How to Pay for College Without Ruining Your Retirement with Jack Wang | 099

Paying for college is one of the most stressful financial decisions a family will ever face — and most families are navigating it completely blind. This week on the Extreme Personal Finance Show, Chris sits down with Jack Wang, wealth advisor and host of the Smart College Buyer podcast, to pull back the curtain on how the college financial aid system actually works, and how families can stop leaving money on the table.

Jack brings a refreshing and honest take right out of the gate, college is still worth it, but not just for the ROI reasons most people debate. The personal development, the friendships, the experience of figuring out who you are — those matter too. And yes, the numbers still have to make sense. Jack breaks down exactly how to make them work.

In this episode you'll learn:

• Why "I make too much money to qualify for aid" is almost always wrong — and what high-income families are missing
• How the FAFSA actually calculates your Student Aid Index and what that number really means for your family
• The NFL Draft analogy that perfectly explains how colleges decide who gets the big aid packages
• Why your kid's gender, major, and even home state can dramatically affect how much aid a school offers
• How divorce changes the FAFSA equation — including the major rule change that tripped up a lot of families
• The right way for grandparents to help pay for college without accidentally tanking financial aid eligibility
• Why Jack prefers financial flexibility over locking money into a 529 — and what accounts he recommends instead
• The one conversation most married couples haven't had about college that can derail the whole plan

Jack also shares his two top strategies for families just getting started, explains why filling out the FAFSA matters even for high earners, and digs into how schools in different states treat out-of-state students very differently when it comes to aid.

Whether your kid is a freshman in high school or heading into senior year, this episode will change the way you think about paying for college.

Contact Chris:

https://heavymetal.money

https://www.facebook.com/MoneyHeavyMetal

https://x.com/MoneyHeavyMetal

https://www.instagram.com/chrisluger

https://www.tiktok.com/@heavymetalmoney

email: chris at heavymetal.money

Connect with Jack Wang

Smart College Buyer on YouTube
https://www.youtube.com/channel/UCGvxjS_uLUIPnHKelqSLaHg

Jack Wang on Instagram 

https://www.instagram.com/fafsafred/

Jack Wang on LinkedIn

https://www.linkedin.com/in/thejackwang/

Resources and Links:

Free Tuition in Minnesota: Unveiling the North Star Promise

https://heavymetal.money/northstarpromise/

Pay Less For Two-Year Degrees That Can Make You Bank

https://heavymetal.money/twoyeardegree/

High-Paying Trade Jobs and Careers That Don’t Require a College Degree

https://heavymetal.money/tradejobs/

Die With Zero: Getting All You Can from Your Money and Your Life―A Revolutionary Approach to Maximizing Life Experiences Over Accumulating Wealth by Bill Perkins

https://a.co/d/09JgROQc

Contact Chris:
https://heavymetal.money

https://www.instagram.com/heavy_metal_money/

https://www.youtube.com/@heavymetalmoney

https://www.facebook.com/chrisluger

email: chris at heavymetal.money

Transcript

SPEAKER_00 0:00

How to pay for college without wrecking your retirement. This week on the Extreme Personal Finance Show. All right, everyone. So my guest this week is Jack Wang. He's a wealth advisor and the host of the Smart College Buyer Podcast, where he helps families all over the country answer two really important questions. How do you maximize financial aid and how do you actually pay for college without torching your own financial future? I think it's really important that parents know how to do this. And so I'm really excited to welcome Jack to the show. Jack, good to see you, man. How's it going?

SPEAKER_01 0:43

Nice to see you, Chris. Thanks so much for having me on. I really, really, really appreciate it.

SPEAKER_00 0:47

Absolutely. This is gonna be a good conversation because I've I've had tons of other uh blog posts and conversations about basically how to go to trade school, how to get an associate's degree for free here in Minnesota. We now have a promise program where you can go get an associate's degree for free, which is pretty rad. But I I often talk about is college worth it? And so I'm gonna I'm gonna come right out of the gate swinging here. I'm gonna ask the expert, what do you think? Do you think college is worth it?

SPEAKER_01 1:16

Right into the deep end, right, Chris? That's right. All right. So do I do I think college is worth it? So so the answer to that is yes, right? And it's not it's not because of what I do, right? So given what I do like professionally, of course it's worth it. That's why you have to hire me. That's that's why or listen to my podcast. That that's not what I mean. I think today, right, so many people are focused on obviously things like return on investment and getting into majors where it directly leads into jobs and stuff. And all of that, of course, is important, right? Like, you know, but college is such an important time for a person's development. Like, if they go off and truly take advantage of what's offered and extracurriculars and activities and sports and really kind of live the environment. I don't mean like go to frat parties and get drunk all the time, although I I did plenty of that. Uh but like I think back to my own experience. Some of my best friends are people I met in college, and it was such formative years for me. Like it really changed me for the better as a person. And I think that people kind of overlook that because college is the time where you sort of can grow up, still like in the beginning, somewhat insulated environment. Like in the beginning, you live in a dorm room and you have a meal plan, so you don't have to learn how to cook, but you're having to learn how to meet new people and make new friends, and you know, and hopefully you're in an environment where you're forced to do that and you put yourself out there to do that. And I think so many families and students are so focused on like, all right, is this gonna get me a job? Is this gonna have a positive ROI and whatever that they overlook these other aspects? You know, like I I talk to parents about all the time about hey, tell me about your college experience. And they might have you know, sometimes I have people say, like, yeah, it was okay, I didn't really learn that much, but then in the next breath, they'll say, Yeah, but my best friend even today is a guy I met in college. You know, and and so from that standpoint, I think it is worth it. Now, should you pay like 90 hundred grand a year for that experience? Yeah, you know, that you know, it's different for everybody. But do I think that people should go and have that experience and have a chance to kind of grow up and kind of tr better transition in adulthood? Absolutely, absolutely.

SPEAKER_00 3:28

Right, right. That's that's interesting. I wasn't expecting to hear that because that's you know, that's if you take the finance piece out of it, the or the ROI piece out of it, you know, you're saying, yeah, it's worth it just because of the experience and you growing as a human, as a person, which yeah, I totally didn't even think of that. Good point, absolutely.

SPEAKER_01 3:50

Yeah. And I think unfortunately, you know, some of the ways that families try to save on the cost of college, right? Like whether it's going to community college first, which which is not a bad option, okay. I'm not like this and that at all, or they go to a four-year college, but they live at home and commute. Nothing wrong with that either. But I think you lose a lot of that experience of the of the making the friends, of networking, of sort of learning figuring out who you are as a person and going to try different things that you might not have gotten to experience in high school or whatever. Because living at home with mom and dad is a different experience than if you were in the dorm, right?

SPEAKER_00 4:31

Just yeah, totally. Yeah, 100%. Do you feel as though once once we start digging into the numbers and you're gonna start, you know, you're deciding where to go, what you're gonna pay. Is there kind of a ballpark figure? Like, is there a number that kind of starts to become the deal breaker, right? Like at what point does the cost just start to not really have an ROI?

SPEAKER_01 4:54

So you know, I think that number is different for everybody. But, you know, there's been a lot of research done, especially more recently, around ROI and things like that. And so not surprisingly, fields like like STEM majors, right, uh tend to have higher RO ROIs, or like, you know, medicine, law, things like that, uh tend to have higher ROIs than if you were a psychology major or an art history major. No, again, no hate on them either. But if you look at the from the employer side, and and interestingly enough, I I did an episode where I interviewed two women who have their own business sort of coaching college students and and recent college graduates to get into their first real job and and things like that. And they were on the corporate side for 20 plus years recruiting these kids. What they are hearing over and what they saw over and over again is that students lack some of those soft skills that you get in some of the liberal arts majors and stuff. So, yes, you have to have the technical skills, right? Like you have to be able to add two numbers together. True, but if you can't communicate effectively or work in a team or problem solve generally, or you know, just you know, or write an email in a professional way, you know, the those are becoming much bigger issues. And so I'm not saying that you have to go again spend ninety to a hundred grand a year to learn how to write an email, but but I wouldn't discount some of those soft skills that you get from some of those liberal arts courses. I I think for every family it really is different, you know, that number. I think it's the experience. I you know, it's I hate to say it this way, and I'm not advocating for families blowing at blowing a ton of money on college, but like sometimes, you know, when you go on vacation, you want to pay a little bit extra for the nicer hotel. And other times, you know, like like I just got back from a trip and I was barely in my room, so I didn't want to pay a lot of money for a hotel room because I knew during the day I was like I was gonna be out of it the whole time, right? Like I was only there to just sleep and nothing else, and a place to take a shower and put my stuff down. So I'm not gonna spend a money ton of money on that. But like if I was staying at a resort or something, I might choose to pay a little bit extra. Sure, sure you could there.

SPEAKER_00 7:05

Yeah, you can use that money in other places. And and I I I have read that there's a large percentage of people now that that do think that you know the the cost of college now kind of you know outweighs the benefits, you know, in you know, last year, 2025, 2026. Some some some kids, right, some students, they actually will start to look at things like trade skills maybe more appealing because they can do that with a lot less than a four-year degree, let's say. I'm curious because I went to a trade school, so this is something where it's very uh it's very close to to my heart. I'm curious what your thoughts are on some of the differences and what you see in the landscape today regarding trade school, vocational school, technical training, that type of thing.

SPEAKER_01 7:54

I I think trade schools are are a fantastic option. And I'm not saying that just because you have me as a guest on your show. Throughout this whole process, whether your kid ends up at an Ivy League school, a comedian college, or a trade school, it it's all about finding the right path for them. Think what so if you if you look at the college landscape overall, and I'll get back to trade schools in just a moment. Yeah. But and this has been the situation for a long time. The top tier schools, your IVs, your near Ivy's, so so the names that everybody knows, right? They get around 90% of all high school applications. So if you look at those schools, for every kid that they enroll, they get about 40 applications. Now, granted, not every kid gets in, right? And not every kid who who does get in goes, because you know, instead of getting going to Harvard, you might go to Yale or vice versa or something like that, right?

SPEAKER_02 8:48

Right.

SPEAKER_01 8:48

But but those schools have a lot of choices. There's huge demand because families are fixated on like and I've literally had families essentially say this to me, like, Oh yeah, if my kid doesn't get into the Ivy League, their life is over, which is complete BS.

SPEAKER_00 9:03

Oh my gosh.

SPEAKER_01 9:05

Okay. But then you read studies like coming out of those schools, right? When kids sort of get into their first job, you know, and you see studies of young people like, hey, was it was your education sort of worth the cost? And and more often than not, for kids who went to those really expensive schools, they'll say no, not because they didn't like it, but because now they're working at a company or they're working a place where they're working shoulder to shoulder to somebody with somebody who went to like University of Minnesota who paid like a fraction of the cost, right? And you're both there, right? Like you ended up in the same place. So what was the point, right? So so I think it's all about finding the right, right path. So if if the right path is a trade school, right, whatever that may be, then then that's what it is. Like that's phenomenal. And so I despite what I do and what I talk about, I I think personally that I think more kids should either go to trade school or at a minimum take a gap year. I think that the as parents, I think a lot of times parents, you know, sort of expect their kid to go from high school to college or or whatever, and the kids aren't always emotionally ready. And we see that in dropout rates and transfer rates. And and I don't mean like kids are flunking out just like they can't handle like being away from home or whatever yet. So if trade school's a path, hey, no, hey, all love towards you, man. Go like if that's what you want to do, trade school, done. And and and by the way, there are many trade schools that are still part of the federal student aid system, so there is financial aid available, federal student loans, right? So it's not like parents just have to trade school pay for trade school out of pocket or whatever. There actually can be financial aid for trade school as well.

SPEAKER_00 10:45

Right on, right on. I know that when I went, and again, this was 30 years ago, but but when I went, you know, I did get some financial aid. I got some grants, but then I basically cash flowed my two-year program while I was working at Toys R Us. Oh, that was now again. I think I think it, you know, college costs have gone up considerably. I don't know if you could still do that working, you know, retail. But you you brought up yeah, right. So you brought up financial aid, and and this is a couple things I want to address here. So my kids, you know, when they were just starting out high school, right, we would go like ninth grade, we would go to you know the uh the information meetings, the orientation stuff, they would get a whole bunch of material. And I will tell you, I mean, if I was I was a kid that age at at ninth grade, I'd be so overwhelmed because they were talking about college that early, right? At ninth grade, they're like, well, you know, if you want to go to this college, you know, you should start taking languages now. You should start doing this stuff now. And I just thought, man, I there was no way. When I when I was in ninth grade, my hair was down the middle of my back and I was gonna play guitar for the rest of my life. Like, I mean, I was not ready to think about college. So, how early is early enough to start planning for college, like financially?

SPEAKER_01 12:03

So Yeah, so believe it or not, it it's earlier than people expect. And I think we've seen that everywhere, and and not just for college, but like you like even now, like kids playing sports, like they start to specialize way earlier than than they used to, right? So it's really across the board. So obviously, if someone wants to save save for college, you know, the ideal world's probably like you know, like you start saving the kid the moment the kid pops out, right? You're uh you're in the delivery room, right? Your baby's coming out, and and then as soon as you turn around, like you're opening up like a college savings count or something like that, right? But that's probably not quite realistic. I know it definitely wasn't realistic in my in my kid uh case because at the moment I was I think I was more in shock and thinking about like diapers and 100% enough sleep and stuff like that, right? Yeah. So so obviously like anything, the earlier you start, the the better off you are. I really focus on what's called late stage plan. So it's really when kids get into high school and what are what are what are the nuances of what colleges actually look at and what actually matters to them and this whole people think it's a a game. It it is, to be honest, but it's not really the game that people think. Um it's not about like some pressing some magic formula or magic button on the financial aid form. It doesn't work like that. But the earlier you start, the the better you are. So I encourage families to start thinking about this, at least financially, as early as freshman year of college. Now, the pushback, right? Kind of like I probably what you're alluding to is like, hey, my my kid's a freshman in uh I'm sorry, not freshman year of college, freshman year of high school. I miss misspoke that phrase. The pushback, of course, is hey, my kid just got to high school. They don't know what they want to do or where they want to go, like what they want to major in, right? Yeah, but there are some things you can figure out, and one of the well, like in finance, we often talk about like budgeting and how much you can afford, but in college, there's also an understanding of how much you're willing to afford, right? So, for example, like if if a family can afford$40,000 a year, just hypothetically, okay, but you have two kids. So does that really mean that you're only willing to pay$20,000 a year for each kid because you know, you you know, you want to be fair to both kids. Um or with with loans, there are families who say, well, I can you know I can aff I can afford$40 a year, but I'm willing to go to 60 a year if my kid gets into XYZ school. Right? So how much families can afford and what they're willing to do are actually two different things. And that's one of the things that the families really need to figure out for themselves earlier the better, so that you can plan for it.

SPEAKER_00 14:46

Sure, sure. You know, it when we talk about financial aid, like I remember when my kids were at that age, and again, it was earlier than I thought, I started filling out like the FAFSA stuff for them. And I want to tell you it was the most confusing thing I've probably ever done in my adult life. And I'm like, I don't know how I don't know how people do it. So can you just dumb it down a little bit on like what the FAFA is, how it kind of relates to what kind of aid you'll get? And I think there's been a bunch of changes to the FAFA now, isn't there?

SPEAKER_01 15:18

There has, yep. So the FAF the FAFSA is free application for federal student aid. That's what the acronym stands for. And it is accepted by all schools, whether it's two-year colleges, four-year colleges, trade schools that participate in the federal student aid system, or what we call Title IV schools. So there are trade schools that are do not participate in that. So if you apply to those trade schools that are not part of the system, they'll never ask you to fill out a FAFSA because they don't take it anyway, right? So that's sort of how you know. So at a very high level, the FAFSA looks at your income, how much you earn, and your assets, how much you own. And together, it calculates something called an SA SAI or student aid index. And it's a number, like a lot of college people say, well, it's just a number to calculate. But but really it's how much colleges think you can afford per year of college. Okay. It doesn't mean that's what you're gonna pay. You might pay more, you might pay less, but but it's at least a starting point. And from that number, then colleges then figure out how much aid, if any, that you qualify for. And so the basic overall formula, right, super high level, is they take the what we call the cost of attendance, which is the sticker price of the school. So tuition, fees, housing and food, books, whatever. And that's where you see the headlines college costs$95,000 for the sticker price, right? So they take that number, they subtract how much they your SAI or how much they think you can afford, and it and what it equals is what's called financial aid eligibility. And the key is eligibility. But unlike everywhere else in this country, just because you're eligible for it doesn't mean you'll get it. That's a whole nother episode. So if that bottom line number is positive, then the most wills will give you a percentage of that number. If the bottom line number is negative, then you don't qualify for need-based aid on paper, but you might get other types of aid like merit scholarships. But here's the thing the FAFSA, like some schools will use the FAFSA to determine whether or not you even qualify for merit scholarships, right? Parents, and I tell that to parents, people are like, no, but I thought merit scholarships based on like grades and test scores. I'm like, yeah, yeah, but not always. But the bottom line is if you don't fill out the FAFSA, you're telling the school that you you don't need the money.

SPEAKER_00 17:43

Okay.

SPEAKER_01 17:44

Right? So even my high income families, I still tell them to fill out the FAFSA because it gets you access to federal loans and there you can use those for strategies and whatever, but but I never want to leave money on the table by telling the school that you don't need the money.

SPEAKER_00 17:58

Right.

SPEAKER_01 17:59

But the FAFSA is a lot simpler than than it used to be. So today the form, if you have your ID and your login, it automatically pulls tax return information from the IRS. You have to enter in some of your asset information, but the whole form can be done in about 15 minutes. Like it's quick.

SPEAKER_00 18:16

Wow. That yeah, it seems like it's much improved just over like six years ago.

SPEAKER_01 18:22

Yeah, yeah. I mean, yeah, but the one of the confusing part, I mean, because the form is essentially it it's it's a tax return, right? Like so, but the confusing part about the FAFSA is even though the FAFSA is based off of your tax return, there are some important differences. And so unless you really know this, or you took the time to read the instructions, so that's where it's confusing because you're like, Well, it says this on my tax return. Why does it say something different here? And also I get questions on the assets, like, well, what if you know, what if I have employer stock, but I can't but my employer doesn't let me sell it for 10 years? Do I have to report it? Yes, you have to report. What if I put all my money or all my properties into a trust? Do I still have to report that? Short answer is yes. You know, what if uh I own half of grandma and grandpa's house because they put me on their, you know, the parent, you know, says they put me on their deeds so that when they pass away, it's easier to for estate purposes, do I have to report the value of that? Yes, right? So those are the the types of questions I I tend to get. And those are all the also the types of questions where people are like, yeah, but but Chris, if I if I bury my million dollars in the backyard, do I still have to report that and will that get me a lot more aid? Usually to that, I'll say, um, let me let me know where you live. Tell me when you're not gonna be home, let me know where you live. I'll swing by just check on it for you.

SPEAKER_00 19:47

Oh man.

SPEAKER_01 19:48

And then you won't have to worry about it. That's right, that's right.

SPEAKER_00 19:50

You know, you you mentioned something too. You said like even those higher earners, because I I remember talking to some people, and you know, some people they they would consider like, well, I'm I'm too rich for aid, right? Right. So walk me through again, like you you kind of talked a little bit about why it's still important to fill up the FAFSA, but it really is like a myth, right? That that's you can't be too rich for aid, right?

SPEAKER_01 20:12

Yeah, you actually can't be too rich for aid. And that and that's one of the misconceptions. So people often think about aid in sort of two separate buckets. There's sort of the merit aid, which is based on test scores, grades, whatever, and then there's financial aid or need-based aid, which is based on the FAFSA, or other schools use a much longer form called the CSS profile, which does not connect to the IRS, so you pretty much have to input your entire tax return manually. Much longer form. The the reality is there's really no two buckets of aid, it's really just sort of one big bucket. And so merit aid can have a need component, need aid can have a merit component, and so here's here's actually how it works, right? Again, I mentioned how people will ask me, like, all right, is there like a secret dance or a secret button I press to get like a lot of aid? There there isn't, you know, uh, not even if you do like jumping jacks while you're filling out the form. The best analogy for how aid works, okay, this is actually the closest analogy I could come up with. So if you're familiar with the NFL draft, which is actually as we record this, it's coming up, right? So you know the the players in college, you know, they're uh they're you know, they're evaluated by different teams, and and so if you are a first round draft pick, you get a really big contract, right? Millions of dollars and millions of dollars signing bonus and whatever. And if you're a seventh round draft pick, you get very little. Now take that in context. Even if you're a seventh round draft pick, you still got drafted, right? Not everybody can say that, so that's still a good thing. But the team may not have viewed you, and so so different teams will view different players differently, right? So you might be viewed as a first round draft pick. For one team, but a third round draft pick for another team. Okay. So every team's different. And every team has different needs, right? Like if you already have a quarterback, you don't take a quarterback. Ha, or you don't take one in the early rounds. You might take one later. Alright. So what does this have to do with college in any way, shape, or form? Well, colleges view applicants the same way, right? Based on all sorts of factors. It could be based on your GPA or test scores, but it could be based on what major you can go into. It could be based on whether you're boy or girl, or boy or girl going into a major. It could be based on sort of where you are from in terms of geography. Like, like I'm in I'm in New England, so like some colleges really want kids from New England, other kids don't because they already have plenty or whatever. But the bottom line is this the more a student helps the college meet the college's goals, the more aid the student is likely to get, regardless of whatever the facet says.

SPEAKER_00 23:03

Interesting.

SPEAKER_01 23:04

So I'll I'll I'll give you I'm I don't I don't out anybody. So I I visit a lot of schools and I kind of ask these questions. Yeah. So there's a there's a s there's a STEM school in the Northeast, and it's roughly like 70% male, 30% female. So of course it's known for its STEM majors and does a great job and it's a great school. But they have a phenomenal business school, they have a phenomenal like visual design and like like media production program or stuff. So if you're a boy who wants to go to that school majoring in electrical engineering, they're they're up to their eyeballs in that, right? Like they don't need another one of them, right? But if you're a girl who wants to go there to major in business, well, now they have more incentive, all things equal, to give you more aid to try and get you there because schools are trying to balance out gender ratios and all this other stuff, right? You also see this in the public school sectors, for example, California, Texas, Florida, North Carolina, and Virginia, those five states, by state law, they limit the number of an out-of-state students that they enroll. Okay, because they already have enough in-state students to fill their classes. So not only does that make it harder to get in as an out-of-state student, but if you did get in, you're not gonna get like a dime of aid because they weren't looking for you.

SPEAKER_00 24:28

Right, right. On the other hand, I am learning so much. This is so crazy. Yeah, okay.

SPEAKER_01 24:33

So on the other hand, like New Mexico, Arizona, Alabama, Mississippi, and even in my backyard, Maine, those schools love out-of-state students. So they give you tons of aid because they're trying to attract more students to come in, you know. And so again, those are some private school uh public school examples, but it's also the same on private school. If you help the school meet the school's objectives, whatever they may be.

SPEAKER_00 24:59

I was gonna say, what are some of the other ones? You mentioned like gender type stuff, just out of curiosity, what are a couple other goals of the school may have?

SPEAKER_01 25:09

Yeah, I mean, this is where you hear the story of like the girl engineering major who also happens to play the oboe who gets a huge scholarship to some random school, right? It can be totally random. So it so most of the common ones around major gender, sort of geography. You know, obviously, obviously good grades and good test scores help, right? But but not as much as people think. So, but those are the most common ones. But there are but there can be other things like uh what are some of the other ones? Sometimes it's a combination of all those. Sometimes they're looking for kids who were like in a certain club, uh like like DECA is a kind of a big one. It's a high school marketing club thing.

SPEAKER_00 25:52

Yep.

SPEAKER_01 25:53

Or they're looking for kids who uh have a particular like uh like like for example, like I I knew a school in the Midwest that was starting a powerlifting team and they didn't have have one yet, so they're they were looking for so the so it's almost like the major didn't matter, but if you put down that you like did powerlifting as a hobby, interesting you got in. Like you got in with aid.

SPEAKER_00 26:14

Right, right.

SPEAKER_01 26:16

So you you do hear these things, and so the the point is like in the college process, families and students are all about like me, me, me. Here's how good I am, here, you know, here like here are my grades, here are my extracurriculars, here my what and and yeah, that's important, right? You have to present yourself to the school. But what families for forget about is what does the school actually want, which is which is different than what will they accept, right? Lots of students get accepted, but very few are actually wanted.

SPEAKER_00 26:48

Sure.

SPEAKER_01 26:49

And so back to that NFL example, lots of players in college, right? Lots of football players in college, but only a handful get drafted. Again, so even if you're a seventh round draft pick, you you're still lucky enough to get drafted, right? But of all the players who are drafted, who gets the big money? First round, second round, maybe third round, but that's it, right? So you have half the population or half the players who got drafted, but they don't really get a huge amount of money, right? And then and then you have everybody else.

SPEAKER_00 27:17

Right, right.

SPEAKER_01 27:19

So it's a it's a very apt anal analogy for how colleges work.

SPEAKER_00 27:23

Sure, sure. Wow, that that's just that is amazing. And so when you're filling out, you know, we talked about filling out the FAFSA and and just high level of what the FASFA is, and I remember um it just it just kind of came to me. When you're filling that out based on my income, my assets, I remember one of the things that was very confusing because I was divorced. So I I want to ask you point blank that question. Like, like how do you approach getting aid, filling out that information, or how have you seen other divorced parents kind of come together and and help pay for their their child's schooling? How does that work?

SPEAKER_01 27:59

Yeah, so divorce adds another layer of complication on on a system that is already pretty confusing for most people. So on the FAFSA, the rule used to be the parent so to determine which parent filled out the FAFSA, because the FAFSA is only one parent in a divorce situation, the rule used to be is which parent did the kids live with the majority of the year, right? It was not who had legal or physical custody per the divorce agreement, it was not who made more or less money, who got to claim the kids on their tax return. Like none of that mattered. It only came down to where do the kids put their heads down at night at least 50.1% of the year, right? That was it, right? And so stereotypically, a lot of times that was the mom. And again, stereotypically, the mom tended to be the lower income earner. Again, obviously not in all cases, right? But but in many cases, so it kind of worked out pretty well, right? Like you had lower income, and and there you go. Today that's actually not the case. So today the rule is the parent who fills out the FAFSA is the parent who provides the majority of financial support, which is a very vague term because schools are allowed to interpret that differently. So uh some schools can say, well, just whichever parent makes more money. So, for example, like if if you made more money than your ex ex-spouse, and it didn't matter if your kids didn't live with you, you made more money, you had to be the one filled the fashion, end of the story. But it looked at, for example, who paid who child uh child support. It looked at uh so it really what it boiled down to was who did the kids live with, and could that parent, did that parent earn enough income on their own to support their household without needing child support or alimony from the other parent? So I'll give you kind of two extreme examples. So in one example, you have two parents, let's say they both make similar incomes, kids live with parent two, right? Parent one pays child support to parent two, but again, parent two has income and and whatever, and the kids live with parent two, but parent two's income is enough to maintain their own household even without the child support, then who provides the majority financial support? It would be parent two because the value of the housing also counts as support, right? But in extreme case, let's say parent one, the non-custodial parent, makes huge income, pays child support to parent two, but parent two doesn't really have any of their own income or they work like part-time retail or whatever, right? Make a little bit. But and the kids live with parent two. Well, then who provides the majority of financial support? It would be parent one in that case, because parent two could not really maintain their own household without the child support or alimony from parent one.

SPEAKER_00 30:53

Sure.

SPEAKER_01 30:53

Right? That's so that's kind of how it works. It yeah, it gets very confusing. Now just to throw another lay on top of that, yeah, yeah. There are schools around the country, mostly private schools, but some publics, that use the CSS profile form. And in the case of the CSS profile form, which is in addition to the FAFSA, it doesn't matter if you're divorced or not, both parents have to fill it out. And but each each parent, you can't see the other's information, the school aggregates it. So it doesn't matter sort of who pays who child support or where the kids live, both parents have to fill it out anyway. So there you go.

SPEAKER_00 31:28

Got it. Got it. You know, I just I just started thinking about um when my kids um my kids are they're adults, they're old enough now where they could start having their own kids, but I started thinking about that. Um once once I'm a grandparent and you want to help, how does that how does that come into play? Like if a grandparent wants to pay, is it just purely you gift them money, or how have you seen grandparents help out in that cost of college?

SPEAKER_01 32:00

Yeah, I I get this question a lot, and uh and this could probably lead to the most awkward situations. Like I always say, like, like please invite me to your Thanksgiving dinner or your next family dinner. Because one because one time I had grandparents and they were second marriage, right? Second marriage from both. So each of them had their own their kids from the first marriage, and the kids were grown. But I guess one one set of grown kids were really good financially, like they had their crap together, they had good jobs, made good income, saved, blah, blah, blah. So the that set of grandparents didn't need help, or that set of grandkids didn't need help. Then the other set of kids, I guess, were a bunch of f-ups, right? And you know, couldn't hold a job to save their life and had no money. So these two grandparents want to help that set of grandkids. I'm like, yeah, please invite me to your next family dinner with everybody there. Like, I'm just like, I just gotta see what happens when like that news comes out, right? Whoa. So, so anyway, so I get this question a lot. And so the first thing you have to think about is sort of like, what does that even mean, right? Like, does grandma and grandpa want to set aside money ahead of time, you know, help them save for college or whatever? Or does it mean like they want to pay for help pay for college in the moment? Or does it even mean like maybe leaving a bigger legacy and help paying off student loans? Right? Because all of those are grandparents helping pay for college, but the strategies to achieve those are very different. Um so, for example, like if grandma and grandpa want to open a$529 for the grandkid, they can certainly do that. And the most common question I get is like, well, if I do that, does that hurt the kids' financial aid? Well, so remember, FAFSA financial aid looks at income and assets, and it's income and assets of the student and their immediate family. So it's the student, the student's spouse. So if you're thinking about your 18-year-old, hopefully there's no spouse, the student's own children. Again, let's hope for not, and then the student's parents, right? That's the student's immediate family. So if a grandparent owned the 529, it would not be in that immediate family. So as an asset, it would not count because it's outside the immediate family. Once you take money out of the 529 for schools that only use the FAFSA, it's not income either. So it a grandparent owning a 529, then taking money out to pay for little Johnny or Lil Sally's college doesn't hurt for a FAFSA only school. But for schools that use the CSS and as an asset, it's outside the definition of immediate family. So it does not count as an asset. But when you take money out, even though it's tax-free in the eyes of the IRS, but for the CSS financial aid formula, it is counted as income. It's counted as an untaxed benefit. So now that could hurt the family's chances for aid. So you have to do some stuff with timing and stuff like that. You have to be a lot more careful if it impacts aid. So there's definitely a little bit more planning involved. Same thing if grandma and grandpa want just write a check directly to the school. For FAFS only schools, it doesn't matter, but for CSS schools, it's it's an untaxed benefit. It counts as income. On the flip side, you know, and then uh sort of the other end is like if you know, grandma and grandpa, as an example, could take their money that they were gonna pay for college and, for example, use it in life insurance, right? Now I'm not promoting, I'm not here selling life insurance, but here's the example you could have grandma and grandpa use that money to buy life insurance on themselves, but make the grandkids the beneficiary. So yeah, grandma and grandpa may not die for a while, but they're the amount of their gift is leveraged up, right? Because like a ten thousand dollar year premium is gonna get you a hundred, two hundred, three hundred, whatever death benefit there is, right? So it's gonna be more dollars at the time of death. And then the kids can use that to pay off their student loans, for example. Right. So those all are versions of grandma and grandpa helping pay for college. It just depends on what's important for the family.

SPEAKER_00 36:01

I I love that. I mean, I'd never even thought of again, like there's different ways. You know, I'm trying to think of ways that rather than just leave a big legacy. Ever since I read the book Die With Zero, I'm just I'm I'm trying not to leave a big legacy. I want to be able to enjoy seeing my kids use the money for things. Right. I don't know.

SPEAKER_01 36:19

Yeah, I mean, I I've read that book. I love that book. I it is funny. I have this conversation with my own mother because I'm an only child. And my mother, she was never rich, but you know, she worked, but she was she really saved up. And so she's like, Oh, this will be yours one day or all. And and I and you know, I I appreciate that, right? But but I keep telling her, like, I want you like that as awesome as that would be for me, I want you to spend it and you'd enjoy it, right? Like, if you leave me like a dollar at the end, I'm 100% okay with that.

SPEAKER_00 36:50

Right on. Yeah, 100%. Like, go on that trip, go do those things that you that that you want to do or whatever. Or, you know, go with your parent to like enjoy that together, right? Yeah, totally. Right.

SPEAKER_01 37:03

Now I'll just say I I I do love my mother, but I can only take her in like small doses. So I will so in fact, actually, my mother travels all the time. She she tr she takes huge trips all the time, so she loves and she's able to financially, which is awesome. But I will be, I will see her off at their point. I will like wave. Love you, have a great time. I'll see you when you get back.

SPEAKER_00 37:22

Oh, you're funny. So I I guess one thing, I mean, my head is still kind of spinning, right? There's just there's so many things, so many moving parts. You know, if there's, I'm just trying to think, if there's like one financial aid strategy that you would like to share with our listeners, whether they're parents and grandparents, what's that one good piece of advice you'd want to give them to help prepare paying for college? Is there is there kind of a single, like, if there's one strategy, this would be the one. Start here.

SPEAKER_01 37:55

I think. I I I'll give you two. The first one is you know, I work with families, married, divorced, doesn't really matter. You know, if you were to ask families like, hey, do you want to help save and pay for college? You know, the families I work with, obviously if they're coming to me, the answer to that is yes, right? Not not everybody will say yes, but but the families I work with say yes. But then I'll ask them, what do you actually mean by that? And I've had and and more often than not, one parent will say, like, oh, you know, when I was in college, you know, when I went to college, my parents let me go to a private school and they didn't want me to take on debt, so they paid for 100% of private school. Well, today that that could be like$95,000. Right. The other spouse will say, like, oh no, when I went to college, my parents wanted me to have a stake in the game, so I had to work for it, so they pay for half of a public school, which in most states is some somewhere between say ten to fifteen thousand dollars. Okay, it's about half of what the sticker is. So my point is like, okay, so I have a married couple, they both want to save and pay for college, but one has$95,000 a year in mind, the other has like$15,000 a year in mind. We have to get alignment on that first.

SPEAKER_00 39:04

Totally, yeah.

SPEAKER_01 39:05

Right? Like, like those are two totally different targets. And they're not right or wrong. I don't make that judgment, right? Just but like we we like sort of need to figure out like what you actually got what you actually need to mean. Because if you did like an online calculating, you're like, all right, my kid was just born, so 18 years from now, I'm gonna need$90,000 a year times four years, you know, and the calculator works backwards. You need to save X dollars per month today. Well, like, well, you know, that's gonna be a much different number than if you put in I'm gonna need 15 grand a year 18 years from now, right? So so we gotta get on that. That's number one. The second thing is I'm a much bigger fan of financial flexibility versus not, I guess I'll say. So, you know, one of the most popular ways to save for college is a f 29. I have no issues with that, you know, and and kind of like anything that you know if you use it properly, it can be really good. And there's good versions and not so good versions. I I don't I'm not as big of a fan of those, not because I don't want people saving for college. I find that there are other types of accounts that are that offer more flexibility, right? Uh like Roth IRAs, for example, because oftentimes what I find is families, the money that families have often have to serve like double or triple duty. Like, like nobody has a money tree. So people are trying to figure out like how to balance between paying for college and saving for retirement or whatever, or a vacation or a vacation home. And so a a 529 is a great way to save for college, excuse me, but nothing else, right? And now there's rules like you can take some of the money and roll into Roth IR. Yeah, I get that. But but generally speaking, like a 529 is great for saving for college for nothing else. You know, a 401k is a great way to save for retirement, but nothing else, right? And and so on and so forth. And so I find with most families, excuse me, it's very difficult to fully fund everything, you know. So you have to save in a way that allows for this use and this use and this use and whatever. And I find that to be more helpful than I have money in 520, I have money in an IRA, I have money in a 401k, and whatever. Now, if people have that, there's nothing wrong with it. It just I I personally like more flexibility than than less.

SPEAKER_00 41:23

Right on, right on. That's awesome. Well, uh Jack, I want to thank you so much for your time today. I've learned so much. I definitely want to know, let people know where they can get in touch with you, where they can find more about you. What else would you want to share with uh with the audience today?

SPEAKER_01 41:38

Yeah, I mean, I so I have my own podcast called Smart College Buyer. I'm on all the major platforms. All right, so uh and and every episode, my podcast is exclusively about college and college-related issues. So if you want to know more about how student loans work, how financial aid works, what colleges actually look at. And and like I said, I interview other people, like I, you know, uh like I did the one with sort of the career coaching, career counseling. Please find me on all the major platforms, Smart College Buyer. If people want to have uh more of an in-depth chat or they want to see a little bit more, they can also follow me on LinkedIn, Facebook, Instagram, and Blue Sky, Jack Wang. So again, Smart College Buyer, you should be able to look me right up. So uh please, please follow me, please subscribe. And if you have questions, please feel free to reach out.

SPEAKER_00 42:26

Awesome. Thanks so much, Jack. I really appreciate it. Thank you so much for your time, and thank you everyone for listening today, for following along. Please like, subscribe, go share with your friends and family, or anyone else that you think would get value out of this podcast. And we'll see you next time on the Extreme Personal Finance Show. See ya.