College planning has proven to be one of those escalating needs for the American family who are seemingly left without an answer that will, once and for all, provide rescue. Why? Is it simply because it is such a complex issue that a "magic bullet" solution is an impossibility? Is it because the sky-rocketing costs of a higher education in today's world simply keep outpacing whatever financial remedies surface to combat them? Is it simply tougher for students to get aid from the schools they want to go to? Do the rules keep changing? Perhaps the problem is in how we try to tackle the very problem itself.
To understand the complexity of the college planning issues that are perplexing families, students and advisors alike, we must first understand the individual characteristics of the issues at hand. This article will seek to simplify the entire picture to reveal the individual elements that often work separately, but in the end, provide a mosaic of solutions that can provide real, workable relief.
At the forefront of the dilemma is a higher education system that has strategically positioned itself as an increasingly more necessary ingredient for the psychological and financial success of the student. In addition to the growing necessity of a degree, it has also become an increasingly expensive endeavor. Whereas in the past it was a struggle for non-wealthy families to strive to afford the best of the best, today it has become a financial burden of epidemic proportions for all families going to all colleges. No longer can we simply choose where the student wants to go based on Mom or Dad's alma mater, knowing that we have State to fall back on in case it doesn't work out. Now we must choose where the student wants to go based on an ever-growing set of criteria -- not the least of which is cost -- regardless of whether it is their first choice. This is the catalyst that sparked the creation of the multitude of approaches.
One issue facing the college planning arena is the fact that the "help" that is available to address the issue facing the family is a camp divided. On one side of the "solution providers" you have what I call the true college planners -- these are the folks who concentrate on the academic side of the equation. On the other side, you have those who focus on the funding aspects of college. The academic side is by far the most pure, but can also be the most difficult to become adept within. College selection, student positioning, admissions, scholarships and grant searches, college visitations, SAT/ACT prep, personality testing, FAFSAs and many more topics are covered in an admirable attempt to ease the pain of the process. The vast size and scope of areas in which the typical family can benefit from assistance is immeasurable. Most planners charge fees to their family clients, the level and success of which can often be determined by the geography and depth of the services offered. This layer, in my humble opinion, is an integral and absolutely crucial piece of the college planning puzzle. However, a total success on this side of the equation still leaves the family with a rather large elephant in the room. How are they going to pay?
That brings in the other side of the equation: the financial soothsayers who have cleverly and sometimes creatively derived answers to the most pressing questions of funding a higher education. This side of the camp is also divided, thus taking the world of college planning even further into a separatist's state of mind that ensures a holistic approach is all but lost.
Half of the financial camp is determined that the funding solutions rest in the reduction of the families' estimated family contribution (EFC) in order to increase aid eligibility. Whereas the EFC is a very important number and its reduction is a goal that every family should strive for, the reality of the more sophisticated reduction techniques (those that venture beyond a shifting of assets, etc.) are that they can be complex, loop-hole driven explorations that are viable in only the most perfect of circumstances. The average family may not be able to benefit from income-reduction maneuvers, and for a family who makes a decent, above-average income, good luck reducing the EFC to a point of real cost-saving relevance. Then you have the 300 or so schools that utilize the federal methodology that can open the door for scrutiny that adds more stress to the process. Without a doubt, this side of the camp is populated with smart, savvy, caring individuals who really can reduce the EFC, and therefore make the family eligible to receive more aid, but it often comes down to the effort versus reward factor. Even in the best of circumstances, we are still left with funds to secure for the exorbitant costs of college -- whether those costs have been reduced or not.
That brings us to the other half of the financial camp, those who have determined that if a certain vehicle is used in a specific way, then the costs of college can be raised, earned, saved or borrowed. Like the other providers, there are definitely solutions embedded in the plethora of ideas, strategies, processes and schemes. The use of the word "schemes" here is where the main problem lies on this side of the college funding equation. Often, the problem of helping families afford college is an open door for another marketing campaign to sell whatever it is selling. It is not that all of the vehicles don't work; in fact, many of the vehicles work amazingly well when used in a specific way for a specifically qualified family. Most of the solutions provided in this camp are unfortunately touted as the "magic bullet" we all seek. This simply is not, and could never be, the truth. Whether it is cash-value life insurance, an annuity, an ESA funding plan, a 529 or whatever else the mass marketers of the world come up with, these vehicles never work 100 percent of the time. Do they work some of the time? Of course, and they should never be referenced as false solutions; however, they do not work all the time and that determination has seemed to rely a lot on the knowledge and ethical make-up of the advisors themselves, and the client families should not have to be put in a position of luck as to whether that distinction is upheld or not. College planning should not be a marketing tool without the ethics and knowledge to back it up.
We all know that college planning is an enormous, complex world that has so many moving parts it is daunting to advisors and families alike. But does that mean we are doomed to mislead and let down the masses? Absolutely not! There are many advisors out there who have found a solution to the puzzle, and the answer to this seemingly overwhelming issue may be simpler than you thought. My next article will dive into what the true college financial planners are doing now to help the student, the family, and themselves in the world of college planning.
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