College Costs
Free money for high-income families
Most high earners are told they will not qualify for anything. Lance works the University of Michigan numbers to show where the aid formula still has give in it.
Watch
Jump to a section
Free money for high-income families
Why not the 529
Don't use your 529 accounts to save or pay for college. Don't take money out of your brokerage account paying taxes or missing out on compounding interest to pay for college. Don't use whole life insurance to pay for college. And definitely don't drain your retirement accounts to pay for college.
Instead, in this section of the webinar, I introduce you how to use real estate tax strategies to get high income families free money for college. That's right. If you don't think you qualify for financial aid, watch this clip where in the first section of the webinar, I dive right in to how high-income families can get free money for college using real estate. Let's go ahead and roll the tape.
What makes us unique is that we actually help families to reduce the cost of college and that way they can go to any school of their choice without sacrificing the family's retirement and their own financial goals. >> Yeah. But that's the question that I have for you. How do you how do you help these kids reduce and parents the cost of college?
>> This is a topic that is near and dear to my heart. I'm super passionate about this topic of how to use real estate to send any student to any college of their choice and still increase your retirement. I understand that that is a big promise. I understand that that is uh a lot, you know, to to try to get through in one webinar.
But that is what we're going to talk about tonight. how to use real estate to send any student to any college of their choice and still increase your retirement. That means students that are exceptionally gifted and those that are gifted in other ways. That means whatever school they decide to choose.
It doesn't have to be a very specific school that's going to give them a lot of free money. It can be any school. And so this is a very powerful topic. It's applicable to pretty much everyone out there that is uh concerned about the cost of college or how that is going to affect their retirement.
you are going to be able to, you know, kill two birds with one stone. You're going to be able to help pay for college and, you know, your retirement at the same time. So, I'm pretty excited um about this topic. We are going to focus in this webinar, we are going to focus on the five benefits of using real estate for college funding.
The three benefits of property
First things first, we're going to show you how to use real estate to get free money for high-income families. you highincome families that don't qualify for financial aid, we're going to show you how to get financial aid using real estate. The second benefit of using real estate for college funding are what we call tax scholarships. You're going to love this.
Um, we're going to show you how to reduce your taxes to offset the cost of college. I would say the large majority, if not all of our clients are usually able to come pretty close to reducing their taxes by the cost of college. So, it's like getting a free ride. Um, so that is going to be um that's going to be very important for everyone on the call, no matter how much money you make, whether you qualify for financial aid or not.
And then the third benefit is going to be how to generate cash flow and maximize the cash flow to actually pay for college. So, we're going to talk about why you shouldn't use 529 accounts to pay for college. Um, and why you should use real estate instead and what to do if you do have a 529 account. Don't let me forget.
Um, we'll talk about that. And then what happens when college is paid for and we still have all this ret all this real estate cash flow coming in. We're going to talk about how that cash flow can continue for our retirement goals as well. This is what I'm talking about as far as, you know, killing two birds with one stone.
We can actually use real estate to generate the cash flow to pay for college. And that same cash flow can, you know, provide our retirement income as well. um or at least be a part of our retirement income. And then the fifth benefit is how to use real estate to leave a legacy.
I admire all of you parents that are making sacrifices to help your kids get a college education. The only thing that I think is almost even more valuable than that is leaving them a legacy of how to generate wealth and real estate and the cash flow from all of that. um you know, you can teach them a lot about money and financial strategies and generating wealth that they're not going to learn in college. And uh ultimately, we'll just kind of wrap it up with that real quick at the end.
Who qualifies for what
Let's dive into the first topic, which is free money for highincome families. Why do I specify highinccome families? Because if you're a lowincome family, you're probably going to get a lot of free money anyway. Um if you don't make a lot of money, you're going to qualify for a lot of financial aid.
If you do make a lot of money, you're not going to qualify for financial aid. However, I'm going to show you how to use real estate tax strategies to get free money for college. Okay? So, there are two ways to get free money for college.
There's need-based financial aid, which most of you are not going to qualify for, and then there's merit-based scholarships. This is basically how it works. Most of you are probably going to be somewhere here in the middle. And in order to get the free ride, you know, the coveted free ride, all the free money down here in this bottom lefthand corner, you know, your goal is to uh move move into this corner.
Student positioning and merit money
How do we do that? First, there's what we call student positioning where we can get merit-based scholarships. That's all based on the student, the merits of the student. There are lots of people out there that focus on college admissions and helping these kids to go from, you know, gifted in other ways to being exceptionally gifted students.
That is not what this webinar is about. But we have partnerships with some of the best college admissions people out there. So, if you need help with college admissions, if you need help getting your kids from gifted in other ways to exceptionally gifted, we can point you in the right direction. But what I want to focus on is the second way to get free money for college and that is through need-based financial aid.
And although most of you may be up here, okay, where you don't get a lot of need-based financial aid, I am going to show you how with financial positioning, we can lower what we call these, we call these financial aid numbers, the EFC and the SAI numbers. We're going to lower those numbers through financial positioning to get more free money. However, even if you can't lower those numbers, there are still discounts. That's supposed to be an S, there are still discounts up here as well for even those of you with fi with high incomes and lots of assets.
But there are also some things that you can do to to change that and get more free money using real estate tax strategies. We're going to use real estate tax strategies to reduce these numbers and get more financial aid. So what are these numbers? Well, these numbers are created when you fill out the financial aid forms and they're used in the formula to determine if you're going to get any free money.
Michigan, worked through
Let me explain. Let's take University of Michigan as an example. University of Michigan's around $80,000 a year. Okay?
So, we take the $80,000 and we subtract it from your financial aid number. This is the number that you get when you fill out the financial aid forms. It's that simple. You fill out the financial aid forms like the FAFSA and the CSS profile and which by the way, it's like go time.
If you have not filled out those forms, it's go time. Okay. So, if you if you have a senior in high school and so when you fill out these forms, they're going to calculate based on your income and your assets, they're going to calculate this number. So, we take the cost of college minus that number and that equals your financial aid eligibility.
That is not how much money you get. that is how much you're eligible for. And then every school is going to cover a different percentage of that financial aid eligibility. For the University of Michigan, that would be $68,000.
However, they consider work study and loans as part of the financial aid. We do not. We want to know the percentage of financial aid in free money. And that's where we get this number.
What the formula counts
Okay, 82%. That is the estimated free money. That's what we want. That's the goal.
Okay. And then that gives us a sticker or an out-ofpocket cost of about $24,000 a year. And that's how it works. That's how financial aid works.
Meaning the lower that we can get this number, the more financial aid eligibility we're going to have. Okay. So, how do we increase this need-based financial aid eligibility through financial positioning? There are two ways to do it.
Repositioning assets, lowering income
Number one, reposition your assets. And number two, lower your income. This is the key. Most people miss this point right here.
And if you've been on any other webinars, they might talk about moving assets, but if you move assets, you're going to generate more income. If I take money out of a 529 account, it's going to add to my income. Okay? If I take money out of my brokerage account, I'm going to have capital gains.
So, we have to focus on tax strategies to lower your income, not just repositioning your assets. And if we do that, we can go from having an SAI number of 75,000 and an EFC number of 103,000 to a $6,000 SAI EFC number. Now, this family didn't have a ton of income, but had lots of investment properties. So, by repositioning assets and applying some of the strategies that I'm going to share, we were able to lower those numbers.
Here's another family with a high income. Okay, a $500,000 income, right? With a lot of equity, but not as much in assets. Still really high numbers.
If the co if your number is higher than the cost of college, you're not going to get any free money. And at this point, there's no schools that cost more than $129,000 a year. So, this family would not get any financial aid. However, by repositioning some assets and reducing the income, we could get that number down to $2600.
What the formula leaves out
And let's assume that we don't want to mess with the equity in the house. That is why this number would be higher. This number is higher because it is looking at the equity in the house. The SAI formula does not.
The SAI formula does not look at the equity in the primary residence, but it does look at investment properties. Okay. So to reposition your assets, you're going to basically move all of the assets that hurt your SAI and EFC number, okay, over to assets that don't hurt your SAI and EFC numbers. So, in other words, we're going to move our brokerage accounts, our our savings, and our 529 accounts, and even some of the equity in our real estate, and we're going to move it over into retirement accounts and maybe some insurance products or real estate.
And I'm going to explain, obviously, real estate is kind of the variable here, but I'm going to explain how that goes. But remember, the equity in your primary residence does not hurt you at some schools, but it does at other schools, but the equity inside of a rent like investment properties do hurt you. Okay? So, we want to focus on that and we'll get into that.
But I want to also focus most of our time on how do we lower our income? And that's just on paper. I'm not telling you to go out and quit your jobs. Okay?
Disclaimer here. Okay, but how do we lower our income on paper? Well, tax savings equals college savings. Okay, so hopefully that was helpful.
Now, no matter what your income situation is, whether or not you can qualify for financial aid or not, there is no reason why you shouldn't be able to qualify for what we call tax scholarships. That's right. Watch this section on using tax scholarships. Click this next video.
Educational information only
This is a transcript of a recorded presentation, edited only for paragraphing. It is general educational information, not tax, legal or investment advice, and it does not take account of your circumstances. Tax law changes and outcomes depend on your own facts. Figures mentioned are illustrations of how a strategy works, not projections of what you will receive. Confirm your position with your own CPA or tax attorney before acting.
Questions this raises
If I earn too much for need-based aid, is there anything left?
Merit money, which is awarded on the student rather than the family's finances, and whatever the aid formula still gives you once income is lower on paper. Lance's point is that the second of these is treated as fixed by most families when it is not.
Which matters more to the formula, income or assets?
Income, by a wide margin, for most high-earning families. Moving assets around is the advice families usually hear first and it tends to shift the number very little. Lowering income on paper is what moves it, which is why the tax strategies and the aid conversation are the same conversation.
What is the SAI?
The Student Aid Index, the number the aid formula produces from your financial information. It is not what you will pay and it is not what you will receive. It sets how much aid you are eligible to be considered for, and the lower it is the more room there is.
When do the aid forms need to be in?
They open in the autumn of the senior year, and Lance is emphatic that this is a deadline rather than a window. The financial year they look at closes earlier than most families expect, which is why planning in the final year is usually too late to change the number.
Does the formula look at the house I live in?
The federal formula does not count equity in a primary residence. Some institutions run their own formula alongside it and do count it. Which applies depends on the school, which is why Lance treats the school list and the financial plan as one decision.
Read next
-
Reduce Taxes
Reduce taxes, pay for college, and increase retirement
The short version of the whole approach: three problems that look separate, one structure that addresses all of them, and who does the work.
-
Retirement
Real estate vs IRAs: which one wins?
A direct comparison. The four percent rule, why a traditional IRA has a silent partner, and what tax deferred actually postpones.
Book a free strategy call
Tell us about your family, your income, and when the first tuition bill lands. We will walk through which of the four strategies apply to you, and what putting them in place would involve.