Late-stage college planning takes place when your kids are right on the verge of entering college. This can be quite challenging for mid-to-high income families. Because they don’t qualify for traditional needs-based financial aid, most or all of the funding is expected to be out-of-pocket. And with few years left to save and grow your savings, finding a way to cover the tens of thousands of dollars in yearly tuition can seem impossible. If you find yourself in this situation, don’t give up! You may be surprised to discover how much help is still available.

How can I get started?

  • Start saving. It’s never too late to start. Anything you save now will only help. On the investment side, watch for high fees. Some kinds of investments, such as A-share mutual funds, charge a high upfront fee. These funds are designed to recoup the initial costs over time, which you may not have if your student is just a few years from college.
  • Keep up grades and SAT scores. Many schools offer merit aid based on a student’s grades and SAT/ACT scores. Strong grades give your student more options and flexibility in picking their dream school. And the value of good study habits doesn’t end with admissions. A high GPA in college can help your student qualify for and maintain scholarships.
  • Start planning. When it comes to finances, knowledge is power. Develop an education plan to determine how much you can afford. This will guide you when deciding which colleges to apply for.
  • Don’t put all your eggs in one basket. Never rely on a single strategy. Layer multiple savings strategies together to score the biggest discount.

What strategies are available?

  • Start shopping. Investigate all of your options. Look for colleges offering aid targeted for your student’s profile – talents, majors, other programs, leadership, etc. And stay flexible. For example, a college traditionally focusing on liberal arts may be looking to build a newly created computer engineering program and so offer attractive aid to students with that major.
  • Needs based aid. Even high-income families may still qualify for needs-based aid. This is especially true if you have multiple students in your household attending college at once. In such cases, your Expected Family Contribution (or the amount the government expects a family to contribute toward a student’s education) is divided between each child in college.
  • Tax planning. There are many tax breaks available for college students and their families:
    • American Opportunity Tax Credit (AOTC). This credit is available for half and full time students during their first 4 years of undergraduate studies. The AOTC provides up to $2,500 per student. If this wipes out your tax bill, up to $1,000 may be refundable. This credit is available for incomes below $90,000 ($180,000 for married couples).
    • Lifetime Learning Credit (LLC). Undergraduate and graduate students alike qualify for this credit for an unlimited number of years. It provides up to $2,000 per family. Unlike the AOTC, the LLC isn’t refundable. This credit is available for incomes below $66,000 ($132,000 for married couples).
    • Elbow grease. Encourage your students to work, both now and during college. Not only will the extra income offset tuition costs while they gain valuable on-the-job experience, but it can also help them qualify for tax credits if the parents’ income exceeds the limits.
  • Think outside the box. Your student may be able to reduce costs with non-traditional routes. Community college can be a viable option for the first years of undergraduate studies.  Many colleges also accept transfer credits from AP classes or standardized tests such as DSST (formerly DANTES Subject Standardized Tests) and CLEP (College Level Examination Program).
  • Attention business owners. One option for closely-held family businesses is a section 127 employer-sponsored tuition assistance program. This allows you to pay education costs through your business up to $5,250 per year. To qualify, your children must be employed by your business, 21 or older, own no more than 5% of company stock, and not dependents for tax purposes.
  • Know when to call for help. The college planning process doesn’t need to be done alone. Admissions counselors can provide invaluable guidance in coordinating outside credits and designing a course schedule around your needs. For additional help and planning for your personal situation, professional college planners such as Fox College Funding LLC in San Diego can provide the specialized expertise you need.

What should I watch out for?

Never sacrifice your retirement for college. To cover tuition payments, parents may shackle themselves with PLUS loans and home equity debt or rob their 401(k). This jeopardizes their retirement, potentially setting them back years or compromising on their desired standard of living. Take care of yourself and your future first before helping your kids.

Beware of alternative private loan programs. These loans may have high variable interest rates, credit-based lending terms (requiring a parent or other relative to co-sign), or unfriendly repayment terms that entangle a family in a debt nightmare. Make sure you understand the fine print before taking out a private loan.

Finally, don’t forget to have fun. College is an exciting adventure where students discover their passions, begin building their lives as independent adults, and form close friendships that may last for a lifetime. Use college planning as a tool for realizing your student’s dreams and setting them on the path for success.


Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.