College Planning Without the Sticker Shock

The cost of college rises faster than almost anything else in family budgets. The sticker price of a four-year private university now routinely exceeds the median price of a home. Public universities have followed the same curve, just at a smaller scale. For families with young children — and grandparents who want to help — the question of “how on earth do we pay for this?” is one of the most common reasons people first reach out to a financial planner.

With careful planning, however, the goal of helping a child or grandchild graduate without crushing debt is entirely achievable. And — critically — it doesn’t have to come at the expense of your own retirement. This page walks through how we approach college planning, the strategies we use, and the trade-offs that matter.

Start With the Goal, Not the Account

Most families ask “Should I open a 529?” before they ask “What are we actually trying to accomplish?” The two questions deserve different conversations. A 529 is a powerful tool, but it’s a tool — not a plan. The plan starts with what kind of education you want to support, how much of the cost you intend to cover, and how that goal fits alongside the other financial priorities of the family.

We start by working through the family’s actual college goal: full funding, partial funding (with the student contributing or borrowing the rest), a particular kind of school, a particular geography. Once the goal is clear, the right vehicles and savings rate become much easier to figure out.

529 Plans: The Right Tool, Used Correctly

A 529 plan is, for most families, the most tax-efficient way to save for education. Contributions grow tax-free, withdrawals for qualified education expenses are tax-free, and many states offer a state income tax deduction or credit for contributions. Recent law changes have also expanded 529 flexibility — for example, allowing up to $35,000 of unused 529 funds to be rolled to a Roth IRA in the beneficiary’s name (subject to conditions).

The details, however, matter:

• Which state’s plan? You’re not limited to your own state’s 529 — but you may forgo a state tax benefit by going elsewhere. The right answer depends on your state’s plan quality, fees, and tax treatment.
• Investment selection. Most 529s offer age-based portfolios that automatically derisk as the beneficiary approaches college age. These are reasonable defaults, but not always optimal. We help select the allocation that fits your timeline and risk capacity.
• Account ownership. Who owns the 529 affects financial aid treatment, control of the assets, and tax reporting. Parent-owned, grandparent-owned, and UTMA-funded 529s all behave differently.
• What if it isn’t used? Recent law improvements have made 529 funds significantly more flexible — they can be transferred to other family members, used for K-12 tuition (within limits), used for student loan repayment (within limits), or rolled to a Roth IRA in the beneficiary’s name (subject to conditions).

Grandparent Gifting Without Aid Penalties

Grandparents who want to help with college tuition face a unique planning question, because the way the help is structured affects everything from financial aid eligibility to the grandparent’s own estate plan. Several strategies coordinate well:

• Grandparent-owned 529 plans. Recent FAFSA changes have made grandparent-owned 529 distributions far more friendly to financial aid than they used to be — they no longer count as student income. For many grandparents, the grandparent-owned 529 is now the cleanest vehicle.
• Direct tuition payments to the school. Tuition paid directly to the educational institution is exempt from gift tax limits and doesn’t count against the annual exclusion. This is one of the few unlimited gifts in the tax code, and it works wonderfully for grandparents who want to help without affecting their own gifting strategy.
• Annual exclusion gifts. Standard cash gifts (within the annual exclusion limit) directly to the grandchild or into a UTMA can help with college costs, though the financial aid treatment differs from a 529.
• “Superfunding” a 529. Federal rules allow a contributor to make five years’ worth of annual exclusion gifts into a 529 in a single year — a powerful way for grandparents to make a large, tax-efficient gift while still alive.

Understanding Financial Aid

Financial aid is its own world, with its own logic that often surprises families who haven’t navigated it before. The two main forms — FAFSA (federal) and the CSS Profile (many private institutions) — treat family assets and income differently, and the strategies that optimize one don’t always optimize the other.

A few principles hold true broadly:

• Income matters more than assets in most aid calculations. A family that strategically times Roth conversions, capital gains, or business income in the years leading up to college can meaningfully affect aid eligibility.
• Parental assets are assessed at a much lower rate than student assets. Where to hold college savings matters.
• Retirement accounts are generally excluded from aid calculations. This is one of many reasons not to sacrifice retirement saving for college saving.
• The base year for FAFSA is two years before the school year begins. Planning ahead matters.

We help families understand the aid landscape, position assets and income thoughtfully, and avoid the common mistakes that needlessly reduce aid eligibility.

The Cardinal Rule: Don’t Sacrifice Retirement for College

This is the most important point on the page, and the one most often violated by well-meaning parents and grandparents. Kids can borrow for school. Retirees cannot borrow for retirement. Tapping retirement accounts to fund education — or skipping retirement contributions to free up cash for college — frequently feels generous in the moment and proves enormously costly later.

If the math forces a choice, retirement comes first. There are loan options for education, scholarships, work-study, in-state schools, community college transfer paths, and a hundred other adjustments families can make. There is no equivalent set of options if you reach 75 and the retirement money isn’t there.

Our college planning work always begins with confirming that the family’s retirement plan is on track first. From there, we figure out how much can responsibly be directed to education.

Funding Strategy During the College Years

The planning doesn’t end when the first tuition bill arrives. The order of withdrawals from various accounts — 529, taxable, Roth, savings — affects taxes, financial aid for subsequent years, and the longevity of the savings. We coordinate the withdrawals to minimize both tax and aid impact.

We also help families think through the post-college handoff: what happens to leftover 529 funds, when (and if) to refinance any student loans, how to support a young adult financially in the years following graduation, and how the family’s broader financial plan resets after the college chapter closes.

A Team Approach, Across Generations

Many of the college conversations we have involve parents, grandparents, and sometimes the student. We’re comfortable in that room. The result is a plan that respects everyone’s role, protects everyone’s interests, and gives the next generation a real running start without compromising the financial security of the generations supporting them.

Beyond College: Trade Schools, Gap Years, and Alternative Paths

Not every family is planning for a traditional four-year college. The financial planning conversation broadens easily to include trade and vocational schools (which 529 plans also cover), military service academies and ROTC scholarship paths, gap years, and the increasingly popular community-college-to-state-university transfer pattern that can dramatically reduce total cost.

We work with families who want to keep options open, who have children with non-traditional plans, and who recognize that “support the next generation’s education” is a broader goal than “fund four years of private college tuition.” The financial vehicles are flexible enough to support most paths; the planning conversation simply needs to acknowledge them up front.

The Conversation Most Families Don’t Have

Beyond the math, college planning involves a set of family conversations that many parents and grandparents avoid until they can’t. How much will the family contribute? What is the student expected to contribute, in time or in money? What schools are on the realistic list? What happens if the first year doesn’t work out? What is the family’s view on student debt — willingness, limits, and conditions?

These conversations are not financial conversations exactly, but the financial plan is shaped by their answers. We are comfortable in this conversation and can serve as a calming third party when families want one.

Frequently Asked Questions

When should we start saving for college?

As early as possible, because compounding does most of the work. A modest monthly contribution starting at birth produces dramatically more than a much larger contribution starting in high school. That said, it is never too late to start — even families a few years from the first tuition bill benefit from a thoughtful funding strategy.

What is a 529 plan?

A 529 is a state-sponsored, tax-advantaged savings plan for education expenses. Contributions grow tax-free, qualified withdrawals are tax-free, and many states offer a tax deduction or credit for contributions. Recent law changes have also added flexibility, including rollovers to a Roth IRA in the beneficiary’s name under certain conditions.

Should the parent or grandparent own the 529?

It depends on the family situation. Recent FAFSA changes have made grandparent-owned 529s significantly more friendly to financial aid than they used to be, which has shifted the answer for many families. We model the specifics for your situation rather than relying on one-size-fits-all rules.

What if my child does not go to college?

529 funds have become significantly more flexible. They can be transferred to other family members (siblings, cousins, even yourself), used for K-12 tuition within limits, used for vocational and trade schools, applied to student loan repayment within limits, or rolled to a Roth IRA in the beneficiary’s name under certain conditions. Unqualified withdrawals are subject to tax and penalty on the earnings, but the principal can always be recovered.

Will saving in a 529 hurt my child’s financial aid?

Parental-owned 529 assets are assessed at a lower rate (currently 5.64%) under FAFSA than non-retirement assets in the parent’s name. Recent rule changes have also improved the treatment of grandparent-owned 529s. For most families, the financial aid impact of a 529 is small compared to the tax-free growth it provides.

How much will college actually cost when my child gets there?

That depends on the type of school, the family’s aid eligibility, and education inflation between now and then. We model realistic ranges for the kinds of schools you might consider, factor in projected aid, and back into a savings strategy that targets the goal without compromising other priorities.

Can I help my grandchildren without affecting their aid?

Yes, in several ways. Grandparent-owned 529s, direct tuition payments to the school, and annual exclusion gifts all have different financial aid treatment. We help structure the help so it actually helps — without quietly reducing the aid the family receives.

Ready to Plan for the Next Generation?

Whether you have young children, college-bound teenagers, or grandchildren you’d like to support, we can help you build a plan that funds education responsibly without compromising your other goals. Request a complimentary consultation and we’ll walk through what’s possible for your family.