Parents who’ve saved a lot for college may not be giving much thought to applying for financial aid or managing cash flow during the college years, particularly if they have deep pockets. Financial advisors can help them make more informed decisions by educating them and getting them engaged in the whole college funding process.

All students who’ll be in college next fall—including high school seniors who haven’t yet applied for admission—should be encouraged to submit the 2020-21 FAFSA (Free Application for Federal Student Aid) as soon as possible after it becomes available this October 1 to maximize their aid awards from federal, state and school sources.

Families who may not have qualified in the past for need-based financial aid may qualify now, “especially if they’re looking at private schools with annual published sticker prices upward of $70,000 and have multiple kids in college at the same time,” says Ross Riskin, assistant professor of taxation at the American College of Financial Services and vice president of Riskin & Riskin PC, a public accounting firm in Orange, Conn.

Even an $80,000 price tag is possible. The University of Chicago, the first college to hit that mark, estimates a total cost of attendance of $80,277 for the 2019-20 academic year for students in on-campus housing. This includes tuition and fees, room and board, books and personal expenses.

Students who wish to borrow money and be considered for work-study jobs and some merit-based scholarships must also submit the FAFSA, says financial aid and scholarship expert Mark Kantrowitz, publisher of Savingforcollege.com, a resource for parents and financial professionals.

For students seeking aid, the 2020-21 FAFSA takes into account a family’s assets at the time of submission and taxable income from two years ago (2018). “The cash in the bank or investments are going to count against you on the FAFSA,” Kantrowitz says, “but the debt is ignored,” except for margin loans on a brokerage account.

That means if one family has a lot of credit card debt and a lot of assets, and another family isn’t carrying credit card debt from month to month and has fewer assets (because they’re paying off their credit card debt), the second family is better off for FAFSA purposes, he says. Paying down debt using money in the bank makes financial planning sense too, he says, because it reduces interest charges.

Financial advisors can also help clients understand their expected family contribution (EFC) calculated by colleges and how specific schools award aid, says Kantrowitz.

Colleges may present these figures in a way that makes a four-year education seem more affordable than it is. “There’s a lot of marketing gimmickry going on,” he says.

About half of colleges front-load grants, he says—giving the most aid or biggest discount to incoming freshmen. It’s more common among private schools, more expensive schools and those that lack big endowments, he says. (These discounts are tallied by an annual survey performed by the National Association of College and University Business Officers.)

Some schools reduce their grants (money that doesn’t have to be repaid) by the amount of a student’s outside scholarship. In essence, “your net price remains unchanged despite your hard work in winning that scholarship,” Kantrowitz says.

Net price calculators on college websites can also be misleading. According to a recent study from the University of Pennsylvania Graduate School of Education, some sites use old or incomplete data or treat loans like grants. By subtracting loans from the net cost, these sites come up with a figure for families that’s much lower than the amount they would actually have to pay, says Kantrowitz.

He checks to see whether colleges’ calculations are in the same ballpark as the more general estimates obtainable through College Navigator, a free tool on the National Center for Education Statistics’ website.

Kantrowitz, author of the 2019 book How to Appeal for More College Financial Aid, also encourages advisors to help clients interpret financial aid award letters they have received from colleges. The letters should state the full price and only subtract out gift aid, not loans, he says.

Filling Gaps

Guidance counselors try to get kids into schools they see as the best fit, “but best financial fit doesn’t always come to mind,” says Riskin. Financial advisors tend to focus on the savings aspect of college planning, he says, and can’t offer much guidance on financial aid, student loans and loan repayment.

To help fill this gap faced by families, Riskin consults with financial advisors on college matters. He’s also still involved with the American Institute of Certified College Financial Consultants, a designation and education program Riskin founded in 2017 for financial and legal professionals (he no longer has a financial interest in the program).

When families use different vehicles, they must also consider the tax ramifications, Riskin says. For instance, families who claim the American opportunity tax credit (which is based on $4,000 in qualified education expenses, for a maximum $2,500 credit per year) can’t use the same expenses if they take a tax-free distribution from a 529 college savings plan.

Beth Walker, a financial planner with the Wealth Consulting Group, a Las Vegas-headquartered RIA firm, would also like to see more financial advisors become “very well versed in financial aid and the tax code during the college years,” she says. “College doesn’t have any kind of professional that creates guardrails for the family.”

As a result, many families acquire more college debt than they should from multiple sources that aren’t scrutinizing their finances. Borrowers assume nobody would loan them the money if they couldn’t repay it, she says, but that’s not true.

Walker, also the founder of the Center for College Solutions, a Colorado Springs-based consulting firm for families, is trying to get parents to approach college the same way they consider other big-ticket purchases.

“Spending $20,000 to $25,000 a year at a state university for four or five years for one kid is like buying a fleet of cars,” she says. “If you’re doing that for two or three kids, it’s like buying another house or a vacation home.”

Parents could use help with in-depth cash planning as they simultaneously try to fund their current lifestyle, stay on track for retirement and pay for college, says Walker. She created a spreadsheet template to help clients track all sources of funding for every year they’ll have children in college.

She also suggests parents consider finding a lending partner. Many parents don’t want their children to graduate with debt, but letting them take direct student loans from the federal government can benefit the whole family, she says.

The loans can help parents manage cash-flow challenges, she says, and if they deposit the principal amount in their children’s accounts within six months of graduation the kids can repay the debt interest free and build their credit.

The limits for direct unsubsidized loans (which are available to dependents and aren’t based on need) are $5,500 for first-year students, $6,500 for second-year students and $7,500 for third- and fourth-year students.

Parent PLUS loans and installment plans that enable college payments to be spread over a semester or a year can also help with cash flow, says Riskin. Some business owners he works with use PLUS loans to pay fall term bills and then pay off the loans in January after their busy season. Both tools may work well for anyone whose income is seasonal or largely dependent on bonuses and commissions, he says.

Kantrowitz also thinks tuition installment plans make sense. The fee is usually less than $100, there is no interest and “it’s almost always cheaper than borrowing the money,” he says.

Smart Shopping

Monica Dwyer, a CFP with Harvest Financial Advisors in West Chester, Ohio, encourages parents to have frank conversations about college costs and how much they’re willing to contribute. She and her husband told their five children (the three oldest are in college) how much they have in college savings and have helped them figure out their options.

“The deal was we would buy them computers and they could stay in our house and eat,” she says, “but we’re not going to cosign loans.”

She didn’t tell her son who wanted to attend college on the beach in Hawaii that he couldn’t, but he figured out he couldn’t afford it.

Dwyer asks her clients where they think their children want to go to college, helps them do the math and gently dispels false ideas they may have about financial aid. She may share bits of her family’s college decisions, depending on a client’s situation, but “I don’t want them to feel like I’m judging them on their money beliefs,” she says.

A client recently asked Mark Wernig, a lead advisor and principal at San Diego-based Dowling & Yahnke, to weigh in on two graduate programs his son is considering. The retired financial professional will pay for his son’s master’s degree and wanted to know which program (basic finance or data analytics) would be a better return on investment. Both programs cost about the same.

“I like to begin with the end in mind,” says Wernig, who scours school websites and Salary.com for data on job placement and salaries. It’s important to consider not just the price tag and starting salary, he says, “but also where a student wants to build a career and a life.”

The data analytics program, which is “specialized yet broad,” he says, is very relevant and shows a faster return on investment and good career prospects. His client’s son is very excited about it.

Megan Coval, vice president of policy and federal relations at the National Association of Student Financial Aid Administrators, encourages families to ask school financial aid offices what kind of need-based and merit aid they may be eligible for. Once a grant or scholarship offer is received, ask if it’s renewable and also what the terms and conditions are. It’s also “never too early to ask what life might look like in repayment,” she says.

Students should check in with their college’s financial aid office at least once a year to ensure they’re on track, she says. If family circumstances change during an academic year (if, say, one of the parents loses his or her job), ask if it’s possible to modify an aid package.

Free tuition offerings are expanding. The University of Chicago guarantees it for families with income below $125,000. So does the State University of New York system (SUNY), for in-state students. A new endowment at the University of Texas at Austin covers all tuition and fees for in-state students whose families earn up to $65,000.

And those campaign promises of free tuition for all? Keep saving and “don’t count your chickens before they hatch,” says Kantrowitz. It could take a long time for Congress to agree, he says, and tuition is often only about half the cost of college once you consider room and board, textbooks and miscellaneous expenses.