Do you know much about college-funding strategies? I'm not talking about 529 plans. No doubt you are recommending these valuable college savings plans to your clients. You can't expect to earn brownie points, however, if your knowledge of college strategies begins and ends with these college accounts.
Why? Because families with teenagers need more than 529 advice, especially when time is running out. Regardless of how they've saved for college — and only one out of every four college dollars is sitting in 529 plans — these parents are often petrified about their prospects for paying for college.
What are you doing for these older parents?
If you can do more than merely commiserate with your anxious clients, you are more likely to cement your relationship with them. You could actually accomplish more than that. Financial professionals who understand how their clients can slash the cost of college are more likely to become sought-after commodities. Basic college knowledge could help you capture that elusive competitive edge that everyone in the business covets.
What do you think the reaction of your clients would be if you could tell them this: “Here's how to find the 50 colleges and universities with the best financial aid.”
Or this: “Even families that make $150,000 to $200,000 may still qualify for up to $25,000 in need-based aid at the nation's most expensive colleges.”
What's exciting about this college niche is that it's wide open. In fact, I'd argue that late-stage college planning represents the final frontier of financial planning. For many American families, paying for college will be the second biggest expense that they face after buying a home, but the financial industry is stubbornly silent when parents and teenagers start exploring colleges and begin contemplating the looming tab.
If this sounds like a golden opportunity, I'm here to help. I'll be writing a monthly column, “The College Solution,” where I will share advice, tips, resources and the latest college trends that you can use to help your clients.
So why will I be writing this column? I am a veteran financial journalist, who has authored three investing books. I have also contributed hundreds of financial articles to such magazines as Business Week, Money Magazine, AARP: The Magazine, Bloomberg and Kiplinger's publications, and of course, Registered Rep.
I began switching gears, however, when my own daughter, now a college junior, was contemplating her college choices. When I started poking around on the Internet, I found that the media, just like financial advisors, are focused primarily on serving up college-planning advice for families with young children. I could boil down their advice to a single sentence: Save a lot and start early. That's wise advice, but it's not helpful for families with high school students.
I ended up learning so much about college financing through my own research, as well as through countless interviews with experts in the higher-ed field, that I decided to specialize in this field. I ultimately wrote a book, The College Solution: A Guide for Everyone Looking for the Right School at the Right Price, which is an Amazon bestseller. I share college tips, commentary and advice on CBSMoneyWatch's college blog, as well as my own, TheCollegeSolutionBlog. In addition, I'm a weekly contributor to US News & World Report's higher-ed coverage. I also give college presentations across the country at schools, professional conferences and for financial advisers.
At this point, you might be thinking that high school counselors, who are the traditional source of college information, are already providing much of the advice that parents need. In reality, counselors are often ill-equipped to help families with more than the most rudimentary advice about financial aid deadlines, standardized testing information and the college admission cycle.
A survey released in March suggested that many high school counselors would flunk out if they were graded like their students. The Public Agenda survey, which was funded by the Bill and Melinda Gates Foundation, asked Americans between the ages of 22 and 30 for their opinions about their high school counselors. A shocking 67 percent of those surveyed said their counselors did a fair or poor job of helping them decide what school was right for them.
High school counselors argue that what's preventing them from performing their jobs adequately is their staggering workloads. The average student-counselor ratio in this country is 265 to 1. In California, the average is close to 1,000 students for every counselor. Strapped school districts, however, aren't going to miraculously find hidden pockets of cash to hire more counselors.
And I'd argue that even if new counselors were hired, the problem would remain. Here's why: the system in place to educate guidance counselors is broken. Public high school counselors typically must obtain master's degrees to work in schools, but the counseling degree programs offered at universities across the country rarely include even one course on college counseling. The curriculum in these master's programs is focused on mental health and other issues.
Here are some topics that I will be covering in future columns:
The best places to find college scholarships. Most families look in the wrong places for the big college bucks.
Financial aid myths. I could spend the rest of my life writing about financial aid misconceptions because there are plenty of whoppers. Here's one of the most stubborn financial aid misconceptions: most of the people I talk with assume they won't qualify for financial aid.
The 529 plan boogieman. I run into parents all the time who gripe that the money that they've saved for college will ruin their chances at financial aid. In my experience, it's usually the dads who work themselves into a tizzy about this injustice. But 529 assets almost never jeopardize the parents' chances for financial aid. When you understand why college assets rarely harm aid chances, you might be able to coax your clients to save more for college.
And by the way, assets in qualified retirement accounts have absolutely no impact on financial aid. Your clients could have millions stuffed in qualified plans and it wouldn't jeopardize aid chances at all. Soon enough, you'll find out why.
I hope I've piqued your curiosity about late-stage college strategies, which I consider to be a real gold mine for financial professionals. Please stay tuned.