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In this episode of THE FINANCIAL COMMUTE, Chief Investment Officer Meghan Pinchuk and Wealth Advisor Patrice Bening tackle one of the most stressful topics for parents: college planning.

Tune in if you’re interested in…

‍• Learning how to plan for college without sacrificing retirement

• Understanding how much to save and where to start

• Navigating financial aid, student loans, and the FAFSA process

• Talking to your kids about college costs and trade-offs

• Building a college plan that fits your family’s goals

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Watch previous episodes here:

Ep. 158 Navigating Different Retirement Timelines

Ep. 157 Retirement Living: Finding The Right Fit

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Patrice, I am really excited to be here on THE FINANCIAL COMMUTE with you. I'm excited for a number of reasons. I'm excited about our topic, which we'll get to in a minute. I'm also just happy to be alive, because we went on a rather challenging, unexpectedly challenging hike recently. And, there were moments where I wasn't, you know, I wasn't quite sure about the outcome.

Well, we did come out of the hike at the other side.

And then afterwards we read the reviews in more detail. And there were many who were airlifted out of the hike, so we didn't have to get airlifted. And we survived. So like I said, so excited to be here.

Bragging rights are bragging rights?

I guess, but again, survival. Anyway, one of the things that's fun, what I've enjoyed about hiking is when you hike with someone, I think a lot of different topics come up, different things that maybe you don't talk about at lunch or quickly by the water cooler. And so we started talking a little bit about college planning and your boys, you know, one being in college and one being about to be in college.

And, one of my responses was panic because I was like, I'm behind. Mine are eight and six. And so I thought I had time. There was a good runway and you're like, oh no, we should have started already. So it it brought up this topic, which is I feel like people need to plan early and just be aware of so much information that's out there.

That was a more probably scarier topic than our hike. I felt like.

No, I mean, I have the bruises for the hike. So this this felt less maybe emotionally bruised from the, from the get one, but like, someone even has a kid, right? It's like, how early do you start planning? Because you have a kid in the first two glorious days of parenthood, when you're definitely, you know, sleeping a lot and thinking clearly, like your first thought, of course, is like, when do I start planning for college?

Not as much, but but the question is, how quickly do you do it? And like, what are some of the immediate things that you should think about?

As crazy as it sounds, you can actually start planning when you're pregnant.

Oh, perfect.

Probably a lot of people by now are very familiar with a college savings plan, the 529 college savings plan. And think of it as almost like the retirement plan for college. It's a tax deferred account. You can contribute to it on a monthly basis. You can, you know, throw chunks of money at it. The grandparents can put money into it.

We can go a little bit more details into it. But I would say that when you think about college planning, you have to think of it through the lens of what is the ultimate outcome, right?

How much do I want to end up with at the end of it.

So I'll kind of kick it back to you because go back to when you went to college, you know.

Just a couple, couple of years ago. Yeah, yeah a few.

You went to UCLA.

And do you want to think like how much UCLA was, how much you paid in tuition.

The couple of years ago that I went, it was not that crazy. I feel it was per quarter. I don't know. Was it a couple thousand dollars a quarter type of thing?

Do you want to guess how much? All in. So housing, all of it.

20,000 a year? It's a state school. It's public.

Double that.

If you're outside of California. I'm scared to ask.

Double that again.

Really? Yeah. It's 80, $80,000 now. That's exciting. So then if you come up with this glorious number of like what you're going to say for and you do some math about inflation things because this doesn't inflate every year, does it?

Not at all.

So even thinking about that, I think we played this game, if education costs since 1983 have gone up cumulatively. Yeah. You want to guess that number?

No, I don't. I'm scared of guessing. No more guessing.

899%.

But I do think the flip side is you don't have to necessarily plan for covering every penny. It's less about being perfect and saying, this is the exact amount I'm going to need, and even saying you start somewhere. Maybe you're going to cover part of it. Maybe there's other ways to cover pieces of that, you know, for your kids, whether it be, you know, based on their they're, you know, being good at sports, being their academic performance.

There's other other options people have.

I think that, you know, personally when I went through this particular, you know, process.

It's definitely a journey. My older son play soccer. So he's a student athlete. And and you learn that there's Division one, there's division two, there's division three. You learn that, you know, there's Division three. Schools do not offer anything for sport. You learn that the really competitive schools out there, you know, like from the Ivies to, let's say, you know, the 20 to 30 very good schools in America, there's zero for merit.

So doesn't really matter how good you've done an on a city or a, on my daughter, your AP classes, all those kids automatically. They are very smart to go to those schools. So you have to really figure out, like, what schools you're going to apply to, because that's doesn't really mean that your child's going to do good, to be a good fit for that particular school.

I really didn't even think about the size of the school, how important that's going to be. We went through this process. I did hire college counselor, by the way, because I wanted that journey to be a smooth journey. I did not want to bicker with my child in the in his last year.

You want to let the college counselor bicker with your child?

Yes. Yeah, it's it's a lot to manage. It's very stressful. And that last year of, you know, the senior year is very stressful for for our kids.

Yeah.

And for me to be like, did you, did you did the essay?

Just nagging them for every little thing. Back to this concept of like how you pick because I will say, you know, it was a little bit ago, but remembering back, I kind of knew I wanted to be in California, and I applied to books and a couple others, and it wasn't. I felt like it wasn't that precise of a process.

We were on another hike recently, and we also survived. This was also an achievement that was a lot of 10,000ft in the air. But we were with a current college student. It was a friend of one of your daughters, and she was talking about how she decided on schools, and it was great she had this woman.

It totally speaks to me. But she had a spreadsheet with everything from like, if she wanted a big football school, if she wanted, you know, different, different specific, academic tracks that she's interested. Geography was a big one, and my favorite was school colors. She did not want to go to the games in purple. So it was like that was out that that eliminated it right there.

But it is like the college counselor could be amazing in terms of really helping kids narrow it down in terms of where they will be happy.

I agree, it's interesting if for my son, the counselor asked him to find a school, it's called the the broken foot or the broken leg factor. So as an athlete is if you break your leg the first week you're on campus, do you still want to be at that school because you're no longer going to play the sport that you are going to be there for?

Yeah.

So it's like, that's kind of things. Kids don't really think about that because they're going to pick the school based on the sport.

I like that. And it's yes, think about it all encompassing. And that leads to a little bit of the concept today of, you know, in a in a world where tech savvy, for example, is very highly prized and people maybe don't need a college degree to be a really amazing at at specific niche industries, I think that debate is coming up more of kind of in school is college even necessary or valuable?

And it depends. To some degree.

It really does. And I think that what I find even today and even I would say even for myself, the one thing that I, you know, I wasn't a financial planner all my life, now that I am in this particular industry, I wish I, I knew what I know now. The problem is, as parents, we arrive to the 11th hour and that is probably in the 10th or 11th grade, where our, you know, Jack and Jane want to go to college.

And, and they say, mom, dad, we want to go to NYU. We want to go to Duke. We want to go to UCLA. They, you know, even UCLA, if it's $160,000 or $170,000 for four years, and if we haven't saved that money, where's that money going to come from? Honestly? So it's who's going to go into debt? Is the child going to go into that?

Are the parents going to go into that? Where's that money going to come from? And you know, when, when I when you look at even the numbers, people pour from there for one case, you know, people pull from their IRAs, they go into debt. You know, if you look at the U.S, student debt right now, it's as of 2024, I believe it's $1.6 trillion in student debt.

With the T, not with the B.

There was something with the our a big, beautiful act that, was just put into place in July. There's something that I really like actually about it that has to do with the student debt. So the parent plus loans where before literally if you just had almost like a heartbeat, you just couldn't have delinquencies or, or bankruptcy, your parent could, borrow all the way up to the full tuition, the full entire cost of of what the, student was going to incur.

Now it's capped at $20,000 per child and a maximum of $65,000 per total. So I think that's actually an opportunity for the parent and the student to maybe even negotiate with the with the university and say, wait a second. I can't, you know, borrow unlimited anymore. It also opens the door to private lending, because now you're going to be have to have to borrow money from somewhere else.

And higher interest rates on that end. So it's going to be interesting to see how that landscape changes come July of 2026.

I think one thing that ideally, parents, grandparents, people guiding the students think about too is it is one a career choice, right? And so some some people are lucky and they're they're very focused. They know what they want to do. Others, you know, like me, maybe you go to college and I was an English major and ended up in finance.

So you don't you don't kind of know your path. And there's a big benefit to, I think, the social just maturity aspect of being out on your own, having to fend for yourself. So that's potentially that doesn't go away. Right. Even for people who want to go straight to work, if you don't know exactly what you want, it's a great place for kids to find themselves.

But back to this concept of let's say they don't go. 529 plans can be somewhat flexible in that regard in terms of, okay, you saved all this money for your kid to go to college, but they don't use it. What do you do? Do you just lose it? Do you just like, well, how does that work?

So in the past, technically you don't lose it. The money's there. If you had to, if you had to pull it out, you would pay, penalties. Just like you would use money from an IRA, a 10% penalty. Now, if there's funds that are leftover, if you could either transfer it to another child or a family member,

I have two kids, if the first one doesn't use it or doesn't use all of it, I could transfer the rest of it to my next kid.

Or I can go to a cousin and nephew can go to stepmother step, you know, I mean, the parents, you know, really it's quite flexible in that regard. And then second, if all those options have been exhausted, it can go up to $35,000, can be rolled over into a Roth IRA in the name of the beneficiary.

So that is very nice. And, as long as that particular beneficiary has a job, but hopefully by then if they graduate college and they will have a job at that point.

Back to scholarships a little bit. So we talked about merit scholarships, like how can some people pursue that or think about that being available. And then even if they're going to give kids money, how how should they structure it? Potentially. So if they can get certain scholarships or financial aid, it's not maybe hurting them.

If like a grandparent, for example, wants to give money for the kids.

So the way merit scholarships work, there's you can actually find out from the school, through the common data set. You can Google and like if, you know, kids come up with their school list, so you can go on that actual school's website and find out, like, you know, what exactly is your merit scholarship policy. And then you can find that out.

And merit scholarships are actually almost guaranteed for four years versus need based aid that the school offers. Those are negotiated every single year.

So if your income fluctuates, for example, mid-year, your amount you're paying could change for college, correct.

So those are the two things that you should be aware of. Scholarships. Also if you do like you know, if you do, apply for scholarships, let's say outside, like, you know, from a city or certain communities or organizations that you will get scholarships from, you have to find out if those will not reduce the aid that the colleges will offer.

So you have to find out if you can stack scholarships. So again, you can go on the website of the college and they'll tell you if they allow stack through if you stack GSB know if to stack scholarships. And then going back to your grandparents. Question. Best way to actually save for college is to actually have the 529 account in the grandparents name, because that is not considered as an asset of the child or the parent.

And then it will not be counted on the Fafsa when it is completed.

So if you think the parents would potentially qualify for financial aid, they can essentially it's better to be in the grandparents name than it won't ding them when they're doing that. Lovely. Whatever the formula is that decides if you get any, any money or not

Though on Fafsa, the biggest, biggest, contributor to what determines if you get aid or not is income. But then assets are a part of it.

And I will say of there's a lot of details here, I of all the things my heart keeps going to if you can afford it, which I don't think the pricing was crazy, but the idea of a coach either you could lean on a high school counselor. Those are probably mixed in terms of the quality.

I'm sure there are some that are amazing, others maybe not as much. Or if you can afford the private counselor, it's probably worth it in terms of the ultimate savings to help navigate all of these details.

I do think so, because they actually go to conferences. They they're very that's all they do. And I, they really understand that landscape and are able to work with your child and understand exactly like what they're looking for and know the exact profile of the school and kind of even for me, if if, you know, I can tell you that like a small school has a class size of 15 to 20 kids, if my child does not show up to class, the kids in that class are going to notice.

If you know, Devin goes or does not go to school, versus if the class size is 200 kids, nobody's going to care if my kid goes to class or not. So which one do you think your child's going to thrive in, or was going to want to be motivated to, you know, participate in?

Do you still have to pay if the kid doesn't go to class?

Yeah.

That's so weird.

Play quick game with me, and it's going to be ironic. You should do it because I think we know it's called optimistic./pessimist, and we probably all know which one I'm going to go for. But maybe not.

Maybe not. Maybe we'll be surprised. But okay. Number one so are you optimistic or pessimistic about college will be more affordable in ten years.

I wish I was an optimist about that, but I do think that will be a different way that people will be able to access education in ten years.

So there's other, other options, other options, and even who knows with AI and different things. So maybe that'll be one of the positive things that comes out of it is there's more opportunities or ways for people to learn.

Yes.

Okay. Look, we had a positive spin. That was good. Even though it's going to be more expensive.

529 plans will become the norm, like for one car for retirement?

I hope so, because right now, honestly, only 36% of families use 529 to save.

So I hope that becomes the norm. It is still, I know you and I have a banter around that because the investment choices in 520 nines are limited. Yeah, so that is definitely a deterrent. And I think probably a lot of people are probably not using them as much because of that.

Even there, the idea of diversifying it. Right? So maybe that's not where 100% of your savings goes for college, but some amount and the tax advantages are potentially worthwhile to to look at more depth. All right. Last one. Trade school and non-college pass will become more socially accepted.

I really hope that that becomes more a thing that along with even gap years, I do think that coming out of high school, I don't think I knew what I, what I saw, you know? Now I know.

You’ve arrived.

Yeah. Thank you for being a partner at the firm. I'm glad you know that you like it.

But I do think that honestly, right now, schools value kids that take a gap year. And I think trade schools and going into something that you can even identify what you want to do and put that skill to work is quite important. And we do need that in our current world.

Always the optimist, I love it.

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The information presented herein is for discussion and illustrative purposes only and is not intended as financial advice. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. Morton Wealth makes no representation that the strategies described are suitable or appropriate for any person. It should not be assumed that Morton will make recommendations in the future that are consistent with the views expressed herein. Past performance is no guarantee of future results. You should consult with your financial advisor to thoroughly review all information before implementing any transactions and/or strategies concerning your finances.