Advisor Today - November/December 2016 - 17

PRACTICE SPECIALTIES

FINANCIAL PLANNING

By James Mahaney, CLU, CFC

College Funding:
Helping Clients Evaluate What's Best
Start by helping them navigate how to select and pay for the "right" college for their children.

P

How Families Pay for College Today
arents only want the best
Your
clients
must
balance their emotions against the risk
for their children. This is
The
family
today
relies
on achildren,
web of
of taking on a level oftypical
debt that
may
burden
their
especially true when it comes
resourcesfor
to pay
fortocollege.
and possibly themselves,
years
come. Fifteen percent
to college. However, there may be
different ways to think about what's
of the cost is funded by student borrowing,
"best," particularly in the face of
a level that captures the maximum
significant student loans if those
7 percent by parent
borrowing, 12 percent
dramatically rising student debt levels
amount their employer will match.
loans hinder the long-term financial
from
student
and
savings,
in America and the impact that can
Research conducted
by the
Center income
prospects
of the
child (or30
parents)
have on retirement security. Your
for Retirement Research
at Boston
after graduation.
This savings,
can be a
percent
from parent
income and
clients may look to you, as a financial
College (CRR) and sponsored by
difficult challenge for parents, as
31student
percent
scholarships,
and
professional, for help. The following
Prudential indicates that
loanby grants
tackling and
this issue
with a high-school
outlines some things to consider.
debt may jeopardize one's
golden from student
is not an easy
task.
Emotions
4 percent
contributions
from
other
The average amount of student
years if it impacts the ability to save
can run high. Their children have
24
relatives.
loan debt for borrowers at every
adequately for retirement.3 The CRR
worked hard, both in and out of the
age has more than doubled between
found that 49 percent of households
classroom. What's more, in an era of
2003 and 2015. This means that it's
without student debt were at risk
social media, they face much greater
Borrowing
Borrowing
not just students who are borrowing
of not being able to maintain their
social pressures
when Income
selectingand
a
1
15%
Student
much more - parents are, too.
standard of living in retirement; that
college than their parents
did.
Savings
7% Parent
The effect of higher borrowing
percentage soared to 60 percent for
Your clients, as parents,
may feel
Student
15%
12%
4
Income
Savings
is emerging as a concern among
households with student debt.
similar social pressure -and
in addition
12%
Student
Parent
7%
30%
economists, policymakers, employers
to self-imposed
pressure
-awarded
and
As noted earlier, need-based
financial
aid is
based
30%
Parent
and retirement experts. Young
Prestige versus cost onGrants
must
balance
these
emotions
against
and income and assets. It takes31%
a family's
the form of grants,
How
Families Pay for College Today
consumers already carrying student
So, what's "best" when it comes to
the risk of taking on
a level
of debt
31%
Grants
scholorships
loans,
and
work-study
programs.
Colleges
typically
employ
The
today
relies
web college
of
loanstypical
may not family
be willing
to take
on ona achild's
education? There
that may burden their
and
andchildren,
Scholarships
one
of at
two
for calculating
whether
a student
Other
debt to buy atohouse
If they Fifteen
is more
than one way to
look
it.methodologies
possibly themselves,
for4%
years
to come.
resources
pay or
fora car.
college.
percent
4%
Other
2
qualifies
for
need-based
aid:
the
Federal
Methodology
or
are willing, they might not qualify.
Attending what is considered a more
of What's
the cost
is
funded
by
student
borrowing,
the
Institutional
Methodology.
This
section
of
the
paper
more, when it comes
prestigious college has often been
Understanding options
retirement,by401(k)
plans
have
viewed
as the best option
for
a
child,
There
is no
the value ofwhich
a
highlights
the
workings
of
thedoubt
Federal
Methodology,
7to percent
parent
borrowing,
12
percent
In 31 percent of
families,
theabout
student
replaced traditional pensions as the
even though the associated
cost
may
college
education.all
College
graduates,
is
used
by
the
federal
government,
public
colleges,
and
from
student income and savings,be30
provides all funds
not covered
by
financial
predominant workplace retirement
higher.
on
average,
earn
65
percent
more
many
private colleges. The next section is devoted to the
25 is
percent
from parent
and savings,
plan. For 401(k)
plans to income
work
Another school of thought
than
counterparts
without
aid.
In another
31their
percent
families,
Institutional
Methodology,
which isofused
by some
private
5
effectively,
individuals
must
save
an
that
it
may
not
be
best
for
a
child
college
educations.
However,
careful
31 percent by grants and scholarships, and
parents
pay
enough
of
the
costs
such
that
to determine
eligibility for
non-governmental
appropriate amount, especially at
to choose a college thatschools
requires
consideration
must
be given to how

Qualifying for Need-Based Aid:
The Federal Methodology and FAFSA

4 percent from contributions from other
24 Pay for College Today
How Families
relatives.

Student
Parent
Grants and
scholorships
Other

Borrowing
Borrowing
Income and
15%
Student
Savings
7% Parent
15% Income
12%
and Savings
12%
Student
7%
30%
30% Parent
31%
31% Grants
and Scholarships
4%4%
Other

Source: The Prudential Insurance Company of America

In 31 percent of families, the student
provides all funds not covered by financial
aid.25 In another 31 percent of families,

financial
aid. pays nothing, either out-ofthe
student
pocket
or borrowed.26
The FAFSA

Qualifying for financial aid under the Federal Methodology
always begins with completing
Familyand filing the FAFSA-the
Family
Free Application for Federal
Student
Aid. The form requires
Contributions
Contributions
financial information from
both the student and at least one
Student
31%
custodial parent, and must be filed31%
for each
year the
Student
Onlystudent
Parent
31%
will be attending college. While awaiting the results of their
31% Parent Only
Shared
38%
FAFSA filing, students can
get an early estimate of how
Shared
much federal aid they may qualify38%
for by
completing another
online form, the FAFSA4Caster, at the website of the U.S.
Department of Education's Office of Federal Student Aid.27
Families should file the FAFSA as soon as possible after
January 1 of the year in which the student will enroll in
November/December
2016
TODAY 17firstcollege, since some
colleges award
aid| ADVISOR
on a first-come,
served basis-and because missing the final deadline, which



Advisor Today - November/December 2016

Table of Contents for the Digital Edition of Advisor Today - November/December 2016

FROM THE EDITOR
VIEWPOINT
NEW PRODUCTS
I Love My Job, But I Don’t Want to Do it Forever!
Building a Practice You Love
The New American Dream
A New View of Retirement
College Education Funding: Helping Clients Evaluate What’s Best
Portfolio Allocations for New Market Conditions
Leveraging the Power of Study Groups
An Interview with MassMutual’s James Ocampo on Critical Illness Insurance
Start with “Why”
Best Practices for Selling Group LTCI
From Yes to Success
Meet NAIFA’s New President
NAIFA’s 2016 Performance + Purpose Conference
NAIFA GOVERNMENT RELATIONS
4 Ways to Build an Effective Email Marketing System
ADVERTISER INDEX
BACK PAGE
Advisor Today - November/December 2016 - cover1
Advisor Today - November/December 2016 - cover2
Advisor Today - November/December 2016 - 1
Advisor Today - November/December 2016 - 2
Advisor Today - November/December 2016 - 3
Advisor Today - November/December 2016 - 4
Advisor Today - November/December 2016 - 5
Advisor Today - November/December 2016 - 6
Advisor Today - November/December 2016 - 7
Advisor Today - November/December 2016 - FROM THE EDITOR
Advisor Today - November/December 2016 - 9
Advisor Today - November/December 2016 - VIEWPOINT
Advisor Today - November/December 2016 - NEW PRODUCTS
Advisor Today - November/December 2016 - 12
Advisor Today - November/December 2016 - I Love My Job, But I Don’t Want to Do it Forever!
Advisor Today - November/December 2016 - Building a Practice You Love
Advisor Today - November/December 2016 - The New American Dream
Advisor Today - November/December 2016 - A New View of Retirement
Advisor Today - November/December 2016 - College Education Funding: Helping Clients Evaluate What’s Best
Advisor Today - November/December 2016 - 18
Advisor Today - November/December 2016 - Portfolio Allocations for New Market Conditions
Advisor Today - November/December 2016 - 20
Advisor Today - November/December 2016 - Leveraging the Power of Study Groups
Advisor Today - November/December 2016 - 22
Advisor Today - November/December 2016 - 23
Advisor Today - November/December 2016 - An Interview with MassMutual’s James Ocampo on Critical Illness Insurance
Advisor Today - November/December 2016 - 25
Advisor Today - November/December 2016 - Start with “Why”
Advisor Today - November/December 2016 - 27
Advisor Today - November/December 2016 - Best Practices for Selling Group LTCI
Advisor Today - November/December 2016 - 29
Advisor Today - November/December 2016 - From Yes to Success
Advisor Today - November/December 2016 - 31
Advisor Today - November/December 2016 - Meet NAIFA’s New President
Advisor Today - November/December 2016 - 33
Advisor Today - November/December 2016 - 34
Advisor Today - November/December 2016 - 35
Advisor Today - November/December 2016 - 36
Advisor Today - November/December 2016 - 37
Advisor Today - November/December 2016 - NAIFA’s 2016 Performance + Purpose Conference
Advisor Today - November/December 2016 - 39
Advisor Today - November/December 2016 - 40
Advisor Today - November/December 2016 - 41
Advisor Today - November/December 2016 - 42
Advisor Today - November/December 2016 - 43
Advisor Today - November/December 2016 - 44
Advisor Today - November/December 2016 - NAIFA GOVERNMENT RELATIONS
Advisor Today - November/December 2016 - 4 Ways to Build an Effective Email Marketing System
Advisor Today - November/December 2016 - ADVERTISER INDEX
Advisor Today - November/December 2016 - BACK PAGE
Advisor Today - November/December 2016 - cover3
Advisor Today - November/December 2016 - cover4
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