. Now, there's a lot of parents out there that say, well, my kid works so hard, he deserves Notre Dame. And we're just going to write big checks and pay for it, which is fine. Saving some families, that's the goal. But again, you also have the option of going to different colleges and getting $30,000 off a $70,000 school. Now you're net 40 instead of Notre Dame at 84, let's say. And then there's this school over here that will cover all of tuition and you just pay room and board. Or maybe they'll even cover room and board and you can go for free. Now, that school is not world renowned like Notre Dame. Most people have never heard of it, but if the price is right, again, a lot of times those same kids go on to be doctors and lawyers. It's just an undergrad degree. Spending a lot of money isn't automatically the better path, as much as the colleges would like you to believe. And all the private school industry. Same with private high schools, right? I mean, they are selling stuff as well.

[Brad Baldrige]

I went to a public state school, Colorado State University, felt like I got a good education. I turned out okay. I didn't have that Ivy League education and we saved a lot doing that.

[Unknown]

Yes, but now on the flip side, if you think your kids on the way to be president of the United States and you have the option of sending them to the Ivy League, you probably should. Because if you look at where presidents tend to come from, it is the Ivy League. So you need those connections. So there are benefits to it. Without a doubt. Whether the benefits are worth it for your situation is the bigger question.

[Brad Baldrige]

So with all the needs based aid we kind of talked about some of the forms on the merit aid, is income a factor at all?

[Unknown]

Generally not. Now, there are some programs where it's both, right? So Bill Gates ran a program where they were paying a lot of money and helping with fantastic 100% scholarships. But in order to qualify, you had to be academically strong and had to be Pell Grant eligible, which meant your family income had to be below $70,000 or something. So you had to be relatively high, need low income and be an academic rock star to win those scholarships. And they were full rides. So it was worth it if you could manage it.

[Brad Baldrige]

I know there are lots of different scholarship Programs outside of schools. How does someone even begin to put together a plan for finding scholarships and merit aid?

[Unknown]

You go to tamingthehighcostofcollege.com scholarships I have the scholarship guide for busy parents. It's four videos that are each about 10, 12, 15 minutes. The goal of it is so you can learn enough to know about what types of scholarships are a right fit for you. I had a family fill out 41 scholarship applications and they won seven for $39,000. But they're the exception, they're not the rule. And if you're going to work that hard at it, you need to know what you're getting into. And that's the reality, right, is families that should work that hard at it because they could be successful, run out of time because they don't start early enough, and therefore they don't do the 40 applications, they do six or five or zero. And then other times, students are busy, parents are busy, somebody has to do all the hard work for scholarships and it could be worth it.

[Brad Baldrige]

I met this woman who was speaking at a conference called fincon and she had applied for so many grants and scholarships, it was more than the cost of attendance. And some of these grants that she was eligible for paid her in addition to the cost of room, board. She actually made six figures in grants and scholarships after paying everything off. If you'd asked me if that was possible, I would have said no. And she was on her way to a million dollars before she graduated from qualifying for so many different grants and scholarships.

[Unknown]

And again, that would be very much the exception and not the rule.

[Brad Baldrige]

But if your kid's very academically strong, putting in the extra effort to kind of find all these things. And one thing, I don't think you mentioned this, but that guide you've put together with four videos, it doesn't cost anything.

[Unknown]

That's correct. Free video series. You can catch it on YouTube. You can watch the videos for free. I don't even ask for an email.

[Brad Baldrige]

We'll put the link in the show notes. But it's probably worth going through that process. If your kid is really strong academically.

[Unknown]

You need to go through it no matter what because there are scholarships for the C student. That's the point I'm trying to make. Right? There's a place for everyone. 70% of graduates start college in some form and that's down maybe to 66 or something. I think it slipped a little bit, but 2/3 of the population coming out of high school goes on to some sort of college. Not just a four year degree, it's a two year degree. It's all the different programs and all of it is appropriate because it all requires need based aid, financial aid, it's all part of the federal system can.

[Chris Hutchins]

All be planned for this episode is brought to you by Cultural Care Figuring out what to do about child care is a challenge we all face as parents. Fortunately, we found a solution. We love hosting an au pair. If you're not familiar, an au pair is a young adult from another country who lives with you for the year and helps care for your kids. We've been a host family with Cultural Care au pair since 2021 and it's been so great for us. We love the personalized attention for our kids and the flexibility it gives us as parents. It's also a lot less expensive than most people think and we chose Cultural Care because they're the biggest agency in the US and work with hundreds of au pairs from over 25 countries who all go through an extensive multi step screening and training process. One reason we love having an au pair is that our family, and especially our girls get some exposure to the world outside of our community. So far we've had au pairs from Italy, Colombia and Spain and we've learned new cultures, languages and foods from each one. So if you're interested in flexible and personalized childcare, you have to check out Cultural Care Au Pair. And as a new host family, if you go to allthehacks.com culturalcare you'll get $250 off your first year after you match with an au pair again, find your next au [e-mail] culturalcare or find the link in the show notes with what AI can do these days, I'm.

[Brad Baldrige]

A little worried about how sophisticated scams will soon be.

[Chris Hutchins]

In fact, that last sentence wasn't even me. It was generated with AI. So I am very proactive about making sure all my personal data, whether it's phone numbers, addresses, emails, isn't out there making me or my family a target. And thanks to data brokers, these terrible companies in the business of sharing and selling our data, it's easier than ever to be a target. When I first looked, I found hundreds of pieces of our personal info online. But I quickly started using Deleteme to automatically get all that data removed and I am excited they're a sponsor today. Deleteme is an amazing service because they don't just remove your personal information from hundreds of data broker websites, but they'll continuously scan for new data that shows up and get that removed as well. In fact, on average, they find and remove over 2000 pieces of personal data for a customer in their first two years. And it's not just for you. You can now extend your protection and peace of mind to anyone you want within your Deleteme account, which I've done for my wife and both sets of our parents. So if you want to get your personal information removed from the web, go to allthehacks.com deleteme and get 20% off a plan for you or your entire family. Again, that's all thehacks.com deleteme I just want to thank you Kwik, for listening to and supporting the show. Your support is what keeps this show going. To get all of the URLs, codes, deals and discounts from our partners, you can go to allthehacks.com deals so please consider supporting those who support us.

[Brad Baldrige]

One strategy I've heard from some parents is if you want to save on college but you really want that great degree, can you go to a local community college for two years, get the credits in some of the basic classes and transfer into a more competitive, academically strong, higher reputation college for the last two years? What do you think about that strategy?

[Unknown]

I think it's a great strategy, but you need to do your homework and it's becoming a lot easier now. Many states have had mandates now where they set up paths where you can go to community colleges or even just some of the outlying colleges and then transfer to the flagship school to finish your degree. And if you are sure your credits are going to transfer and you understand both schools really well and it's all put together, that could be great. But I have had situations where okay, Well I got 62 credits and I transferred and they only accepted 32, so I lost a year anyway, which could.

[Brad Baldrige]

Hurt into your savings and it probably. I don't know the answer to this, but I'm guessing it's not as effective of a strategy. If the goal is to save money on an Ivy League school versus a tier one state school.

[Unknown]

Correct. It would be relatively hard to transfer into some of these schools. And again, if you got a kid that's strung the Ivy leagues, the high end, they're going to be so generous that they're going to be the low cost option, they're going to be cheaper than the local community college, they're going to be free. Remember, if Your income's under 100,000, they're free. They're the low cost option. The challenge is you got to be an academic rock star to get accepted. I think a lot of people need to understand that there's wide variability in pricing. It's like an airline seat. You don't really know what the person sitting next to you paid. You know, they could have used their frequent flyer system or gotten the right credit cards and played the game and paid nothing for the whole family to go on vacation. And then someone sitting next to them is like, well, I need to be in Boston tomorrow. And they put their Diners Club on the counter and they didn't care what it cost and they paid $4,000 at the counter to leave immediately.

[Brad Baldrige]

So it sounds like especially if you're at the low income, there's a lot of options for savings for anyone on the higher income. I don't want to spend a ton of time focused on them because they can't afford this. But it's still a massive cost, right? For someone who doesn't qualify for need based aid, how should they be thinking about this?

[Unknown]

Probably half the people I work with don't qualify for need based aid per se, but they still send their kids to college sometimes. You know, the colleges you're looking at will ultimately be full price. And you have to decide, well, am I going to write a check for 90 or am I going to pursue other schools? Or maybe you get some merit aid or your local state school might only be 30 and kind of finding that balance. But there's still a lot you can do, right? There's tax planning, there's saving and investing, there's merit aid, there's negotiating with the schools, there's a lot of planning just realizing that need based aid is not on the list. And that's where I think a lot of people get a little confused. Is a lot more to it than will I qualify for need based aid or not? Because even if you don't, you're still going. And now it's going to be expensive. So how are we going to raise those kind of funds and the higher incomes? It's a lot more tax planning. It's a lot more negotiating with schools. It's understanding the CSS profile. I had a dad earning 404, 50, had two kids in college and he got need based aid. Now it went from 90,000 per student to roughly 70,000 per student, but we consider that a win. 40,000 a year.

[Brad Baldrige]

Okay, so you talked a little about tax savings. What should people be thinking about when it comes to taxes to optimize the cost of college?

[Unknown]

I mean, we covered A big one, which is the 529s and the various savings. Right. That's a big one. But on top of that, there's the opportunity credit that phases out between 160 and 180 if you're married and 80 and 90 if you're single. I work with families where it's like, okay, how do we stay under 160 so we can take advantage of this credit?

[Brad Baldrige]

How much can that credit be?

[Unknown]

Up to 2,500.

[Brad Baldrige]

Per year. Per student?

[Unknown]

Yes. Up to four years. So it's roughly 10,000 per student. So again, a lot of times it's, oh, I chose to put this money in the Roth version at work. If I'd have put it in the deductible version, I would have gotten the credit. So maybe I should do that.

[Brad Baldrige]

Or if I had put money in the hsa, when there's these hard requirements, it's really dialing in the levers. If you're making $800,000 a year, it doesn't matter. But if you're making somewhere between 150 and 180, depending on how you contribute, this is a year to pay attention.

[Unknown]

Exactly. If you're a business owner, if you have inheritance, if you're divorced, there's a lot more levers to pull and a lot more things you can do, like business owners hiring the kids in the business and paying them a wage, making them independent again. If you lose the benefits for claiming your own student, well, then stop claiming them and have them claim themselves and then figure out how to transfer income to them, hire them in the business. So if your income's $600,000 and up or roughly, and somewhere in that neighborhood, all of a sudden you start losing all the benefits of having children and then their deductions and that kind of stuff. Let's say you're operating a restaurant and your kids show up and work shifts. Pay them well and make them independent versus saying, well, that's what you have to do. Because I'm paying for your college. So you have to show up at the restaurant and work for free. No, do it the other way around. Pay them well. Have them pay for college. Because when they pay taxes, they'll pay less than mom and dad.

[Brad Baldrige]

Yeah. And they'll be eligible for these credits also.

[Unknown]

And they'll be eligible for the credits. So they'll have a tax bill, there'll be a lower rates, they'll have some taxes, and they'll be able to use the credit, whereas mom and dad can't use the Credit, they won't get any benefit for claiming. So again, it's a lot of accountants kind of understand this and can help you with it. Sometimes you got to lead them to the water before they really jump in with you. I think those are the big ones probably if you hear things like Roth IRAs and IRAs, there's a lot of planning there that can be done.

[Brad Baldrige]

Yeah, I mean, at the end of the day, you've done a podcast with over 100 episodes on this topic. I've read articles of yours, I've gone deep. We obviously can't cover everything. So I think my goal today is to at least touch on things. And if someone listening to this is like, oh, I am a restaurant owner, you're going to have to go a little deeper. If you're like, oh, I want my kid is that academic rock star? You're going have to go a little deeper. So I'll link to a bunch of those things in the show notes. But by no means is this meant to be the most comprehensive guide because we just couldn't do it in the time we have, especially given how much I've seen you've created on this.

[Unknown]

So at our website we've got the cost of colleges by income. That will help you understand the true net cost of college. That's a great resource. We've got financial aid calculator where you can work that out. We offer a free email newsletter where we kind of remind you, oh, here's some new stuff. One of the big challenges as a parent and myself included, college is important, but it's not the only thing going on and weeks go by and you go, oh yeah, we were supposed to call the college and it just doesn't get done. Starting early is another challenge. Right? I'd like to start in my sophomore year, but I don't really know what to do or how to do it. Scholarship guide for busy parents is a great place to start. Start learning about need based aid and merit aid and understanding. Because you can plan as a parent whether your student is ready or not. I see that a lot too. Well, we can't do any planning. My kid doesn't know what they want to be when they grow up. We're not even sure if they're going to college. They're only a freshman or sophomore. We haven't quite figured it out. You can start planning anyway. Maybe you can't visit colleges yet because your student's not ready, but you can figure out the parent side of college planning.

[Brad Baldrige]

Okay, we didn't Talk about student loans. So how should people be thinking about student loans right now and how would that change depending on whether it's out of necessity or not?

[Unknown]

Student loans are just another tool in the toolbox. And some people will take true student loans in that they're what's available through the federal government or through the credit unions or whatever. Other people will borrow money for college, but they'll do it as a home equity line of credit or margin loans or all the different ways where they can say, well, I can borrow money cheaper, why wouldn't I do that? And the answer is, well, maybe you would borrow it cheaper some other way if you can. But there's a lot of families out there that can't borrow it cheaper because they don't have enough home equity or they've already used it or whatever it might be. And then the federal student loans are decent, but they can be beaten in the private market if you've got strong credit and that type of thing. And they're just a tool where for some families the reality of it is college with loans is better than no college, almost for sure. Especially if it leads to a career that you need the college for. If you want to be an accountant or a nurse or a teacher and you need to use some loans to get there, well, that's climbing the socioeconomic ladder. That's the way it works. Typically that's the first generation college student is how they're going to do it. Second generation mom and dad might be able to pay or help, but they're not good and they're not bad. If the math works, great, go ahead and use them. Now the challenge I think is the student cannot borrow much in their own name. Again, the typical 18 year old coming out of college, they can borrow 5,500 for their freshman year. Mom and dad can borrow the rest. So pick the expensive school. That's 90,000 student borrows 5,500. Mom and dad could borrow 84,000 and pay for it all with a loan. I'm not saying you should, I'm saying you could.

[Brad Baldrige]

People who graduate with hundreds of thousands of dollars of student debt is that often that their parents were the ones that kind of co signed on these loans? I have lots of friends who are still paying off student loans. Are those loans all technically their parents, but they're taking that responsibility or how did they end up in that situation?

[Unknown]

So parents either co signed or grad school. Once you have your undergrad, if you go on for a master's or doctor, lawyer, all that stuff, lots of people can borrow lots of money there. Once you go on to the advanced degree, the game completely changes. And most aid is just loans. And it's also quite expensive now. So the typical doctors and lawyers out there could borrow hundreds of thousands in order to get through the process. They don't necessarily have to, but a lot of them end up needing to. Or again mom and dad co signed in the private market where primary borrower is the student mom and dad co signed. And I think that's where again I work with parents and parents need to be the adult and say, you know, I'm not willing to co sign this much debt. We have to find a better path. And I think the biggest frustration that I see out there is when mom and dad have strong income and strong assets, disqualifying the student from most aid. But then their philosophy is we're not paying for college because I worked hard and therefore you work hard and you figure it out. I don't believe in college or I paid for my own college by borrowing or whatever. And then that student is just kind of stuck unless the parent is willing to sign or co sign.

[Brad Baldrige]

I never really thought about it from the perspective of parents that if you didn't have a lot of money and you weren't willing to pay for your kids college, it might have been a lot cheaper for them.

[Unknown]

Right.

[Brad Baldrige]

Is there an argument for people who can and are planning on paying for their students college to still take out loans?

[Unknown]

Yes. I mean wise use of debt in any financial plan makes sense and abuse doesn't.

[Brad Baldrige]

This is an area I don't have a lot of expertise. But you know, a mortgage you might have to pay a high interest rate right now, but that interest is deductible on up to $750,000 of mortgage. Are there any rules that make it such that taking out a loan could actually despite the interest rate, be more attractive?

[Unknown]

Well, yeah. So there's two components. One is the math problem of it all right, I can borrow money at 5% or I can give up this investment that's paying 10%. Well, I'll borrow at 5 and keep the investment that's paying 10 because I make more money than it costs me. So if you can out earn your loans, then that's what leverage is all about. But you want to use leverage sparingly in some situations. But there's also, I think, kind of the unwritten rule of skin in the game. I've had parents that could easily pay for whatever the kids want and they still have the kids take out the student loan because it's like they need some skin in the game. They need to earn $3,000 in the summer in order to pay for their spending money. If they want to go out for pizza or beer or whatever, they got to earn that money because I'm not giving it to them. And then on top of that, we expect them to take out this 50, $500 loan that they can sign up for. The interest rate's pretty friendly. They don't have to make any payments till they graduate. And it's just their skin in the game.

[Brad Baldrige]

The loans that are in the student's name, it sounds like probably have better terms than the loans in the parents name.

[Unknown]

Correct. If you show a need, they can be subsidized. So interest rate is 0 while you're in college. People often would say, why wouldn't I take a 0% loan? It's like you would you pay it off later if you want. The only exception to that would be if you get yourself in over your head and start defaulting on them and that kind of stuff, then you didn't do yourself any favor.

[Brad Baldrige]

We won't go deep on this at all. But I know there are also some loan forgiveness programs, depending on what kind of careers you go in. There are some employers that help with loan repayment assistance. And so you obviously have no idea what your child's going to do after college to be able to plan that way. If going into college your child was like so set on becoming a public school teacher. There might be a world where some amount of student loans would actually have been the lowest cost in the long run, right?

[Unknown]

That's correct. There's loan forgiveness programs, you know, if you graduate and go to work for a nonprofit or if you go to work in an industry like teachers or firefighters, there's various professions now that they're trying to subsidize because they need more of them. And some states will do different things. Some states are doing engineering now as an example. They're trying to get more engineers in their state. So you take advantage of those programs where you can. But I often caution people, there's some pretty unhappy families out there, like, well, should I be taking these loans just so we can get them forgiven? It doesn't seem fair. My general answer is no, it could happen, but it's not a plan. That's kind of a hope.

[Brad Baldrige]

I would never recommend anyone do something in the hopes that our government will do something in the future. Because we're recording this before the 2024 election. And I would not put any confidence on what will happen. I have no clue. And this is not a political statement. It's just I would not want to make a financial decision in my life that was contingent on some future act of Congress or presidential veto, like something like that. So totally with you there. But I just, I want to point out there are some student loan forgiveness strategies that certain career paths could make more sense than.

[Unknown]

Absolutely right. So if you need the loan anyway, well, then by all means, go ahead and take the loan. But you need to be able to see a path that works. If it works out and it's forgiven, life is good. If it works out and it's not forgiven, you still got to be able to survive and have a decent income. And you can't be so far underwater that all hope is lost. And we hear about some of those recent graduates out there that are so far in the hole that they can't figure out how to earn enough to live. So you don't want to put yourself in that situation going in if you can avoid it.

[Brad Baldrige]

I have a couple fun things I'll share. I'm going to do it after we stop recording with you, Brad, just because I know you're short on time and I want to maximize the time we have with you. So first, if there's any important point we missed, would love to hear it. And then I have one last question before we wrap.

[Unknown]

We covered a lot. I can't recall anything in particular, but I think the bottom line is just do it. I mean, college planning and financial planning, they kind of go together as well. I think college for a lot of families is kind of that first. Okay, these big expenses that are coming, we really need to sharpen the pencil and figure this out. Is this going to impact our own retirement? Is it reasonable to spend $20,000 or $50,000 or $75,000 a year per student? Some of those big picture things need to be worked out and some reasonable guidelines need to be determined early on. Because if you wait till the end, parents start to feel guilty they didn't plan well or whatever it is. And they can always sign that big loan at the end to make it all come together. So that's, I think, where a lot of the problems come in as well, is we're all the way to the end. My student applied to very expensive schools and got accepted, and now I feel guilty about saying no. So I guess I'm going to sign up for the loan because we didn't plan well.

[Brad Baldrige]

Some of these things, we didn't talk about deadlines, but the deadlines for merit aid need aid. They might be before the deadline for applying. They might be at different times of the year. So not only plan ahead, but one of those planning ahead things should be to look at the dates because they might be earlier than you think. Okay, so my parting question, and then I want to ask where people can go deeper is how much do you think the average? So not ultra high net worth, but not below that kind of 100k threshold where the answer might be 100%, the average person. Is this something where if you plan well, you could save 3% on the cost of college, or is it like 20, 30%?

[Unknown]

So I think the average family could save, you know, 10 to 30% if they plan well and some substantially more off the cost of their college. Certainly the stronger academics families can save tons of money. One option may come in dramatically different than another, and they just need to be aware that the option existed.

[Brad Baldrige]

All right, now, obviously we didn't hit everything. Where can people go deeper on all of this?

[Unknown]

Everything that I have is at tamingthehighcostofcollege.com We've got our podcast, a newsletter, scholarship guide for busy parents, financial aid calculator, etc. And there's actually a phone number there, and if you call during business hours, we'll answer.

[Brad Baldrige]

This has been awesome, Brad. When I was prepping for this, I read a lot of the content on your site and I listened to a lot of podcasts. It's really fantastic. I'm still in that early stage of planning with kids under 5, but I'm already starting to think about what I should be doing. And I have no doubt that in like 10 years, I'm going to be consuming a lot more of that content. So thank you so much for joining me.

[Unknown]

Thanks for having me.

[Chris Hutchins]

Like I said, I want to share a strategy I've been using on 529 contributions that I think so amazing that I actually pushed back the interview with Brad because I wanted to be able to take advantage of it and I didn't think I had enough time. That deal, unfortunately, is not around today, but there's an iteration of it that is. I did actually end up being able to send it to all the Hacks members the morning it happened, and a handful of them got to take advantage of it. So in the future, when there's really timely deals that are like that, I do send them to members. Allthehacks.com join if you're interested, I'll talk about it and what it was. I'll talk about how it's evolved and how you can still take advantage of it today. So I think the number one thing I hear from a lot of people is I wish that I could put my college savings or my college tuition payments on a credit card. And a few people that listen to this show have reached out and said actually their school or their children's school does allow that, but the vast majority of schools don't. I'm not aware of any five 29s that let you contribute with a credit card. There are some schools that even if they don't let you contribute with a credit card, they'll let you contribute with a debit card. And there are a couple of debit card programs out there that do earn points or some kind of cash back, but they're few and far between. So that is an option. And then there's a credit card that hasn't come out yet called the Rise Tuition Card that I've shared in the newsletter in the past that, similar to the BILT card, is going to be like a card that allows you to earn points on tuition. However, it is capped at a hundred thousand dollars of tuition spend, which seems like a lot, but it only earns 1%. So that means that at most you're going to get an extra thousand dollars back a year. And I don't think that's trivial, but I just want to point out that relative to a signup bonus that could be even more than a thousand dollars, you might want to consider it against opening up a new card each year. That could be a higher roi. If you did two cards or three cards, it'd be even higher. But just something to consider when thinking about new cards. The main deal that caused me to delay this interview and that I've been really focused on recently is centered around gift of college gift cards. So if someone isn't familiar, you can buy these gift cards and you can buy them online at grocery stores. And what they do is they make it really easy for you to give them to someone and they can apply them to their529 account without needing to know where their account is and what institution. So I have the 529 for our kids at Wealthfront, and if someone were to gift me a gift of college gift card, I could basically go online, redeem it, and say, hey, send all of these funds over to my 529 at Wealthfront for my kids. So it makes it really easy to gift around 529 contributions. And you can buy these gift cards at convenience stores, gas stations, grocery stores. But the catch is they usually come with an activation fee that's about $6.95 when you buy them in a store. That means that if you're buying $100 gift card and you're paying a 695 activation fee, you're effectively paying a 6.95% fee on the card, which makes it much less appealing. However, gift of college gift cards do come in denominations up to $500. So I'm looking at a list right now of where you can get them, and the few places that have that $500 level are Brookshire Brothers, Cumberland Farms, but not in vermont, Food, Max, HB Lucky, and SaveMart. Now, there are some other places like cvs, Fleet Farms, Stripes and Walmart that have them at smaller denominations, But I'm going to first for a second on the fact that you can get them in store at a 6.95 fee. And if you were able to get a 500 value one, then if you're looking at 6.95 out of 500, you're only paying about 1.39%. So if you had a credit card that earned more than that, you'd have a little bit of a margin there. And if that card earned 4 points per dollar at a grocery store, well, then that margin's even bigger. So that's been something that's interesting. But if you don't have one of these stores near you or they're not always in stock or you have to drive around, that can be a little bit of a hassle. But I noticed the morning of this interview that gift cards.com was selling gift of college gift cards only at the $200 value, but they were selling it without an activation fee, meaning you could buy five $200 gift of college gift cards for $1,000 with no fee. So right out the gate, that's interesting. But at the time, gift cards.com, which has their own rewards program, was giving 2% back in points that you can use on their site. And giftcards.com was on Rakuten with a 2.5% cash back rate. So you could buy a thousand dollars of these gift cards, you'd get $20 of rewards on giftcards.com in the form of 2,000 points. You'd also get 25 of cash back on rakuten, plus whatever points you got buying this on a credit card. So in my mind, if you stack that up you get 2 1/2% on cash back from Rakuten, you get 2% on giftcards.com and let's say you had the US Bank Smartly Card that has already come out. You could stack those up for 8 1/2% back on your 529 contributions. That's amazing. Even if you just had a 2% card you'd be at 6 1/2% off your college contributions. Now I told you, I did send that out to all the Axe members. So I hope a lot of people listening got to take advantage of it. But I'm not just going to talk about a deal that you can't take advantage of because that wouldn't be that interesting. Though it is good to know what kinds of deals do pop up from time to time. And one thing that I forgot to mention on all of the cashback portals there is usually a two thousand dollar cap on your spend on giftcards.com so when I was running this all morning I was purchasing $2,000 and then I was doing another transaction and another transaction and another transaction to keep that limit and I was just stacking up all the Rakuten rewards which I actually have my Rakuten account linked to my Amex account. So I was actually earning Amex points. So that was the play that happened. Then a few things changed to the negative and then one big thing changed to the positive and I actually think the play might be even better now, but it's just a little different. So what's changed is that unfortunately you're no longer getting 2% in gift cards.com rewards which by the way you do need to go into your account on giftcards.com and opt in. You're only getting 1% so that's a bummer. Also, they are now charging a 595 fee for buying these gift cards and unfortunately the maximum gift card you can buy is only a hundred dollars. So now you're stuck paying a 595 fee on a hundred dollars which means you basically have a 5.95 fee. They do give you 1% in giftcards.com rewards. So let's assume it's a 4.95 fee. So let's just round it and say it's a 5% fee to buy gift of college gift cards on giftcards dot com. Now if you use the Rakuten Portal you get 2 1/2% back there. Now you've got a 2 1/2% fee. And then if you were to use a card that earned 2.625. Like one of the bank of America cards with Platinum honors. A robinhood card at 3%, the U.S. bank card at 4%. Yeah, you could probably make a little bit of a spread there. But the really interesting thing is twofold. So one as of recording this and unfortunately by the time this is done, I don't know if these deals will be here or if they'll be replaced with better ones. But a lot of the airline shopping portals have these big holiday bonuses that I imagine I could be wrong would come back again as we get close to the holidays where for example, American said if you spend $1600 you'll get a bonus 4000 miles on top of on the day I did this, two and a half miles per dollar. So spend sixteen hundred dollars, get two and a half miles per dollar or four thousand points, get another four thousand bonus points, you end up with eight thousand American miles. Whereas on Rakuten two and a half percent would have only been worth forty dollars. I value American miles at over one and a half cents because they're really difficult to get. They're not transfer partners of anyone. So that's a way better deal. But let's say even that's not available and you've still only got your 2 1/2% back on Rakuten, it still feels like it might not be a great deal. You pay a 5% fee, you get 2 1/2% back. On Rakuten you need your credit card rewards to beat the two and a half percent which is hard to do. Obviously if you're in the middle of trying to hit a sign up bonus it would work, but otherwise that doesn't make a lot of sense. So where I think it gets interesting is the fact that right now there is a Chase offer and I have it on 10 different chase cards for 5% back on giftcards.com up to $50. Which means for each of those cards you could spend a thousand dollars, get 5% back and that would negate the entire gift of college fee. Because you're paying a 5.95% fee, you're getting 1% back in giftcards.com rewards and you're getting 5% back on Chase. So you end up with whatever those shopping portals are. So let's say Rakuten 2 and a half percent plus whatever rewards you're getting on your card. So that's the trick I've been using. I've been playing with this as it comes and comes. I think it's still possible that in the near future, giftcards.com will actually bring back the 200 gift of college gift cards. It still says like 50 to 200 on the image on the site, so I'm hoping that comes back. These Chase offers don't expire till the end of the year, so there's no rush. Unless of course there's some holiday shopping portal bonuses or elevated cash back for giftcards.com definitely keep an eye out for those if you haven't yet activated some of these offers. For any offers, whether it's bank of America, Chase, Amex, I highly recommend checking out the Card Pointers app. You can get a discount of 30% at all thehacks.com card pointers and the reason why it's such a great app and I mentioned this last week in the Gift Guide episode is that for all these card linked offers, when you add them through card pointers they go and hit the bank website APIs at the exact same time so you can add them to multiple cards. So right now we have this giftcards.com offer on 10 different cards, which means if each one can spend a th000 we could go spend $10,000 conceptually and get that extra $50 back on all 10 of those cards and negate the fee on all of them. And then any of the credit card rewards and any of the shopping portal bonuses are a bonus. So hopefully that's really helpful. Wanted to share that quick hack before I signed off today. Thank you so much for listening. [e-mail] if you have questions or you want to reach out. I'm going to read a quick disclosure that Brad asked me to read because if I do, he's willing to share this episode and I wanted him to.

[Brad Baldrige]

Be able to do that.

[Chris Hutchins]

I will see you next week. The information provided to you today is for educational purposes only. It is not intended to be specific recommendations or advice. Please consult with a qualified professional before acting on any of this material. Investing does involve risk. Depending on the type of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal, on 529 college savings plans. Investors should carefully consider investment objectives, risks, charges and expenses. The information and other important information are contained in the Fund Prospectuses, summary prospectuses and 529 product program description. These documents can be obtained from a financial professional or directly from the plan's website. Please read them carefully before investing. Depending on your state of residence, there may be an in state plan that offers tax and other benefits which may include financial aid, scholarship funds, and protection from creditors. Before investing in any state's 529 plan, investors should consult a tax professional. If withdrawals from 529 plans are used for purposes other than qualified education, the withdrawal could be subject to a 10% federal tax penalty, state penalties, federal income tax, and state income tax. Finally, Brad Baldrige is a registered representative with Cambridge Investment Research, Inc. Securities are offered through Cambridge Investment Research, Inc. A broker dealer member at FINRA sipc. Brad Baldrige is also an investment advisor representative with Cambridge Investment Research Advisors, Inc. A registered investment advisor. Baldrige Wealth Management and Baldrige College Solutions are affiliated. Cambridge and the Baldrige companies are not affiliated. His registered branch location is 2810 South Calhoun Road, New Berlin, Wisconsin 53151.