Three ways to pay for college

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The three secrets

1. Free money first
2. Financing, and who pays the interest
3. Opportunity cost
4. Paying cash, or borrowing
5. Avoiding the debt

Free money first

hey Lance Morgan here and as a father of five kids with the oldest two already in college I know the stress of trying to figure out how you're going to be able to help them pay for college now like many of you we started saving when our kids were young but we had no idea how high the cost of college would actually be when they got older now to make matters worse we had a major Financial setback during the recession in 2008 and literally lost everything including our home this created a tremendous amount of stress on our relationship and we of course were trying to figure out how we were going to be able to possibly make up for all that lost time now my wife and I sat down and took a hard look at our finances and we decided we didn't want our kids to pay the price for our financial mistakes so we decided we wanted to be able to help them pay for college so that they could have the education

of their dreams and go to the school of their choice that's when I became obsessed about learning every strategy I possibly could about reducing the cost of college and new ways to save and pay for college by implementing these strategies I'm about to share with you we now have a plan to allow all of our kids to attend the school of their choice without having a negative impact on our re retirement we no longer have that Financial stress in our relationship and our kids will be able to have the education of their dreams and over the past decade we have helped hundreds of families just like you to do the same thing now I know these are some pretty big promises so let's go ahead and dive right into it what I discovered is that there are three secrets to reduce the cost of college and three strategies to save and pay for college and that is where the biggest savings comes from but do want to introduce you to Secrets number one and two

secret number one is all about maximizing all that free money the grants the scholarships and the financial aid now yes it's true this is based on your student and their ability to get scholarship money but it's also based on your family's financial situation this is what we call Financial positioning you want to position yourself financially to be able to maximize all that fre money that comes from the government and the schools this is done by positioning your finances in a way that gets that free money from the schools for example if you have a lot of college savings they're going to look at that and say oh they don't need any free money look at all this college savings they have yes it's true you could get penalized for having College savings doesn't seem fair does it but that is the case you want to be able to position yourself to maximize all that free money whether you make millions of dollars or not and even if you have students that are not exceptionally gifted

but maybe gifted in other ways and they're not going to get any traditional merit-based scholarship money they could still get some scholarship money or financial aid based on your family financial situation okay now let's talk about secret number two secret number two is how to reduce the college loans and the loan payments for example do you think there is more money made in selling cars or financing the purchase of cars it's in the financing right now College we all know how expensive college is so imagine how much money is made by financing these educations this is where you have a chance to save tens of thousands of dollars by finding loans with the lowest interest rates but also by taking advantage of government programs like loan forgiveness forbearance income driven payment plans there's a lot of things the government is doing to help you to reduce the college loans and loan payments even if you make millions of dollars and you don't qualify for any financial aid huge savings in secret number two when it

Financing, and who pays the interest

comes to the loans and the financing of college now speaking of financing let's get into the three strategies to save and pay for college CU this is by far where the biggest savings comes from because how you pay for college is 10 times more important than how much you pay okay the first way to pay for college is by paying cash out of your college savings or your cash flow now for most of you you might think this is the goal the goal is to avoid loans the goal is to pay cash for everything and hopefully you've been saving since your kids were young as well and hopefully you have enough money Sav to be able to pay cash for college but is that the best thing to do now the second option is actually believe it or not even better which is to borrow the money for less interest then you could earn on your savings now I know the idea of borrowing money is what you're trying to avoid everyone wants to avoid

loans however everyone is going to Finance College you're either going to pay interest to use somebody else's money or you're going to give up the interest that you could have earned on your savings by paying cash now I'm going to go over that again in just a minute because that's extremely important but let's talk about the third strategy the third strategy is the best of all which is borrowing the money for less interest than you could earn on your savings with out loan payments now how does that sound that sounds crazy I know but let's go ahead and dive into it okay so the first option is to pay cash use your savings or live in a van down by the river and eat beans and rice and just pay for college out of your cash flow or out of your pocket each semester as you go either way whether you pay cash out of your pocket or drain your savings no matter what you are not not borrowing the money in this example okay

now let's just take $100,000 as an example let's say we're talking about a state school that is 25,000 a year for four years so you've got $100,000 that you're going to be paying for college now because you saved $100,000 the best part about this is that maybe you only had to come up with $50,000 over the years and you earned another $50,000 of Interest so the best thing about saving for college is that you earn interest but now you have the $100,000 and you're trying to decide if you should pay cash for college you might think that's the best option because you're not going to have to pay any interest on loans but there is a huge cost to paying cash for college and it's what we call opportunity cost now if you've never heard of opportunity cost I remember the first time I heard it and I was thinking this seems so simple but I had never thought about it let me explain okay so if you have $100,000 that could be earning 5%

interest then that money if you spend it on college is going to be gone this interest over the next 10 years is the interest that you're not going to earn that's the opportunity cost so you might think it's expensive to pay $100,000 for your child's education but it's actually worse it's worse than that because it's not just the $100,000 it's what that $100,000 could have earned over the next 10 years in fact the number in this example would be $64,000 of interest that you're not going to earn if you pay cash for college okay so let's say you're in your 50s and you're going to easily be alive for another 20 years you're going to be in the early years of your retirement and that $100,000 education is now going to cost you $271,000 in your retirement okay that's money that you're not going to have that is the true opportunity cost of paying $100 ,000 for your kids to go to college that's an instate State School right and that's one student that's not

out of state that's not an Ivy League private school and it's definitely not five kids that's the cost out of your retirement that is the opportunity cost now I had someone once that said hey I love my 529 account it's earning 8% and I said wow that's unfortunate and he said what do you mean 8% is a great return and I said you're right 8% is a great return and now you're going to spend that on college so your money is no longer going to be earning 8% remember everyone finances College you're either going to be paying interest or you're going to be giving up the interest that you could have earned so if you have some amazing financial advisor getting you 8% interest or you've got your money in Bitcoin or whatever the case may be then at 8% if you spend that money it's no longer earning 8% so your opportunity cost is almost a half a million dollars out of your retirement account by helping your kids pay $100,000 for college that

Opportunity cost

is the opportunity cost and the opportunity cost is by far the most expensive part of paying for college okay so what's the second option the second option is to borrow the money right and some of you might not have enough money saved and you might not be able to cash flow the cost of calls so you might have to borrow the money anyway so let's talk about the second way to pay for college which is borrowing the money so here's our $100,000 and in this example let's just say that our savings could have earned 5% and we're going to borrow the money at 5% now I know interest rates fluctuate sometimes they're higher sometimes they're lower but I'm also going to help you to find a way to get those interest rates as low as possible but let's just say 5% so at 5% this is the interest that you're going to have to pay $58,000 over 20 years if you got a 20year loan now if you got a 10-year loan let's say that

you got a 10-year loan then we're talking about $27,000 of Interest this is what everyone wants to avoid everyone wants to avoid the interest because obviously if you're paying $27,000 of Interest that's money that you're not going to have in your retirement that $27,000 is going to the government or to the private loan company the banks whoever it is that $27,000 is going to someone else to be able to borrow their money right but it's worse because what did we just learn we learned about opportunity cost so if you have $27,000 that is going to somebody else then it's not going to your retirement it could have been earning 5% if you know of a place to earn at least 5% so guess what the reality of it is there's the opportunity cost on that interest so it's even more expensive right because all that interest could have been earning interest for you but it's going to somebody else so now we've got the interest but we've also got the opportunity cost now what else

is there if we're going to take out a loan we have to make a loan payment so let's just say that we're looking at $1,000 a month $1,000 a month on a loan payment towards these loans well that's expensive right but it's worse than that because now we've got $1,000 a month that could have been going to our retirement so instead of putting $11,000 a month towards our retirement we've got $1,000 a month going towards these loans so now there's an opportunity cost on those loans so let's add it all up we've got first of all we've got the interest we've got the opportunity cost on the interest right we've got our loan payments and we've got the opportunity cost on the loan payments are you ready for this check this out okay 164,000 is the true cost to borrow $100,000 at 5% interest over 10 years or we pay $100,000 in cash that could have earned 5% interest over the next 10 years which would be the exact same number as if you were

to borrow the money what does that mean what does that mean it means that mathematically it does not matter if you pay cash for college and lose the interest or take out a loan and pay the interest if if the interest rates or rate of returns are the same okay so if you could have earned 5% and if you're going to have to pay 5% on the loans it does not matter which one you do now this I know the first time I heard this it just blew my mind because it goes against against everything I had been taught I had always been taught to never take out loans always pay cash for everything and why do you think that is well because our cash is usually not worth anything so if our cash is only earning 1% and the bank wants to charge us let's change this to 5% let's say the bank wants to charge us 5% so we're earning 1% on our money the bank wants to charge us 5% well then

Paying cash, or borrowing

obviously it's better to pay cash of course it's better because our cash isn't worth anything so the opportunity cost isn't very much so paying cash in this example is better however what if okay what if you could earn 6% and borrow the money at at five okay it would actually be cheaper to borrow the money now I know this goes against everything that we've always been taught right when in the world have we ever looked at loans or borrowing the money as a better option than paying cash but if you truly understand how money works and compounding interest and opportunity cost you could save tens of thousands even hundreds of thousands off the cost of college just by how you pay for college now again I'm not saying that you don't need to save for college because you can earn interest and you might only have to save $50,000 to get to your $100,000 but once you have the money you might not want to spend that money you might want that money to keep

earning interest for your retirement and you might want to borrow the money at a lower interest rate which brings me to the third strategy the third strategy to pay for college without having a negative impact on your retirement is finding a way to not have to make these loan payments this is the secret okay first of all first of all we need to be able to earn a better rate of return on our savings and borrow the money at a lower rate then the second strategy or the second step is we need to take this money here and instead of putting it towards our loan payments we put it towards our savings okay let me explain this again this is very important step one step one you earn a better rate on your savings than the loans okay step two you take that loan payment and you put it towards your savings now you have your money going towards your savings and not your loans so what happens to the loan the loan gets bigger

okay the loan does get bigger because you're not making any payments so your interest is growing the opportunity cost is growing on the interest the loan balance is getting bigger but guess what so is your savings your savings is also getting bigger in fact over 10 years you could have $355,000 in your retirement savings and only owe $164,000 all right let me say that again you could have $355,000 in your savings for retirement and only owe 164,000 now once again if you are in your 50s you've easily got 20 years left until you're in the early stages of your retirement and you could have a lot more money towards your retirement the net the net difference between that is extra money that you could have in your retirement okay so again some of you are probably not familiar with financial institutions will give you loans without required loan payments and the key is called collateral you have to have collateral so you use your savings as collateral to secure those loans so then there's no

risk to the financial institution and they don't require a payment because they have your savings to secure the loan so if you could not make payments towards these loans and put all of your money towards your compounding interest which would you rather do it makes way more sense to put all your money towards your compounding interest than the loans if you didn't have to so I'm not talking about going out and getting a home equity loan because if you go out and get a home equity loan you're going to have to make a payment so then there's an opportunity cost on that payment I'm not talking about standard traditional college loans some college loans you can defer payments while the kids are in school but then you're going to have to make a payment after gradu uation I'm talking about college loans then maybe other loans that you never have to make another payment and then when you die you'll pay off the loans and your family gets the rest okay now it's like it's

Avoiding the debt

like two cars going across the country one car is going 60 M an hour across the country the other car is going 50 m hour across the country there might not be a big difference in the beginning and we're not just talking about the four years that your kids are in School we're talking about the next 10 20 or even 30 years depending on how old you are the younger you are the longer you have if you go from New York to LA the difference between those two cars could be huge and your money actually works the same way and again just to summarize you need three components in order for this strategy to work you need uninterrupted compounding interest then you need loans at a lower interest rate than you could earn on your savings and then you need optional loan payments now again how you going to get optional loan payments you're going to use your savings as collateral to secure the loans the key is that you're never in debt that's right

for those of you who want to avoid getting into college loan debt you're not in debt because you always have the money to pay off the loans you always have more in your savings than what you've borrowed so you're never in debt however the difference the difference between what you owe and what you have in your savings can all be used in retirement this is how you have extra money to use in retirement this is how you can help your kids have the education of their dreams and help them to go to any school they want and you can do this without having a negative impact on your retirement now you could literally save hundreds of thousands of dollars off what we call the opportunity cost of paying for college which is by far the most expensive part of paying for college and yes this will work for any school any any student any school public schools private schools Community College trade schools maybe your kids don't even want to go to school and they

want to start their own business and you want to help them start their own business it doesn't matter it's the same concept it works for any school and any student whether you have an exceptionally gifted student or whether you have students that are gifted in other ways because this does not rely on scholarships or financial aid okay and works for any student that are the younger students for those of you who are younger and you have kids that are just born or or for those of you who have seniors in high school or even college students and you still have a few years left to pay this will work for any of you because you can use this strategy to pay for college or for those of you who have older students you might need to use a combination of this strategy with some college loans so you're kind of combining strategies one two and three Al together to be able to save some money borrow some money from the government or from the private

institutions and then use this strategy to pay back those college loans okay so the question I get all the time is hey Lance can you show me exactly how this is going to work for me in my situation using my numbers and of course the answer is yes click the link below and get started and the first thing that we're going to do when we meet with you one-on-one is we're going to help you to position yourself financially to maximize all the grants the scholarships and the financial aid no matter how much money you make no matter if your students are gifted students or gifted in other ways we're going to show you how to maximize the free money through what we call Financial positioning next we're going to determine where are we going to borrow the money do you have older kids do we need to use a combination of some college loans maybe some government loans could you qualify for an income-driven payment plan how are we going to finance it what kind

of loans are we going to use and then finally we're going to help you to analyze all of your different College funding options we're going to look at all the strategies we're going to look at all the products that we need we're going to look at your specific situation with inflation how much college is going to cost how many kids you have we're going to break down a College funding plan and we're going to show you how to save thousands even tens of thousands off the cost of college here we're going to show you tens of thousands maybe even hundreds of thousands of dollars in savings off how you finance college and finally we're going to show you how to save tens of thousands even hundreds of thousands of dollars off the opportunity cost of paying for college in the secret number three where we focus more on the actual savings and how we're going to pay for college okay so again click the link below to get started book a call with us now

picture a day when your kids finally realize what you've done for them and they thank you for helping them to have the education of their dreams and picture a day when you no longer have the financial stress of how you're going to help your kids pay for college and still have any sort of a retirement you are one click away from that day happening so click the link below and we'll talk to you soon