Next, you add one or more students. For each student, you enter the date of birth and financial information (such as income, if any, and whether private loans are allowed and, if so, what is the maximum). If you have specified that the parents own a business, you have the option to shift earned income. This strategy adds income to the student's tax return so any tax benefits could be offset by a decrease in financial aid. The benefit of the strategy depends on how much income you are shifting (according to the literature, amounts under $5,000 often have little impact on financial aid) and whether or not the student qualifies for needs-based aid.
You then enter education plans. Here, you can specify if you want to fund private education for K-12 or any part thereof. You can specify the type of college (two-year or four year, public or private) and the year the student will enter college. If you anticipate the student will require more than four years to complete the coursework, there is a fifth-year option. You also specify whether the application should calculate all costs, and what inflation rate to use (the default for education is 6%).
By default, the program will estimate costs based upon the national average of similar educational institutions. If you prefer, you can add your own custom costs on a year-by-year basis for increased accuracy.
YBS also requires academic information. This is used to determine the likelihood of a student gaining admittance to a specified school. Here you enter SAT or ACT scores, grade point average (GPA) and class size/rank. There is also an optional ethnicity question. Ethnicity is used to better gauge a student's admissibility to a school.
Assets in the student's name come next. This is followed by a college "wish list," if any. Entry here, as in much of the program, is easy. You can begin typing to see a list of applicable colleges, or you can select a state from a dropdown list and scroll through the results to select the school(s) you are interested in.
Once you have entered the information, you click the "start algorithm" button. The program will display a chart with all the colleges you listed. It will provide the likelihood of admittance to each, the gross costs and the net costs after projected financial aid. You can then select a specific college and generate a full education plan for the student.
At this point, one of two things will happen. If you have insufficient education funding, the program will give you a warning and suggest tactics to address the shortfall. If you have sufficient funding, the application will generate a full plan. The plan lists all the inputs, sources of funding including tax deductions, tax credits, parent and student loans, admissibility index and something called the "strategy score."
The strategy score is a measure of how the education plan impacts the parent's retirement plan. It consists of two components: total education costs and family net asset value (the parent's net assets at age 70). The score equals family net asset value minus Parent PLUS loan debt plus student assets after education minus all Stafford Loan debt. It is a method of measuring the cost of one education plan vs. another.
Overall, the YBS application is a welcome addition to the financial advisor's toolkit. The application addresses the four pillars of education planning in a way that no other program we've seen does. When compared to filling out a financial aid form or creating a comprehensive financial plan, the amount of data entry required to produce meaningful results is minimal.
The admissibility index is useful and quite impressive. Although the strategy score will not satisfy all users, it is a good, quick method of comparing one strategy to another.