 Our next session here at Boglehead's conference is going to be by Ann Garcia. She's going to be talking to us a little bit about saving for college. She spent a dozen years as a financial advisor, but that is not her only professional interest. She also has an interest in wine as an importer and distributor of wine. She holds the CFP designation. She graduated from Berkeley and is the author of How to Pay for College. She's a member of Phi Beta Kappa, Phi Beta Kappa, and of NAPPA, which is a leading association of fee-only financial advisors. She hails from Portland, where she lives with her husband and their twins who just graduated debt-free from college. So this is not only theoretical but practical knowledge. And spends her evenings and weekends exploring Portland's food scene, running on the Wildwood Trail, or coaching, playing and spectating soccer on the pitch. Ann Garcia, thank you for being here. Jim's taller than I am. Thank you so much, Ann. Thanks for having me. Can everyone hear me? Yes. So as Jim mentioned, I'm a financial advisor and I'm from Portland, Oregon. It's a great place to live. It's a great place to raise kids. But it's not where I'm from and it's not where my husband is from. And it's not where we went to college. I'm from California. He's from Michigan and that's where we went to school. And frankly, we both think that we went to the world's best colleges. And only one of us is right. But we can both continue to think that. We feel like our colleges were not just great places to get an education, but great places to become adults. You know, we've made friendships that have lasted a lifetime. We learned all sorts of skills and knowledge that have made us successful in our professional careers. And that was really what we wanted for our kids. So from a very early age, we started indoctrinating them in all things blue and gold. Here's another thing. We hate the organ ducts. And so, I hope I'm among friends and I can say that. So, you know, we took them to visit our schools. We bought them all the gears. We even got our dog in on the action. Now, I bring this all up not because it matters where I went to college or that I have a dog or anything like that, but because it's usually not homo economicus who's thinking about college. It's us as parents looking back at a really amazing time in our lives. It's us as parents doing that most human thing we do, which is wanting the best for our kids. It's not that rational thought of college is expensive and how do we make it a good investment. So if that's not how you're thinking, you're normal and that's okay. But that's not how we're going to go forward. Because as Jim mentioned, my kids just graduated from college from these pictures. You think they were 10 years old. And actually I did not stop taking pictures of them when they were 10 years old. It's just that when they were about 10, I looked up what it would cost to send them to either Berkeley or Michigan. And that was when we stopped buying all the t-shirts and all the gear. Because much as I love my kids and much as I love my college, $65,000 a year times four times two kids was completely out of the question for my family. And I realized as I started thinking about why I wanted them to go to Berkeley, that it was about things like all these brilliant professors who were just eccentrically fascinating on odd topics. And it was exposure to different people. And it was learning how to clean the lint screen out of the dryer. And all of that seemed like it was going to be available at a lot of places. And I realized if we stopped thinking about which college we wanted them to go to and started thinking about why we wanted them to go to college, we opened up all kinds of doors and provided great opportunities for them to get great educations at prices that worked for our family. And my story has a happy ending. Both my kids found a great college and neither of them is a duck. So before we get too far into this, because I know there's tons of numbers and you want to hear about the FAFSA and how you do better on it and whatnot, really important piece of college planning. It's equal parts financial planning and parenting. You could have the greatest plan in the world. Like when you do your retirement planning, you can plan out the dollars exactly. But when you're making a college plan, it's not for you, it's for them. So you have to do the parenting work. You have to be talking with your kid about what your expectations are, what your goals are, what your budget is, why you're doing this in the first place. Because if you're not doing that, the greatest plan in the world will go completely sideways because they will be hearing about it from their friends and their friends, older siblings, and from colleges and from all those beautiful brochures. So here's my agenda. But I want to leave plenty of time for Q&A. So I'm going to take a vote of what we want to spend the most time on. Who wants to talk about saving for college? Excellent. Who wants to talk about how much college costs? All right. How about scholarships and how to get them? Yes. Fafsa? All right. How about the actual mechanics of paying for college? Okay. And sorry, you don't get to skip the messy parenting stuff. So let's blow through the savings part. Saving for college is the ultimate moving goal post-school. I just had to show that because my husband loved that slide. Please use a 529 to save for college, not a 401k loan, not life insurance, not annuities. I will say Secure 2.0 lets you roll over 35,000 unused education dollars and a 529. So do not choose not to save because your kid might not go to college. Your 529 is your child's launch fund, regardless of what they ultimately end up doing. Okay. So fun fact about saving. If you increased your monthly 529 contribution by $5 a month every month, every year on your child's birthday, you would have $20,000 more dollars for college than if you didn't. So that's an easy, easy flex on your savings. But let's talk about what college actually costs. So obviously list prices, $82,000 and up for private schools, $25,000 and up for public. Here's the crazy thing. While the average tuition inflation rate for list prices has been over 6% for the last 25 years, the net price that people actually pay has hardly budged since the financial crisis in 2008, 2009. The average tuition discount is over 50% right now. Not only that, but there are tons of other pathways through college, dual enrollment, getting college credit through AP and IB courses. It's not necessarily a four-year, $80,000 a year proposition to go to college anymore. In fact, college is available at whatever price you're willing to pay. My son has a friend who graduated from college for $0. She did two years of free community college. And then she worked at Starbucks. And Starbucks has a partnership program with Arizona State. Arizona State let her go online for free for two years. So she literally paid $0 for a four-year college degree. And her diploma looks exactly the same as everyone else's from Arizona State. In fact, she walked across the stage on graduation with all the rest of them. So whatever price you're willing to pay, there is a college out there that will charge you that for it. Here are some of the things that drive college costs. I mean, we talk about, you know, lazy rivers and dorms. We talk about declines in state funding. The reason that the list price of college has gone up is that people are willing to pay it. Every year the top colleges, the Ivy Leagues, the Ivy Pluses, the public IVs, turn away 100,000 or more people who are willing to pay full price. They have no incentive to drop that price. However, lots and lots of people aren't able to pay that price. And so they do discount that tuition. So that's a thing that drives college costs up. Other things drive it down, selectivity, for example. The most selective colleges, part of the reason why they're so selective is that everyone who's accepted says yes. Part of the reason everyone who's accepted says yes is they're typically the most generous ones. So if you have high financial need, don't shy away from the Ivy Leagues. They're probably going to give you the best price there is. My daughter's second cheapest college choice was the most selective school that she got into. She went to the University of Chicago, which is the most expensive university on earth. And her only cheaper choice was the University of Oregon where she received a full tuition scholarship. So don't let selectivity scare you away because that tends to be where you get the best deals. U.S. News and World Report rankings, you need to use these the opposite way. There's so much pearl clutching around ranking colleges. But the college rankings are the best tool for parents who want to save money on college. You know what the cheapest colleges are? The college ranked 26, the college ranked 51, the college ranked 101. Because you know how they get up to be a top 25 or a top 50 or a top 100 school? They enroll students with higher GPAs and test scores. And how do they do that? Well, they give those students scholarships. So pay attention to the rankings, but not for the reasons you've been told to pay attention to them. The other thing is local cost of living. You know, I'm from the West Coast. University of Utah is so much cheaper than UCLA. Why? Because housing for a year there is $10,000 instead of $18,000. So all kinds of factors go into the cost of college. And many of them are within your control and available for you to research. One of the really important things to do as a family is just come up with what your baseline college budget is. And this doesn't have to be fixed for your lifetime. But you should understand well in advance what it's going to cost to educate your kid. So look up what your in-state schools cost look up what scholarships they offer, look up what pathways they offer. Is this a four-year thing? Is it a two-year thing? Is it a three-year thing? Who gets scholarships? Because the great thing about scholarships is most of them, most public colleges, virtually every public college offers merit scholarships to good students. They want to keep the good students in their state and state. So find out what those scholarships are and what your actual cost is. And then monitor and adjust as time goes on. You know, is my savings budget tracking to a college pathway that I'm okay with? This is just an example from the University of Arizona. I chose this one because it lays out well on a slide. You can see annual cost, $33,000 on campus, $30,000 off campus. News flash to parents. It used to be cheaper to live in the dorms than off campus. Dorms are now a big profit center for colleges. So do be mindful of that. These are their scholarships they give. You can get a scholarship with a 2.75 high school GPA. You can get a merit scholarship at the University of Arizona. And with a 3.75 GPA, you get a big scholarship at the University of Arizona. And you'll get those scholarships as an out of state student as well. So this is normal for public schools. You also can get credit for your AP and IB classes. So, you know, take those classes and maybe you can graduate in three years. Look at all the other pathways that are out there too. Dual enrollment where you're simultaneously enrolled in community college and either high school or your four-year college. Getting credit for college level coursework you do in high school. But the important thing is if these are your pathways, make sure that you're looking at four-year colleges that will take those credits and give you credit for what you've done in high school. Does your state offer free community college? If that's one of the options, definitely look into it. What kind of employer support do you have? You know, my son's friend who worked for Starbucks got free tuition from Starbucks. But maybe your employer offers scholarships. There are loads and loads of companies that offer support, either for their employees or for their employees' children that can be built into your budget or into your college pathways. So, like I said, just looking at this example, with no scholarships, $32,000 a year, with a reasonable, you know, scholarship that's within reach, that's $24,000 a year. Is it a four-year or two-year path? Maybe that's your baseline cost that you're aiming for. Of course, people talk about, you know, having, you know, you have to have the cost of college saved before your kid is 18. Actually, you don't. And very few people do. Most people do a combination of paying from savings, paying from their income, having their student contribute something. Maybe grandparents are gifting. Maybe you're eligible for the tax credit. You're willing to take out a student loan. But start doing your budget projections early so that you have an understanding. Am I, you know, are we on track for a college experience, you know, a college pathway that we're going to be happy with? Or do we need to readjust, whether it's suggesting our expectations or adjusting our budget? But the sooner that you can start getting your arms around those numbers, the sooner you can be guiding your child's choices towards colleges that will work in their budget. All right, so let's talk about scholarships. My two kids went to what, you know, when I tell people where they went to school, their reaction is, oh my gosh, that sounds really expensive. Because yeah, my daughter went to the world's most expensive private university and my son went to an out-of-state public school. His school was actually cheaper than staying in state because University of Arizona is more generous with scholarships than University of Oregon and the cost of living is cheaper there. His apartment was $200 a month cheaper than any of his friends who went to Oregon. So $2,400 a year times four years is a lot of money. Every college offers scholarships. Every student is eligible for scholarships, but not every college is going to offer scholarships to every student. So you need to think of, you need to look for the scholarships that look for colleges that offer scholarships that you are eligible for. The good news is it's very simple to apply for scholarships. You just apply to the college and file the FAFSA and the CSS profile if it's required. That will get you in the running for the vast majority of scholarships that your college offers. But most important, if you want to get scholarships, you have to apply to colleges that offer scholarships to students like you. So there are three big types of scholarships. There's financial aid, there's institutional merit aid, and then there are outside scholarships. Need-based aid, financial aid is scholarships, grants and loans and work study that fill the gap between your ability to pay as calculated by the FAFSA and the CSS profile and the cost of attendance at a specific college. So you may or may not be eligible for financial aid at a college. You may be eligible at some and not at others. Typically an institutional financial aid package will combine the college's own dollars and then federal funds like Pell grants and student loans and work study. But that's an award that's recalculated every year with each year's new FAFSA. And so your cost can vary from year to year, particularly if you have variable income from year to year. Really important to remember is that not all colleges meet financial need and even less meet 100% of need through grants and loans. The ones that are the most generous tend to be the most selective. All colleges are required to have a tool on their website called a net price calculator and that lets you punch in your financial information and see what students like you get as scholarships in every year. Really important, again, financial aid is allocated by the colleges. Your eligibility is calculated by the FAFSA, but it's the school itself that decides what to do with that number. The next big category of scholarships is what's called merit scholarships. And we often think of student-athletes as being the ones who get the big scholarships, but it's really the mathletes that clean up. And why is that? Well, because colleges want to move up in the U.S. news rankings. And the way they move up is by admitting and enrolling better students. But there are loads of merit scholarships for all kinds of different things. You might be the only student from a certain state that's applying to a small college that wants to say we have students from all 50 states. You might be the only cellist and they need one in the orchestra. My son had a scholarship for playing video games, so that is a real thing. You can choose to share or not share that with your own teenage boys. But typically, merit scholarships are awarded to students who are in the top 20 to 25% of the incoming class. And good news, they're offered by both public and private schools. You can just Google the college name, like I said on the slide, and you will see what scholarships are available there. The great thing about merit scholarships is they are typically guaranteed for all four years as long as you meet certain criteria. And typically that's a minimum GPA and course load. So it's easy to keep your merit scholarship and your cost of college becomes very predictable with merit scholarships. Now, more than 50% of students receive some form of scholarship to go to college. So this is not like when I went to college, scholarships were for basketball players, football players, and maybe a handful of academic superstars. Kids today can get scholarships. Every kid can get scholarships if they're just willing to look for the schools that offer them. A great resource in looking for scholarships is the website CollegeData, and that's just collegedata.com. You can look up any school there, look at its financials tab, and it will tell you what financial aid form they use. Is it the FAFSA or the CSS profile? It will tell you what percent of students had need and got scholarships, what percent of need was met, and what percent of students without need got a merit scholarship. So super helpful when you're shopping for scholarships. Net price calculators are a tool to help you see what scholarships you'll get at a college. Every college is required to have one, and you punch in your data, and that shows you what students like you are getting in the current year. The great thing with net price calculators is they can only show gift aid. So colleges can include student loans and work study in their aid packages, but those cannot be shown on net price calculators. Some of them include merit scholarships, some don't. So the third big type of scholarships are what's called outside scholarships, and that just means that it's a scholarship offered by someone other than the college. They can be offered by your employer, they can be offered by local civic groups, a lot of the activities your kids participate in offer scholarships. I would say key points about them don't overlook them, but also don't overestimate them. They tend to be in the four digit and below numbers where institutional aid tends to be in the five digits and five digit numbers. The other thing is there are great big websites like FastBetWeb and the College Board that have tons and tons of outside scholarships you can apply for. I think you're best off looking closer to home. Your high schools, college and career center will have a whole list of scholarships. Many of them are only open to students at your high school or students in your local community. Our high school had a scholarship for the tennis team. I mean, there's like 12 people on the tennis team and they're not all seniors. So your odds of that one are a lot better than say the duct tape prom dress scholarship that, and you don't have to wear a duct tape prom dress to school. The student outside scholarships do get added into the financial aid formula. So for a student who has high financial need, it is really not worth applying for small outside scholarships. On the other hand, there are great ones out there that have tons of benefits. My daughter had an outside scholarship that was $5,000 a year, plus $1,000 for technology purchases, plus a corporate mentor who helped her find an internship that led to a full-time job. So definitely don't overlook them, but they are not the thing that's going to close the gap between a $10,000 a year college budget and an $80,000 a year college. So the FAFSA is your ticket to need-based financial aid. It is the free application for federal student aid and the data that you put in there calculates a number called your student aid index. It used to be called the expected family contribution, but much has changed with the FAFSA this year, including the name. Normally it comes out on October 1st. This year, because of all the changes, it's delayed and it's coming out sometime in December. Odds are the favorite dates are the 31st and the 30th and the 32nd of December. It has to be out before January 1st, but it gets filed every year for every student. The thing about the FAFSA, I think there's a common misperception that it's the tooth fairy. I filed a FAFSA and I'm eligible for aid, therefore I can apply to any college I want to and it will cost me the $15,000 that my student aid index is. That is flat out wrong. It is up to colleges to decide what financial aid you get. So every college uses the FAFSA and they use it as a tool to evaluate all students' ability to pay on a consistent set of metrics. What they do from there depends on the college. The only thing that the FAFSA guarantees is access to federal aid dollars. That is Pell grants, direct student loan, and work study if you're eligible. So if you are eligible for financial aid, you need to apply to colleges that give it. There's an additional aid form called the CSS profile that's used by about 250 private schools, but the vast majority of colleges use the FAFSA. There are four buckets of financial information that go into the FAFSA's calculation of your student aid index. Income and assets from the parents and income and assets from the student. People talk a lot about assets and what do I do about my assets? You know, oh, I should buy this life insurance policy instead of having a 529 because it won't be an asset. That really parent income is the biggest factor in it, and you don't want to give up your income for the sake of financial aid. I can tell you that. How is it calculated? Well, it's your total income from your tax return, not just your AGI. So any untaxed income on your tax return gets added back. If you're making IRA contributions, they get added back. If you're self-employed and contributing to a SAP or an individual 401k, that gets added back. Payroll contributions to your employers 401k don't get added back anymore. They used to. They do still get added back on the CSS profile. You get subtractions for your family size and your tax liability. So one of the FAFSA planning tools that you can do is to pay more taxes in years when your income counts on the FAFSA. Every incremental dollar of income is assessed at 47 cents. So that is a big number. Parent assets are the ones that people pay the most attention to. And of course, you do have more flexibility about your assets. What counts is all of the assets that the parents own, except for retirement accounts. So it's your 529s for all your kids, if they're owned by the parents, not if they're owned by grandma, grandpa, aunts, and uncles, investment properties, second homes, whatnot, and adjusted value of your business. But all of your assets are only assessed at 5.64% of their value. So while people freak out about, you know, how do I get rid of this $500 in my bank account? You know, that does nothing. Just waste your time. Student income and assets are another piece of it. For the vast majority of students, income doesn't come into play at all because they can have $9,400 of income before anything counts against them on the FAFSA. But where students do get hung up is on their assets, especially right now because wages are so high. Students' assets are assessed at 20% of their value, so much higher than parent assets. So, and particularly now, you know, kids are earning a lot of money. They're earning a few thousand dollars in their summer jobs, and that can add a lot to their ability to pay for college. So I always recommend that parents, you know, if that money is for school, move it into a 529. It's not for school. Open a Roth IRA. But, you know, don't have them sitting on tens of thousands of dollars. So just so you can see, the impact of a thousand dollars depends on what thousand dollars it is. If it's income from the parents, it's $470. If it's assets from the parents, it's only $56. Student income, only if they have a lot of it, doesn't matter at all. But if it's a student asset, it's $200. So really, your income is the thing to think about when you're thinking about planning for the FAFSA. I always think it's important to have a slide with lots of small numbers on it, so here we go. You can download this. This just shows when different things count for the FAFSA. The FAFSA uses what's called prior prior year income. So when you're filing the FAFSA in the fall, you're using your previous year's tax return data to file it. Your assets are on the day that you file. So as you go through the years, these are the dates to pay attention to. So your first income year starts January 1st of sophomore year of high school and ends December 31st of junior year. Your assets count on the day that you file it. And if you ever want to see how different things impact your ability to pay, there's a tool in the Department of Education website, which is studentaid.gov, called the Student Aid Estimator. It doesn't work right now because of FAFSA simplification, but it is normally there. And you can play around with that and see, okay, if I do this, what's the impact on my student aid index? Or if I do that, what's the impact? Big changes came this year, a few of them. First and foremost, one of the biggest changes is your expected family contribution used to be divided by the number of students in your family. The student aid index is not divided anymore. So students coming from big families, that's going to have a big impact on your eligibility for financial need. If you have a student in college right now, and this impacts you, reach out to the financial aid office and find out how that's going to be treated. The good news is many colleges will continue considering that. I know my daughter's school, as soon as this change was announced, they have a supplemental questionnaire that you fill out and they added a question about how many college students are in the family. So many colleges will continue offering what's called the sibling discount. But that's just a question that you need to ask. For students whose parents are divorced, it used to be that this parent that the student lived with filed the FAFSA. Now it's the parent who provides the most financial support. It's also now your income from your tax return only. It used to be W2 income as well. So that's something that helps a lot of people. If you're making 401k contributions, that'll bring down your income because you no longer add those back. A nice change for parents, for students who have grandparents who are helping pay for college, is that they no longer have to report distributions from 529s that aren't owned by their parents on the FAFSA. And then there have been a number of tweaks to the formula. So I know that first thing is a big one for a lot of families, but a lot of the other changes really mean that the majority of students will be eligible for more financial aid, not less going forward, even some students who have siblings in college. There are issues because of the simplification. You know, the delayed FAFSA means delayed student aid estimator, inaccurate net price calculators, and there's going to be a huge scramble when colleges get all these FAFSAs in January and have to process them where they're used to having all fall to do that. I still think net price calculators are a good tool. They'll give you a sense of, you know, how does the college award aid? Do they meet need or do they not meet need need? The college board also has a tool called an EFC estimator on its website, and you can use that in the interim. So CSS Profile, again, is a second financial aid form to use by a small number of colleges relative to the universe of colleges. It's a superset of FAFSA data, so it includes W2 income. It includes assets like your home equity, insurance, other things like that, all the 529s. And if you're divorced, both parents are required to use it. The thing about the CSS Profile compared with the FAFSA is that colleges have a lot of flexibility in how they use it. Home equity is one good example. You know, colleges might exclude that completely, they might take the full value of your home, or they might cap your home equity at a multiple of your income. Any grandparents here? Alright, so grandparents wanting to help. Opening a 529 or contributing to the student's 529 is a terrific way to help. There are a lot of estate planning advantages of opening a 529. It removes those assets from your estate to the extent that that's a consideration, like if you live in Oregon where we have a state tax. If the student is eligible for need-based aid and you intend to contribute large sums of money, then open your own 529 and fund it. If you're not making large ongoing contributions, you know, if it's birthday money or holiday money, then just contribute it to the parent's account. It's one less thing to think about. And it just makes sure that the parents have access to that money when the time comes for the kid to go to college. I always think the parent, so with the 529, you have an owner and a beneficiary, and then you have a successor owner. If you're a grandparent setting up a 529, name one of the parents as the successor owner. If you just look at the timeline of life, something that we see all the time is grandparents set up a 529. The parents know about it, but don't necessarily know why. And now the grandparents are either having cognitive issues and they don't remember where it was, or they've passed away and there's a lengthy process of getting access to those funds because they haven't named a successor owner. So you're doing your grandkids a favor by making the parent the successor owner of your 529. So college, we spend a lot of time talking about how to save for college. You actually have to pay for it, too, and there's better and worse ways to do that. So college costs typically when you accept, so colleges send out acceptance letters in the spring. May 1st is acceptance day, and that's why May 1st you see all those Instagram posts of kids when they're college acceptances. You will pay a deposit at that point. It's usually a couple hundred dollars. It's non-refundable and it is credited against your cost of college. All of your other direct build expenses, so tuition fees on campus room and board, are typically due at the beginning of the academic term. One of the difficulties about paying for that is that financial aid doesn't often get added until right before the term starts. Your loans and your outside scholarships get dispersed directly to the college as well, so it takes a while before you see what you actually have to pay. Most colleges do offer payment plans. Sometimes there's a cost associated with them. So just know as you are thinking about that a $75 fee for a payment plan is cheaper than taking out a student loan because you don't have the cash up front. But if you're just taking money out of your 529, you're probably better off just paying it all. Paying it all up front. When you take money out of your 529, there's three places it can go. It can go to the account owner. It can go to the school or it can go to the beneficiary. Important point about 529 distributions and super boring. So if you haven't fallen asleep now, hopefully you can bear with me through this one. The 529 issues a form called a 1099Q, which is just like the 1099 that you get from a brokerage account or an IRA distribution. If the distribution goes to the student or to the school, that 1099Q has the student social security number on it. Now the college issues a form called a 1098T and that is a tuition tax statement. That will only have the student social security number on it. If there is a matching 1098T and 1099Q with the same social security number on it, the IRS kind of just says, okay, this was paying for college. If there's a different number social in the 1099Q because the distribution went to the parent, chances are good that over the course of four years, you're going to get a notice from the IRS that you took a non-qualified distribution from your 529. So even though it's horrifying to think of sending this money to your kid, that is usually the best way to do it unless you like dealing with the IRS. So why would you do a distribution to your student besides that? Well, first of all, if your student's receiving need-based financial aid, picture the financial aid office in August or September. They're allocating all the money for the students. They're getting all these loan disbursements. They're getting outside scholarships. They're getting checks from 529s. It's easy to code some of those in the wrong column. And it's not at all unusual for a college to think that a distribution from a 529 is actually an outside scholarship and they will then readjust the student's aid package. And then you have to go back and track down your very busy financial aid office to get that rectified. And furthermore, if your student moves off campus, you're going to be probably taking distributions to pay for room and board. And so you're going to have to get the money to someone other than the college anyway. I think the best practice is set up a bank account in the student's name that's linked to your own. It's really easy to do that with an online savings account. And then you take the 529 withdrawal to that account and then transfer it to your own and then pay the bill that way or transfer it to your student if they're paying rent and buying groceries and what not. You don't have to time your distributions to college bills so you could take out an amount or pay the bill out of pocket and then reimburse yourself or do whatever is convenient for you. Your 1099 queue is only going to show the total amount that you took out not when it came out. Am I going backwards? So I can't talk about college without talking about student loans. Reading the news, you would think that student loans are a one-way ticket to the poor house. But in fact, for many students that is the difference between going to college and not going to college. There's three groups of people who struggle with student loans. Those are graduate people who get graduate degrees, particularly in areas that are not as high paying as say medicine and law. Thank you. There are people who attend for-profit schools like cooking schools, massage therapy, things like that. And students who don't graduate. The cohort default rate among people who take out the direct student loan only as an undergraduate and graduate is very, very low. So that is a good, you know, best practice for planning for college is limit your borrowing to the direct student loan. I know that people always say, well, limit it to the amount that you're likely to earn your first year. Here's the thing. The majors with the highest attrition rates in college are the highest paying ones. So a lot of students go in expecting to be engineers and come out as philosophers. And that's a lot of maybe a little bit more debt than the philosopher might have wanted. Finally, the parenting piece of it. Save the best for the last. Age-appropriate college conversations are super valuable to have. So many parents wait until the kid actually gets acceptance letters from colleges to talk about how they can't afford what the child has applied to. I think there are great conversations to be had at every age. You know, young kids talk about how college enriched your life. Talk about friends you made in college. Talk about aspirations you have for them as a college student. You know, hey, I never knew about thunder and lightning. Listen to this. I never knew how this happened until I took a meteorology class in college. And it was so interesting. Or, you know, my friend Kelly and I, we do all this great stuff together. Well, we met in college. There are also tons and tons of on-campus activities at your local college that are appropriate for every age. So, you know, take them to a sports event. Take them to, you know, one of their on-campus programs, loads and loads that you can do. Once they get to middle school, absolutely appropriate to start talking about money. And usually your kids will have some friends who have older siblings where you can, you know, talk about, hey, look at the difference between Gonzaga and Oregon State where Jack is applying. Once they get to college, it's time to talk about your budget and talk about appropriate pathways. I think the best way to do that is by being goal-oriented. And so goal-oriented means my goal is that you can get through college without any student loan debt or with only taking out the direct student loan. And we've been saving diligently, and we know that you can do that at our state schools. There are probably other schools that you can do that as well, and we will absolutely support you in finding them. That's a lot better message than we can only afford for you to go in-state, so don't bother looking anywhere else. Really important is that you be your student's ally and their partner and their guide, and that you set the parameters of their search, and that you do it, like I said, before they start getting acceptance letters. It costs about $100 to apply to each school, so that's a lot of budget to spend on applying to colleges that no one's ever going to go to because you can't afford. So I will... Oh, more questions. All right. So I will try to get through as many of these as I can. Does a 529 plan make a student ineligible or reduce scholarship? So a 529 counts as an asset on the FAFSA. It counts at 5.64% of its value. So it will... So every $1,000 in your 529 plan will reduce your eligibility for financial aid by $56. So that means that you are $944 ahead by saving in a 529. So if people tell you don't save for college because you'll get more scholarships if you don't, that is... There's just a tiny grain of truth in that. Saving for college gives you lots more choices, and really what we want for our kids is good choices. And so by not saving, you are limiting their choices. Let's see. What is the difference between the student aid index and the EFC? So the student aid index is the new name for the EFC starting this year on the FAFSA. The CSS profile is still calling it the expected family contribution, but it used to be that the number that the FAFSA calculated was also called the expected family contribution. Now it is called the student aid index. It'll still be a number if your student aid... If your EFC was $22,000, your SAI will be $22,000 or some other amount based on the slightly different calculation. How you interpret that is that number shows are you or are you not eligible for financial aid? So let's say, for example, your student aid index is $35,000 and your in-state school costs $30,000. You are not eligible for aid at that school, but you're applying to a private school that costs $75,000. You are eligible for aid at that school. It does not guarantee that you're going to get that aid and that's why it's important to not just do the student aid estimator, not just file the FAFSA, but do the net price calculator at the college because that will tell you, is this student aid index likely to get me a scholarship or not? Is the CSS profile going to follow FAFSA and not including 529s of the siblings? And will CSS follow the FAFSA change in not adding back 401Ks? So far, the CSS profile has not said that they have any intention of stopping considering siblings or that they're not going to include financial W-2 information. Here's the thing with the CSS profile. The whole point of the CSS profile is to collect more financial information about you than the FAFSA does. If the CSS profile was going to do everything the same as the FAFSA, it wouldn't exist. So my guess is they will not stop collecting this information. Now, it's up to schools what they actually do with this information and there are ways that the FAFSA changes can still impact profile schools. For example, a student with two siblings in college may have been eligible for a Pell Grant under the old FAFSA formula and many colleges have additional grant funds that are automatically given to Pell Grant recipients. That student, when you stop dividing your student aid index from the FAFSA by number of siblings in college, is no longer Pell eligible and they may be losing out on grants that way. But now for the first time, historically, you've always had a higher expected family contribution on the profile than on the FAFSA and for many students that won't be the case. But again, because the whole purpose of the profile is to collect more financial information about you, I don't foresee that changing. Let's see. I am saving for an out-of-state online university, tuition is $9,000 per year, tax advantage of pre-tax money for education. So using pre-tax money for education, so a 529 is like a Roth IRA. It's after tax money going in, tax-free coming out and that's usually your biggest tax advantage. Now one thing to keep in mind, if you are eligible for the American Opportunity Tax Credit, which is an education tax credit for dependent students whose parents' adjusted gross income is $160,000 or less, you do need to pay for a portion of your tuition from something other than a 529. So you don't necessarily want to have the entire cost of college in your 529, but the best way to get tax advantage dollars into education is through a 529 or if you have an employer tuition matching program. Who can contribute to a 529? How many people can contribute to a single 529? And how much can each contribute to a 529? The great thing about 529s is the contribution limits are immense. They're set by the state, but they're typically in the hundreds of thousands of dollars. So you can keep contributing until you have about $400,000 give or take in your 529. Now a contribution to a 529 is treated by the IRS as a gift for tax purposes. So you are limited to the annual gift exemption, an annual gift tax exclusion amount, which is $17,000. So two parents can contribute $34,000 without filing any tax documentation. You can also do what's called superfunding your 529, which is where you make five years worth of contributions in a single year and then you file that as a prorata contribution over five years. But anyone can contribute to a student's 529. So everyone who wants to give money to the student's college doesn't have to have their own 529. Almost every 529 has a tool called a gifting page, and this is one of the great things about a 529. If you've ever said stop giving my kids toys, you know, give them the gifting link to your 529 and they can contribute directly to your account that way and it'll be invested according to your investment choices in the plan. So when parents own a 529, the grandparents, aunts, uncles, friends, anyone can contribute to that 529. Students can put their own money into the 529 and in many cases they can take the state tax benefit for doing so. So for example in Oregon we have a refundable tax credit for 529 contributions. So a student can put $170 into their 529, file an organ tax return and get $170 back from the state. So it's a great way to teach kids about how tax incentives, how tax incentives work. So I hope I answered those questions. Is it possible to get tuition discounts at a selective school if you are wealthy with a high income? So this is a great question. It depends on the selective school. The Ivy Leagues do not give merit scholarships. Being eligible for merit scholarships elsewhere is how you get into an Ivy League. So you are not going to get merit scholarships there. If that's you, then you want to have your student apply for outside scholarships. That's going to be their best path to get there. However, you may think you're wealthy and private schools may not agree with you. You may think you're poor and private schools might not agree with you too. So it's always worth doing the net price calculators. Many families are eligible for more need-based financial aid than they think. But the very upper echelon of schools does not give merit scholarships. It's kind of the next tier down. But there are fabulous, fabulous schools in that category. There's been so much research done about the benefits of college. And unless you want to be a hedge fund manager, it really doesn't matter where you go to college. It matters how you go to college. So there was a study done called the Purdue Gallup poll where they surveyed adults who are successful in life trying to tie that back to their college experiences. And they found it had nothing to do with public versus private. It had nothing to do with large versus small, urban versus rural, selective versus not selective. They found it had to do with a set of specific experiences that people had in college. And that was being able to apply classroom learning to a job that was feeling like professors cared about you. And that was participating in extracurricular activities. It was working on a project that lasted a semester or more. All of those are available at loads and loads of schools. You do not have to go to a highly selective school to become a functioning adult. I'll say to as a parent, one of my kids went to a single digit acceptance rate school. The other one went to a sign up and go school. And both of them graduated this spring and have identical jobs. Same salary, same basic functions, same type of company. The one at the more selective school is not better off than the one at the less selective school. Is it better to have grandparents, uncles or aunts have a 529 instead of a parent or a student? So I feel like the impact of assets on the FAFSA is really negligible. So unless a grandparent or uncle intends to give vast sums of money and wants the tax credit and wants to retain control over those dollars, it's usually better to just put the money in the parents 529. But if it is tens of thousands of dollars that they're planning to give, if they're superfunding a 529, then it can make sense. Superfunding is doing that five-year contribution in one, then it probably makes sense for them to have their own account. The thing is, the schools that tend to be the most generous with financial aid tend to be the ones that take the CSS profile and the CSS profile requires you to report all of the 529s for which your student is a beneficiary. So it's not going to get you around the Ivy Leagues barriers to contributions. And it does make it a whole lot easier. You know, if it's a couple hundred dollars at a time, it makes it a whole lot easier to just have it in the parents account where you know where it is. Any thoughts on prepaid college trusts versus 529 plans? So there are two types of 529 plans. There are college savings plans and prepaid tuition plans. Most prepaid tuition plans are run by a small number of states, and so they're only open to people who live in those states. Those I think can be a great late-stage college planning tool. So typically what happens in those is you're buying tomorrow's tuition at today's prices. So if you contribute $10,000 this year and the cost of tuition is $20,000, you've bought half a year of tuition, regardless of whether it costs $50,000 or $100,000 when your kid goes to college. Most state school tuition inflation rates aren't that high. So three years ago when interest rates were low, those were a great late-stage planning tool if you lived in one of those states. Now when the FDIC-insured piece of it makes 5%, it makes a lot less sense to lock up your money that way. Those can also only be used for tuition, and there's often a limited universe where you get a lower inflation crediting rate if you go out of state. So that would be my two cents on those. And Jim's here, so I think we're out of time.