Speaker 1 00:00:08 What's up, everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. Join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
[email protected] let's. Jump into today's episode.
Speaker 2 00:00:26 Hey everyone, have you looked at college costs lately, if you haven't definitely check that out. If you have, you know, how much they've gone up. It's been surprisingly, it's been 20 years since I started undergraduate. And so I took a look at, uh, you know, my college costs and they're three times higher than they were with. And I think for a lot of schools it's even substantially higher than that increases. So costs have been going up on top of it all. Uh, the actual price that you pay has become difficult to understand. It's very, there's not a lot of transparency in what people actually pay and it's progressively, it's become progressively more expensive for those that have more financial resources, right. Uh, which is probably a lot of you listen. So I think it's safe to say that if you have children or plan to that, you should be thinking about how this is going to play out in your situation ideally sooner than later.
Speaker 2 00:01:27 So today we're going to be talking about how this all works and how to start planning ahead, what it might look like for your situation and to talk through it. I brought on my buddy, Joe messenger. Joe definitely knows college planning. He's a baller in this area. He's been, um, very involved in, um, helping people work through this particular scenario for years. Uh, he's uh, he's a fellow certified financial planner and the founder of capstone wealth partners. He helped build out their college planning approach. He's also the founder of college aid pro, which is a technology and service solution it's designed to help advisors provide clients with better college planning, advice and services. And so he's just in general, overall, a very knowledgeable guy when, especially when it comes to college planning. So I think you'll definitely benefit from hearing some of the ideas he has and some of the conversations. So, um, hope you enjoy today's conversation. And, uh, we'll jump into that now, Joe, what's up, man.
Speaker 3 00:02:35 Hey, how's it going, Daniel? It's going
Speaker 2 00:02:37 Well. I'm glad to have you on, uh, looking forward to talking some college planning with you for those of you listening, Joe is I would consider probably the most knowledgeable person that I know in regards to college planning. So I know it should be a fun conversation because you very much know your stuff in this area. Also, I'm excited to talk about it cause it's such a big beast of an area. It seems like it's become a bigger, bigger thing. Um, I was, I was curious about this, uh, as far as like cost-wise, so I went to university of Florida and I went and I started in 2001. So I mean, that's been quite a while, but um, it's not that long. So back then I was looking up the rates for it. So the tuition in 2001 for USF was 2200 a year, which sounded about kind of right with what I had remembered.
Speaker 2 00:03:27 And so today it's a $6,400. So they have very, by the way, they have very, very low in-state tuition levels. Like university Florida in particular has very low levels. So that's, I would say probably below average, but, um, I mean we're still talking like a three X increase in tuition costs, so it it's, it's been kind of on a crazy increase cost-wise right. I mean like, has that been kind of the general consensus, like over the past 20 years or is that, how has college costs changed over the past 20 years? Or has it just been me?
Speaker 3 00:03:59 No, it's not just you. I mean, college costs, they really soared in the nineties and then in the, in the 20 odd. So, uh, you know, up through 2010, I mean, they were, there were years where we were clipping away at, you know, seven, eight, 9% increases every single.
Speaker 2 00:04:14 Yeah. And that's when inflation was not that hot. Right, right.
Speaker 3 00:04:18 You're right. I mean, these, these, these colleges continue to raise prices because nobody, nobody pushed back. I mean, it's like, you know, it's a supply and demand thing. And people say that all the time, I started doing this planning back in 2008 and nine, and then people were saying, oh, these costs are out of control and blah, blah, blah. But I'm like, yeah, well take a look. I mean, you know, like, like you, I went to Penn state and I was an in-state kid. The all-in cost was 10 grand when I graduated in 2000.
Speaker 2 00:04:44 Yeah. That's tuition room and work and everything
Speaker 3 00:04:46 That that's all in. So, you know, as, so put that in perspective, like when you go to school, you could get a little bit of scholarship, maybe pays for a third. You could work while you're there pay two, 300 bucks a month and have maybe a little student loan for like maybe 10,000.
Speaker 2 00:05:00 Yup. That's exactly what I did.
Speaker 3 00:05:03 And it was doable. Yeah. Yeah. And it was doable and it's not, you know, the student loan debt is not, you know, you know, it's a hundred, a couple hundred bucks a month. You can handle it. But that same student today at one of our state schools, they're, they're all in cost, probably 25 to 30,000. So, and they can't make any more than, you know, those few hundred bucks a month to pay for it. So the pay as you go has not moved. So therefore we've just, uh, the student loan crisis has gotten out of control. I was
Speaker 2 00:05:28 Looking at a report. It was from, um, who was it from college board. Anyway, they, they were saying that, uh, the inflation, their data was showing that the inflation, the growth rate of college costs was really high, but over the past five years or so, it's gone down quite a bit to where it's almost, or it's a lot closer to inflation. Like I think they said in 2019, it was like 0.5% above inflation. Has that been the same trend you've seen?
Speaker 3 00:05:55 Yeah. It's been a, there has been a trend in the fact that they've kind of leveled off, but they're still raising tuition too. Like at the state schools, we've seen them really come down because they're being held accountable that the two to 3% kind of like inflation cost of living. Um, so that's when things happen, but the privates are still going up four and 5%. A lot of them, especially the high end ones. So I mean, it is, it's better than eight, but when you talk about, you know, our high end privates, many of them are over $80,000 a year. Tuition is 60,000. So even raising it by 5%, that's $3,000 more per year. So the numbers, you know, so, so yes, they've leveled, but that 3% is a much more meaningful number, if that makes sense. Right.
Speaker 2 00:06:38 It's it's um, I mean, I guess part of it is, uh, you know, or really all of it is supply and demand. I mean kind of what drives, especially private schools, they're just pricing it based on what they can collect. There's
Speaker 3 00:06:51 A crazy, there's a crazy part of it because people are like, you know, they continue to go up and they kind of got into this, like, you know, well, if they're 72,000, we better be 73. And if they're 73, we better be 74. Just this idea of like the value acquainted to having a higher price. It's just crazy thing. Like there's no, but the problem is there's no price transparency in the whole process because very,
Speaker 2 00:07:13 It can explain that for us. So,
Speaker 3 00:07:15 I mean, for example, the most recent study that came out said that private college university across the country are discounting tuition over 54%. So that $60,000 of tuition, the average university is discounting that 50 over 50%.
Speaker 2 00:07:30 What does discount mean? I mean, I know what it means, but like what do they base that on? So
Speaker 3 00:07:36 They're either going to do it in, in, in, in the form of need-based financial aid, which you have to qualify based on finances, or they're going to do it based on merit or a combination of the two, so scholarships for your academics. So that, that to me is probably the biggest challenge as a consumer, going into this meat grinder of figuring out what college is going to cost is it's getting down to what's it going to cost my family to go to this school because it's different for everybody, every, every student going is and stuff.
Speaker 2 00:08:05 Yeah. It sounds kind of like, it sounds a little bit like a medical billing or something. I mean, it's just difficult to understand what your true price is going to be, because it depends on your, like what procedure and everything like that. But yeah, and
Speaker 3 00:08:17 I think that's a really good analogy, right? Cause if you're a doctor and somebody says, well, how much is that procedure going to cost? You, you're sitting there going, I have no idea because I don't know your insurance and all these other factors that go into that ultimate net cost of that procedure. So I think that's a really good proxy with college. Cause it is expensive, but it depends on where, what are you going to get a discount for? Um, so that's a really good analogy. I didn't think of until you said that.
Speaker 2 00:08:42 So there's this like sticker price and then there's like the net or true price, I guess is the way it works. Are there types of colleges where you always pay the sticker price? So
Speaker 3 00:08:54 The thing to understand is when you go into financial aid, like, so if you've got a you're looking and you've got a junior senior in high school, you're looking at school, side-by-side, there's really three key components. Number one, they're going to look at your family's finances. That's going to determine if you're eligible for need based financial aid. Number two, they're going to look at your students' academics. That's going to determine if they'll qualify for merit scholarships. So those are the two big drivers. The thing that consumer can not change though, is the business model of the school. So I'll give you a concrete example. If you look at, uh, uh, like all the Ivy league schools, what they have said is it doesn't matter how smart you are, how good your act is are we do not have scholarships for merit. So let that sink in about top some about our top 50 schools. These include schools like USC and Northwestern and Stanford and Georgetown and Yale and Princeton. So all these top schools, we all know the name brand. The reality is if you're a high income person that does not qualify for need-based aid, you will pay full price. It's nothing to do with you or your student. It's just about the business model of the school.
Speaker 2 00:09:59 You could have children. The average listener on this podcast is going to be paying full price at some of those top schools at some of those stops.
Speaker 3 00:10:08 Yeah. So, so those top schools, because again, it just, but if, and, and the thing is, I would say if you want to shop smart, just think of casting the net a little bit wider to say, if you're bright enough to get into those schools, there are absolutely schools that would pay to have you go there to their school. You know, cause of what they're trying to do is raise their profile at their school and they've got awesome merit scholarships. Um, so, you know, these are the kinds of conversations we have all the time. If you look at, you know, casting the net a little wider, right?
Speaker 2 00:10:38 I I've heard this, people have this stance quite, uh, quite often. And I kind of have a little bit of a flavor of it myself. So it's like, you know, um, I went to school and I mentioned before I went to university of Florida and my parents were like, you're on your own. You you're gonna have to take out loans or whatever to get taken care of it. And so I got in, I guess the good thing for me was my parents were broke so financially and we had a lot of kids. So it was like home run for financial aid. Uh, so I got tons of aid and then the difference, I took out some loans to cover the difference. Um, and so I can kind of look at that as I get older and be like, oh, you know, the timid temptation, or I guess the tendency for people to be like, you know, that's why I became the person I am.
Speaker 2 00:11:27 And you know, it's good for you to go through the same thing I went through because that's why I'm so good. I mean, that's just kinda how people are, but so I'm thinking, you know, maybe I should, uh, you know, maybe have my kids take care of it, take care of it themselves and um, you know, take out the loans or whatever. And, um, but I guess the I've heard that come up a lot of times, um, with physicians, they're just, and that's, uh, I think kind of, uh, this, the concept sense, cause you can kind of learn through some of those challenges and take care of things. Be it builds financial responsibility and whatnot, but the challenge there and the big kind of, I guess, hurdle with high income is that you lose all that aid and on top of it costs have just skyrocketed. So can that even happen? Like, is it possible if I'm a high-income physician and I am, I agree with that philosophy, like I did it myself, so I'm going to have my children do it themselves completely, but I also on top of it make a really high income. What does that play out?
Speaker 3 00:12:31 Yeah. Cause that, that's the challenge because you can say those things, but the reality is the system's going to tell you what they think you can afford and it's called your expected family contribution. So if you think about that, they're going to look at your finances to determine what that student can afford. So, you know, and likely you're not going to qualify for need based financial aid. So having that conversation of, Hey, look, you're on your own for college and you're going well, look like your income is driving me out of getting any money for college. So it is this delicate blend. So, you know, I, I think it's being a good steward of your resources to say like, let's, let's understand what is our college funding philosophy, right? The best way to pay for college is to save for college. So if you can start young and save, I know most people listening probably have significant student loans with this idea of can we begin to save, do it in a tax efficient way? Um, as soon as we have kids, um, yeah, I think that's part of it. Cause you got to just like to your point, understanding like your finances, the fact that you do well, that's going to directly impact your students' ability to get any financial aid. So, but working hard to get great grades and good, good academics to get merit scholarship, and then understanding there are schools that were based on merit scholarship. Um, but you, like I said, you got to look at schools that, that give money for merit, not just for need.
Speaker 2 00:13:51 Yeah. So like, it sounds like you're kind of advocating that whole, like, let's take a look at this. Let's take a closer look at the school, uh, in there, how it's gonna the true costs, going back to the sticker price versus the actual cost based on situation and what, but so let's say I have, my, my child is like average. Like they're just kind of, you know, average academically and um, I haven't really saved for their college and it's coming up soon and I had gone under this impression that I'm going to have them take care of it themselves. Cause that's the way I did it. And so I guess I'm curious like logistically or financially, um, how does that like literally play out? Like if I'm talking, say average in state's tuition room and board is 25 grand a year or something like that, can the child even get the loans? I don't, I can. Right. And so what happens then? Yes.
Speaker 3 00:14:42 So I'd say number one, like the process that I run is college. Pre-approval like, I think it's important to understand like what is the budget for school? It maybe it's assets, but if it's not, can you cashflow some, can you help them through school that way? You know, if it's four or 500 bucks a month, doesn't sound like much, but if it's $500 a month, you know, that's close to 25,000 over four years. Um, and that's probably just what you're already paying to support them. You know, that's kind of, you know, to your point, that's what my folks did for me. They gave me three, 400 bucks a month, you know, they'd help me out when they could, but you know, so that kind of idea is important. And then, and also understand like the, the components is helping your students understand, Hey look, here's what we can contribute.
Speaker 3 00:15:23 Here's what we expect you to contribute. Because if you work during school, that's less, you have to take out student loans. So be that in work study or waiting tables or whatever that be applying. Some of that as you go, is going to reduce your student loans directly. And then kind of that third component is, is grandparents. A lot of times, you know, grandparents have money, but, um, I meet with, you know, 45 and 50 year old people all the time. And they say, I say, what about grandparent money? And they said, well, I don't know exactly what it is or where it is. I'm like, well, we're going to get a bill for 25 to $80,000 for the next four years. We need to figure out how they're gonna, if they're gonna help pay for it. So, so that process, but those are really the three, three things of our money.
Speaker 3 00:16:04 We want to use the school's money first and then the federal money obviously, but the school's money. So figure out where can we find a reasonable school to may give us some discounts and then just really put together a budget because there are limitations. I mean, but the one thing is the federal direct student loan. Um, that's something that every student will qualify for. It doesn't matter if you make $10 million a year, as long as you apply for the federal aid, through the FAFSA free application for federal student aid, you qualify the student, the student, and it's all in the student's name. There's no co-signer required, but above that 27,000
Speaker 2 00:16:39 Thousand a year, you can get, do you know the CA cap on those? Yeah. So
Speaker 3 00:16:44 It's actually stair-step so, and it's use it or lose it. And that's an important thing. You know, if there's people listening that have a student that maybe is junior senior, what I mean by use it or lose it as it's 5,500 for your freshman year 6,500 for your sophomore 7,500 for your junior 7,500 for your senior. So the temptation sometimes is to use like all your 5 29 money in year one, and then just take out other loans in the latter years where the better strategy may be take out those student loans in the student's name, you know, right now they're, you know, they hover around a 3% interest rate and it's a fixed rate. It's a very good loan. Um, so, you know, but understand it's use it or lose it. So maybe, you know, if it's part of the planning you need loans, use that federal direct student loan first.
Speaker 2 00:17:28 So there is a way to kind of partially still go this route of like, I want my kids to learn by taking care of it themselves. So they're going to get student loans, but that those numbers, there's very few colleges that, that will cover the full cost cost of at that level. So odds are the, either the child is going to have to find a very low budget, uh, school, or, uh, they're gonna have to earn income or the parents are gonna have to provide for it either in the form of like Joe's advocating, ideally you save ahead of time for it, you know, in a college savings account. But, um, if not, you're going to have some, uh, you know, parents could get out student loans themselves, right?
Speaker 3 00:18:09 Yeah. Well, I think maybe a helpful way kind of a rule of thumb. Like how are normal families paying for college? They average 5 29 balance is right around $25,000. And that's great if you've got that or more for per student, but that only covers part of it. So if you think of it in terms of, if you can save for a third pay for a third while they're there and take out a third and loans, you're in pretty decent shape, it's kind of a good rule of thumb
Speaker 2 00:18:34 And it's a much lower hurdle. It's a baby step, I guess. So I think a lot of people, so I showed them, you know, as a financial planner, I'm kind of showing people, you know, they just have their first child and I'm like, you know, here's what it's going to cost. You know, what kind of school do you envision your newborn going through? They're like, I have no idea. And it's like, okay, well let's pick a school and, you know, kinda, kind of come up with an average cost. So we show them the cost. It's like, okay, a thousand dollars a month, you need to be saving for college or like what you're crazy. Um, but I like that approach. It's kind of like a, let's take a small step and maybe do a little bit, a tiny bit into a five to nine. So five to nine is like the education, uh, tax, uh, efficient place to put money to save ahead of time for education. Um, it's kind
Speaker 3 00:19:17 Of like your 401k for college as I call it, you know, it's, uh, it's basically, it functions a lot like a Roth IRA, but yeah, it's, it's, it's your, it's your savings plan with tax benefits for college. And that's what I would advocate for. So
Speaker 2 00:19:29 We kind of implied that most physicians would not be getting much need-based funds from schools, but I just wanted to clarify that on your end is that I know it's a little bit more complicated, but is that a pretty decent, uh, you know, assumption is that most, the average physician let's say makes two 50 a year or something like that. Um, is it extremely low likelihood that that sort of income level is going to qualify for any financial aid these days?
Speaker 3 00:19:56 Not necessarily. So a couple of rules of thumb, the formulas are going to want 20 to 25% area income. So, you know, they're gonna want, you know, on that two 50, they're going to say we want around 50,000 to 60,000 of that towards the cost of college next year. So it used to be, I would say, yeah, two 50 and up, like, you're not going to get any financial aid, but now we've got schools that cost 80. So if a school costs 80 and they think you can pay 60, you're going to qualify for $20,000 of need-based aid. So it's, it's not a, uh, it's not a one size fits all.
Speaker 2 00:20:31 You have six kids, you can kind of, it all goes under that total amount available. Right, right.
Speaker 3 00:20:38 So right now it's an expected family contribution. So that same example I just gave, let's say they wanted 60,000. If you've got multiple kids in school, most schools are going to give you a discount of about 40 to 50%. So if you just call it roughly half EFC expected contribution at 60, they're going to expect 30 for each. So you may qualify with those overlap years for pretty significant amount of money. So, you know, we, we see that all the time where first year one student in $80,000 is what they expect. But then years, 2, 3, 4, uh, when your younger sister comes into school, they only expect you to pay about 40 to 50,000. So you can get quite a bit of aid at those higher price schools.
Speaker 2 00:21:21 Yeah. So what's the, what's the ideal way to start planning for college? I mean, is it, I think it seems like it's gotta be kind of a, you know, regular thing you're checking up on because like I was describing like the newborn situation who knows what you're doing and then who knows, who knows what college costs are going to be. But like, um, I would be curious if you could kind of talk through like the ideal setup, like things people should be thinking about based on, you know, different life circumstances. Yeah.
Speaker 3 00:21:51 I think there's always this blend of current lifestyle paying down student loans for most of the people listening, um, and then saving for our future goals. So I think it is those, those things, but you know, if we talk about, you know, current lifestyle kind of, you know, when you get that first big check, try not to get it out of your head, take 10% of that and say, we're going to put that towards savings for our future goals, because that's going to really benefit you from a budgeting standpoint. And then if you say like, cause if you go from making 60,000 a year to two 50, which a lot of folks do in this profession, if you can say, let's carve out some and not spend all of that to get the huge house and all the cars we've always wanted. And if we can say, let's pretend like we're only making two 30 and let's start saving some dollars into the retirement plan at work at the match.
Speaker 3 00:22:35 And then if you have a child, you don't have to start with a thousand a month, start with a hundred a month. Yep. Start small. And then, yeah. So we try to get on that cadence of, if you start, when they're, you know, that one years old at a hundred bucks a month and you raise it 50 to a hundred dollars a month, as you get those raises, you're going to be saving 5, 6, 7, 800 bucks a month. By the time they actually go to school. And that, you know, just the, the hard part, the beauty of like our at-work retirement plans is as your salary goes up, your contributions go up. But with, with college savings, you kind of have to do it yourself manually. So when you get that race, they, oh, you know, I heard Daniel and Joe say that we should up that by 50 or a hundred bucks towards college. And that stair-step approach it's bite size pieces to your point of like, this is a big goal. And it comes really fast. You know, the runway is really short for college, but if you can just kind of have that discipline to say, Hey, each year, if we start with a hundred, next year, I'm going to do 200 the next year, I'm going to do 300 and you'll have a really nice nest egg for college. Once you get there. Right.
Speaker 2 00:23:36 At what point do you start thinking beyond just like, I need to save a lot. I mean, maybe you sprinkle that in as, you know, more information, but like we were talking about with the scenario where, you know, I want my child to learn by taking out student loans. So you can start to factor that in, like you were saying, the rule and the third rule, that's a good kind of example. Like maybe a third is covered by the student loans that they're going to take out. And maybe you're trying to save for a third through like a 5 29, and then maybe the other third is like money. You were used to spending on them and that's going to kind of stop and you can just kind of use for college. Um, that's kind of a really good, I think, example for like, just starting to pinpoint what, how much you should be saving. So what you're backing into is how much you should be saving, but, and that sort of thing needs to be re revisited over time. But what I'm curious about is like, at what point do you shift to start thinking about like, which college should I be looking at and how should I be comparing them and, and ironing out those numbers.
Speaker 3 00:24:39 Yeah. So I call that one of the things college-age pros, our software platform, that essentially the idea is we, we always say we're changing the way America shops for college. And I don't think a lot of people think about college in terms of shopping, but we certainly do, because once you get to like that freshmen, sophomore year of high school, it becomes less about accumulation and more about shopping smart. Cause, cause you're going to kind of have what you have now. We need to go and understand these things. Like I talked about, like we have a better idea of what we're making so we can get, uh, uh, we can understand what they think we can afford. And then number two, we can figure out, you know, based on today, what can we actually afford our pre-approval process? So what do we have in assets?
Speaker 3 00:25:21 What do we have a cashflow outside help? It's really identifying like, what do we have today? And then how do we shop smart? So the idea is like, how do we find schools are going to be the most generous with financial aid for our families and our students. So that's when you've been to say, okay, look, if I look at this school and I'll give you like an Ohio. So if I looked at a school like bowling, green state university, I would say, well, look, you know, their average act is like a 22 to 26. So my daughter has a 30 act. That university is going to give her a big scholarship, somewhere around 12 to $15,000 per year, right? That, that same student looking at our marquee school in the state, Ohio state, she might get $2,000 off because they, what the, what the school is trying to do, this is kind of a little hack for you to look at is if you look at like their middle there, they're going to show you like their middle act is like, you know, say it's a, uh, you know, a 30 to a 32, well, if you're a 33 on the act, you're going to have a highest probability of getting money from that school because they only incentivize the top core tile of students because that's the only people they have to incentivize.
Speaker 3 00:26:26 So that's, that's how you begin to shop smart for scholarships is understand like what the school is trying to do every year is get better students in. So their us news goes up, their Forbes goes up and all that stuff. So there are schools out there that you can find if you're in the top core tile, you're more than likely going to get a nice scholarship at that school if they award merit scholarships.
Speaker 2 00:26:45 So your child's getting to that freshman year timeframe. So that's, at that point in time, you can kind of start to say, let's look at, um, revisit, like what the goal is, like, what school kind of range we might be thinking about in the situation you're in how much you've saved there, you know, academics and then your financial position and kind of mix all that stuff together. And then starting start running it through like different school examples and start to see like established like a range of, uh, potential, uh, schools to fit. Is that kind of the, what you're saying here? Yeah.
Speaker 3 00:27:20 So in every, a couple of things, one would be that try to get a handle on kind of, is it an academic fit and a social fit for that student? Like, I mean like large, small, medium campus, do they have the major that leads us to the career we want? And then from the financial aspect, every school is required to have what's called a net price calculator on their website. So if you go to a school's website, they'll have a thing called a net price calculator on the financial aid page. And if you put in some information about your income and assets in the student, they'll say, if you were to come last year, we cost, you know, 50,000, but you would have gotten $15,000 in scholarships. That's what we would project. So every school is required to have
Speaker 2 00:27:58 That. Yeah. Cool. And does that incorporate, uh, academics? Yes. Can it,
Speaker 3 00:28:03 Yes. Yep. So it's not an indicator for admissions. It's just really for the financial aid component. So that's why they ask a GPA act and then income and assets. And that just kind of spits out if you qualify for need-based aid or merit scholarship. Huh? That's cool. Yeah. Yeah. So it's, it's required now. I will. I, I caution people because, um, many of them are a little bit misleading, but it's a good place to start. Right.
Speaker 2 00:28:28 So you can start to see like true costs, not just the sticker price like we were talking about or yup.
Speaker 3 00:28:33 Yup. And I'll tell you too, like if you go to free college money report.com free college money report.com is a free website that we have out there for parents, advisors, anybody to go, and it'll give you your, what, the school sick. You can afford that EFC. And it'll give you your net price estimate at three schools. Side-by-side and it'll show you, did you get scholarship or need based aid? So it's a, it's a completely free tool that we have out there just for people to go get an idea of. Here's my academics. Here's my GPA, CT. Uh, what, what could I expect that three schools side-by-side
Speaker 2 00:29:06 Okay. I like it. We'll link to all this in the show notes, but these are kind of some of the tools you can use to start like getting into the like let's, let's ratchet down on these numbers. And so you were saying like, you want to change the way average Americans shop for college. So how does the average American we're kind of talking about the ideal way, but how does the average American shop? Most
Speaker 3 00:29:27 People say, honey, if you get in, we'll figure it out. That's not shopping. Most people sell. So I picture this. So you're, you're in Kentucky, right? Yeah. So somebody goes down to down south and they come up the east coast and they're doing college visits. So they visit Vanderbilt Georgetown. They go to MIT, they washed up on Harvard. Maybe they hit Penn while they're up there. All the while these schools are completely intoxicating and they'll convince you to, no matter what it takes, you should come there. You've not looked at one school that costs less than $80,000. You've only tested in Lamborghini's Ferrari's. And definitely what, if you have a Camry budget, you're going to tell a 17 year old, this is the way we shop now, go get good grades, go get a perfect act, do all the clubs, do the sports, do all the things to get you into these great schools all the while when they get in, you say, we're not gonna be able to afford that. And they're sitting there going, but you told me to do all these things and I could go where I want.
Speaker 2 00:30:22 Yeah, yeah. Or, and I've seen this happen. The other scenario that happens is you kind of say, you know, if you get in, I'll take care of it and try to get as high of a city score as you can. And like Joe was saying, as long as you get in, I'll take care of it. And so people just on the other end of the spectrum, the child gets in to save Andy or whatever. And 70,000 years or something, the parent is like, I have to take care of it. I said I was going to, but now I realize what the cost actually is. And it's 70,000 a year. So they, you know, delay their retirement or take out their retirement accounts if they haven't saved for it or they get, take out student loans. So parents can take out a lot of student loans themselves, which is kind of ideally you don't take out student loans, but I guess thinking about this kind of stuff on the front end strategically, before you start looking, it's kind of like looking for houses before you have a budget, obviously a hundred million dollar house is going to be a lot sweeter than the 500, right?
Speaker 3 00:31:22 Yeah. Yeah. And so that's a, that's a, it's a great proxy too, because like we talk, we call our program, our college pre-approval because we think you should have to show exactly how you're going to pay for all four years, including the loans and the resulting student loan payment, regardless, who's going to take it. So if we can have conversations earlier with sophomores and juniors in high school and have that college money conversation and help them see into the future for themselves, because we look at, we say, you should never take out more than student loans and you think you're going to make your first year out. And that chosen, never take out more than student loans. And you think you're gonna make that first year out in that chosen major reason is because if you go above that, they're going to be coming back and living in the basement.
Speaker 2 00:32:01 Right? Yeah. That would happen for me. I took out, we, you, you said you took out 10. I was right about 10 when I got out of undergrad and yeah. And for
Speaker 3 00:32:09 Every, for every $10,000 someone takes out, they owe back about a hundred bucks. So if you take out, you know, it, it is relative to what is the return on that education. Right. So helping people understand, you know, you don't need to take out a hundred thousand dollars to go be a teacher. You just don't. Right. Because the return on that education just is not there. Yeah. So, you know, but you know, and so th the other thing is I equate this to, like, if I go to the same school and I, uh, same four years exact same out-of-pocket costs in my, my is a computer science major. He's going to come out, make an $80,000 a year. If I'm a teacher I'm coming out making 42. Yeah. But it's not that we're bad people, but that investment and the return on that investment, in that education is different. Just it.
Speaker 2 00:32:51 Yeah. So you, you encourage having, including the student and on the financial discussions early on, it sounds like I think that not all parents do that. Um, some people were like, we'll take care of it to the point where it's like may see nothing. That's
Speaker 3 00:33:06 The, you know, the, it starts with mom and dad getting on the same page. You know, I really do believe that because a lot of times people ask, well, Hey, do we bring our junior in high school into the meeting? I say, absolutely not, not the first meeting, because we've got to get the two of you on the same page. Right. So, you know, having that conversation with each other to say, Hey, you know, how was college paid for, Hey, well, I went over seven years. I did it. Part-time I paid for it. Myself, took out some loans, work my tail off and got my bachelor's degree. Whereas dad's sitting there going, Hey, I did it over four years, private university. It was all paid for. We've got to find a bridge there, you know, to figure out what's our college funding philosophy for our kids. And just because you make a ton of money, doesn't mean that you necessarily want to put that all towards education. And if you've got five kids, you know, figuring out college funding philosophy, it's just important to have those conversations, because what you do for that first child make no mistake, Childs, you know, four through one are all going to be looking, right. So you set expectations and then you're really in a hole.
Speaker 2 00:34:06 Yeah. Yeah. That's um, I guess a little, uh, plug for we're, we're both financial planners. Um, I don't know how much in Joe's dunes, but you know, that, that, that kind of conversation can get a little dicey. So surprisingly like college is one of them. There's a bunch of them that can get kind of dicey, but some, for whatever reason, uh, education, this discussion around what our, what is our education philosophy, or how much are we going to help out with education that a lot of times it gets dicey with couples. And so working through that, uh, dizziness with a third party is sometimes helpful. They can kind of help help you get it, because at the end of the day, you typically it's a compromise, or at least that's probably how you should be thinking, thinking about it as opposed to like staunch. So, yeah,
Speaker 3 00:34:53 And I think it's, it's, it's tough because we're talking about two things that are for a lot of American families, the most important things in their, in their life, which are a great education. And I get that. You want to do everything to give your kids the best opportunity, but just having that understanding, one of the things I think this is, this is one of the first times we're going to help them make a strong financial decision. And I'll give you like a concrete example of where this really turns itself on its head is a woman that I met about three, four years ago, uh, at a financial planning conference ironically. And she says to me, you know, I'm looking forward to hearing your talk. And I said, cool, like, what's your story? So well, I went to a private university, had a great experience, play the cross there. And it was awesome. I said, and she said, Anna graduated $128,000 in student loans from undergrad. So where that plastic is, is that I haven't talked to my parents in over four years. I was 17. How was I supposed to know they co-signed on loans? I signed on the loans. I had no idea what I was getting into. So for her figuring it out, that meant she had a $1,400 a month payment and she was done. That's figuring it out sometimes not understanding exactly what you're getting into. So that's a really concrete example.
Speaker 2 00:36:02 It's tough way to learn. Ideally though, you know, if I'm thinking about my kids, I need for that situation to play out with them. And so that's kind of, part of what we were talking about is, you know, ideally you start to teach those lessons before it all plays out and you can, and the parents are, you know, we try to play like, we're perfect. Everybody kind of plays this whole, you know, especially with social media, it's like, look at my perfect family, but, um, we all kind of try to play the part of perfection, but in reality, like most people are not great about thinking about some of these future oriented things ahead of time. And so it starts with the parents and thinking about this type of stuff ahead of time, that's kind of the foundation of what I think we're talking about.
Speaker 2 00:36:49 And then it all, it also opens up all kinds of opportunities to, you know, be strategic to like, and maybe even loop your children in and help teach them lessons along the way, because this is just one of the biggies. I mean, you can kind of start to sprinkle and end at the end of the day. I think the biggest thing that motivates me for this kind of a thing is you end up tending to, I guess, like emulate your parents. Or like, even without noticing, you know, fall into the examples of what they've set. So for this kind of thing, you're setting the example for what they're going to ultimately, uh, follow. So that's a little bit more like pressure to kind of get, get these types of things done. Right. You know, cause you're always, you don't want your child to get into a tough spot just because of your, you're not thinking about something like this. So with everybody's different at the end of the day. So that's the thing that's probably most important. It's like everybody has a different philosophy. Everybody has a different spin on this. So it doesn't, there's no like definitely no one size fits all. Uh, and some kids won't even go to college. Right. So it's like, you gotta always incorporate that. That's what I asked.
Speaker 3 00:37:56 Yeah. Yeah. And I think that the last piece, as you were kind of running through that, because it is important to understand what's the investment, because we do think of it as a buying choice and investment. And I just recently did a piece where we were saying like, is, is one school worth the premium over another? So if the out-of-pocket cost is a hundred thousand for one school and 200,000 for another a hundred thousand dollars difference, what could that a hundred thousand dollars do? So I ran it through a calculator said if you put a hundred thousand dollars in for an 18 year old, it's worth over two and a half million dollars when they're 65.
Speaker 2 00:38:28 Yeah. Right. So then the question is, yeah. Is it worth it to pay the extra a hundred thousand? Yeah. And a tough question.
Speaker 3 00:38:36 It is tough. It's a premium, is it worth the premium? You know, is the education that much better? Is your outcome that much better? It is just, it's just a lens to consider looking through, you know, when we buy things at a premium, you know, there's a reason you buy a Mercedes instead of a Corolla, you know? So I mean, there's, there's reasons we do that. So it's just a different lens to think of it through,
Speaker 2 00:38:54 As opposed to, to saying, you know, if you get into the $200,000 school, we'll make it work.
Speaker 3 00:38:59 Yep. Just thinking about what could that be? Could you put it in an account or could you help them start a business when they're done or
Speaker 2 00:39:08 Yeah. There's alternatives that would have been a whole lot of potential fund or future wealth or whatever, or a down payment on a house or something like that.
Speaker 3 00:39:18 Just things to think about. Cool.
Speaker 2 00:39:19 Well, Joe, I really appreciate you chatting with me about this stuff. Um, where can people find out more info about
Speaker 3 00:39:25 You go to capstone wealth partners.com. There's a very deep blog. There's a number of eBooks videos. What kind of resource? And then college aid pro.com is, are, is a platform that more will coming. And, um, I think that, you know, if you're at college free college money report.com is probably a great place for you to get a handle on what schools may actually cost you out of pocket this year. If you're in high school, that's a great place for you to
Speaker 2 00:39:49 Yeah. And starting as early as freshman year too, it's like, that's probably the time to be starting to think about that. So. Awesome. Joel, I appreciate it, man. And look forward to talking again soon. All right,
Speaker 3 00:40:01 Man. Thanks for having me on best of luck here. Uh,
Speaker 1 00:40:05 As always, thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend. Also check out our
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