Stretch your education dollars with knowledge
Jul 11, 2016 10:58AM ● Published by Neighbors Magazines
by Steve Ciaccio
If you’re planning to fund someone’s college education, educating yourself in tuition assistance programs has the potential to give you an advantage in terms of having enough money available when needed, and in positioning for grants and scholarships.
Although many grants, loans, and scholarships are based on the student’s academic and personal accomplishments, many others are based on financial need. Financial need is determined by the amount and types of your income, the amount and structure of your wealth, family size, number of family members in college, and many other factors.
One of the factors that many people try to manage for this purpose is their wealth. Some types of wealth can have a negative impact on the amount of assistance that you receive while others do not have an impact. For example, money in your bank account or cash on hand can have a negative impact with some programs, whereas money in certain types of retirement accounts and certain types of insurance policies sometimes might not have a negative impact. Also, the equity in your home might not impact the amount of assistance that you receive but the amount of equity in a rental property might have a negative impact with some assistance programs.
I have seen instances where other advisors have recommend placing their clients’ cash, bank account balances, and other types of wealth into a life insurance policy. While this strategy might help in some cases, this option can be very costly in terms of the commissions and other expenses that will come out of your insurance premium payments. It can also create a lack of liquidity and could cause you to pay for life insurance that you might not need. An alternative to consider might be to use that money to pay off your home mortgage so that the equity is in your primary residence is increased while your cash balance is reduced. With your mortgage balance paid down, you might consider then having a home equity line of credit, if you qualify, so that you can access your equity when needed. This approach might have the potential to avoid insurance expenses and provide available liquid cash when you need it.
There are many assistance programs and many rules that affect the amount of financial assistance that you might receive for education funding. There are many strategies that can help one aspect of education funding while hurting another aspect of your financial situation. Before making any financial decisions, you should consider all aspects of your situation and make educated, informed, and well thought out decisions. You should always consult with a qualified CERTIFIED FINANCIAL PLANNER™ professional and a Certified Public Accountant as well.
Bear in mind that anytime someone in an advisory role provides solutions that involve a fee, commission, or any type of potential compensation, that advisor might have conflicting interests. It is your money. Protect it so you can have it available for your needs.
All the best to you!
Ciaccio, MBA, CPA, CFP®
Ciaccio Wealth Management, Ltd.
232 South Batavia Avenue, Suite B
Batavia, IL 60510
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC