BiggerPockets Money Podcast Summary Episode: How to Create Huge Tax Savings Funding Your Kid’s College (& FIRE on Time!)
Release Date: May 9, 2025
Hosts: Mindy Jensen, Scott Trench
Guest: Amberly Grant

1. Introduction

In this episode of the BiggerPockets Money Podcast, hosts Mindy Jensen and Scott Trench, along with guest Amberly Grant, delve into the intricacies of funding children's college education while maintaining financial independence and pursuing FIRE (Financial Independence, Retire Early). The discussion centers on maximizing tax savings through strategic financial planning, particularly focusing on tools like FAFSA and 529 plans.

2. Understanding FAFSA and Financial Aid

Amberly Grant opens the conversation by emphasizing the importance of the Free Application for Federal Student Aid (FAFSA) in determining eligibility for federal grants and loans. She clarifies that FAFSA is not only for grants but also essential for accessing federal student loans and numerous scholarships.

Amberly Grant [02:40]: "FAFSA is not just for free money, for grant money. It's also to determine what your kid will need for federal student loans."

Mindy Jensen shares her frustration with FAFSA, noting that despite knowing she doesn't qualify for aid, completing the form is mandatory.

Mindy Jensen [03:48]: "You have to fill out the whole form, which is really annoying when you already know that you're not going to qualify."

3. UTMA vs. 529 Plans

The hosts and guest compare the Uniform Transfer to Minors Act (UTMA) accounts with 529 plans. Amberly explains that while UTMA accounts are treated as child assets and significantly impact FAFSA calculations, 529 plans are parent-owned and only account for 5% of assets in FAFSA assessments.

Amberly Grant [07:00]: "A 529 account belongs to me, the parent, and my child is just a beneficiary of the account. Therefore, it's only weighed at 5%."

Mindy expresses concerns about UTMA accounts, highlighting the risks of assets being heavily weighted and automatically transferred to children at age 21.

Mindy Jensen [11:10]: "I don't see a use case for it [UTMA over 529]."

4. State-Specific Benefits: Focus on Colorado

The discussion highlights the significance of state-specific benefits for 529 plans, with Amberly pointing out Colorado's advantageous tax deductions.

Amberly Grant [22:00]: "In Colorado, we can use the 529 account contributions as a tax deduction on our yearly taxes."

Scott Trench adds that while some states like California offer no tax deductions for 529 contributions, Colorado stands out with substantial benefits.

Mindy Jensen [39:53]: "There are some states that have absolutely no benefits. Colorado for 2025 has a $25,000 deduction or if you're single, or $38,000 if you're married, filing jointly."

5. Funding Strategies: Lump Sum vs. Yearly Contributions

Scott advocates for a lump-sum contribution to 529 plans to maximize tax-free growth over time, suggesting that an initial investment can significantly compound by the time children attend college.

Scott Trench [19:08]: "I would put in about 75 on day one, essentially, and just let it rip for the next 15 years."

Conversely, Amberly recommends a balanced approach, cautioning against overfunding and allowing flexibility in case children's educational paths change.

Amberly Grant [20:44]: "You might go 10 years in and realize you have a kid who's super handy with plumbing... So you might want to back off of contributing those extra years to that account."

6. Personal Perspectives and Anecdotes

Mindy Jensen candidly shares her current situation, admitting that she hasn't saved for her children's college education, which contrasts with Scott's intent to fully fund his daughters' education and Amberly's moderate saving strategy.

Mindy Jensen [37:33]: "I do have a friend who... ended up asking people instead of giving us any gifts because we don't need anything. We're in our 30s. We're established. We actually asked them to contribute to our children's 529."

7. Overfunding and Penalties

The hosts discuss the consequences of overfunding 529 plans, including a 10% penalty on the growth portion of withdrawals not used for qualified educational expenses.

Amberly Grant [24:42]: "If you overfund the account, any dollar in that account is going to be weighed... it's something to pay attention to."

Scott emphasizes the importance of precise funding to avoid penalties while still leveraging tax advantages.

Scott Trench [22:32]: "I can pull out the 100 grand and use the 200 gain to pay for all of the college expenses... but with the gain, there's a penalty."

8. Flexibility in 529 Plans Use

Amberly highlights that 529 funds can be repurposed if a child chooses not to pursue traditional university education. Funds can be transferred to vocational schools, other beneficiaries, or even returned to the contributor with certain penalties.

Amberly Grant [22:47]: "You can put use some of it towards a vocational school... or you go back to school yourself."

9. Community and Expert Advice

The hosts encourage listeners to engage with experts and the community for tailored advice, acknowledging that individual circumstances vary widely.

Mindy Jensen [48:47]: "Do you know of a 529 expert... please correct us. Mindy@biggerpockets.com Scott@biggerpockets.com Amberly@biggerpockets.com."

10. Conclusion

Mindy wraps up the conversation by emphasizing the importance of researching state-specific 529 plans and considering individual family circumstances when planning for college funding.

Mindy Jensen [53:30]: "Set up your 529 plan and give that out to all your friends and family. If you're thinking about giving our child a gift, this is a great place to do it."

The episode concludes with the acknowledgment that while there are various strategies to fund children's education, it's crucial to balance these plans with overall financial goals and flexibility.

Key Takeaways:

• FAFSA is essential for accessing both grants and federal student loans.
• 529 Plans offer significant tax advantages, especially in states like Colorado.
• UTMA Accounts heavily impact financial aid calculations and transfer control at age 21.
• Funding Strategies should balance between lump-sum investments and yearly contributions to maximize growth while maintaining flexibility.
• Overfunding 529 Plans can lead to penalties, so precise planning is crucial.
• Flexibility in using 529 funds allows for adjustments based on children's educational paths.
• State-Specific Benefits play a pivotal role in maximizing the effectiveness of 529 plans.

Notable Quotes:

• Amberly Grant [02:40]: "FAFSA is not just for free money, for grant money. It's also to determine what your kid will need for federal student loans."
• Mindy Jensen [11:10]: "I don't see a use case for it [UTMA over 529]."
• Scott Trench [19:08]: "I would put in about 75 on day one, essentially, and just let it rip for the next 15 years."
• Amberly Grant [20:44]: "You might go 10 years in and realize you have a kid who's super handy with plumbing..."
• Mindy Jensen [53:30]: "Set up your 529 plan and give that out to all your friends and family."

This comprehensive discussion offers valuable insights for parents aiming to fund their children's education efficiently while aligning with broader financial independence goals.