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Save Early for College!
Perhaps not the freshest advice you've ever gotten. This may be: 529 Plans may not be the right way to save for college. Assuming the rules that are in place now remain in place, 529 Plan withdrawals for private college can have a negative affect on financial aid. "Wait, my 529 Salesperson told me the withdrawals are
tax-free." Well, not exactly. If you receive financial aid, they likely are not completely tax-free. Worse, some colleges treat withdrawals as "student income" and reduce aid by 50% of the withdrawal. Others count 529 withdrawals as a "student resource" and reduce financial aid dollar-for-dollar by the amount of the withdrawal! At this point, you may be wondering, "Why are we using a jack-of-all-trades-investment-salesperson to guide us on complex college financial planning matters?" What a coincidence - we're wondering that, too! (And talking to us IS free.)
Here's another thought: Paying down your mortgage increases your wealth. Using accumulated home equity as a future loan source is the best way to borrow for college. And saving 5% or 6% (or whatever your mortgage rate is) is the SAME THING as earning 5% or 6%. And it's guaranteed. Yet another thought: Are you protecting your family? Talk to us about the specifics and how these planning tips can help your family.
How is your Elementary Schooler doing so far and why is it important?
Now is as good a time to introduce you to the Immutable Law of College Cost: The Better the Student, the Cheaper the Education. Why? High-quality (some might say, "elite") colleges have large endowments and are generally, more generous with financial aid that does not need to be repaid - "gift-aid" in college parlance. The more subtle part of the answer is that the better colleges graduate a higher, often much higher, percentage of students in four years. This may surprise you: Only 18% of American public college students graduate in four years. More about this, here.