Smart College Planning Strategies for Parents and Grandparents with Laura Russo – Ep 099

Planning for retirement doesn’t always stop with your own financial future. For many families, helping children or grandchildren afford a college education has become one of the biggest priorities facing retirees and pre-retirees.

With rising tuition costs, evolving financial aid rules, and widespread misconceptions around 529 plans and FAFSA, families with great intentions can unknowingly make costly mistakes without the right strategy in place.​

In this episode, Matthew Peck is joined by SHP Financial Advisor Laura Russo to break down the increasingly complex world of college planning. Laura explains how parents and grandparents can support their family’s education goals in ways that remain tax-efficient and how ownership structures, gifting strategies, and early planning decisions can influence outcomes for both students and families.

Together, they share practical strategies such as direct tuition payments, 529 and ABLE accounts, and recent FAFSA rule changes that significantly impact financial aid eligibility. Ultimately, this conversation emphasizes how education planning is done proactively, it can reduce financial stress, preserve family wealth, and create opportunities for future generations without compromising retirement security.

In this podcast interview, you’ll learn:

• How grandparents can help fund college in a tax-efficient way.
• Why 529 plan ownership now matters more than ever.
• How recent FAFSA changes impact financial aid eligibility.
• The differences between direct tuition payments and 529 strategies.
• Why student-owned assets can unintentionally reduce aid opportunities.
• How ABLE accounts support education planning for individuals with disabilities.
• Why early financial conversations help families make smarter college decisions.

Inspiring Quotes

• “Scholarships and foundations, they give away money to local kids. So, why not take advantage of that?” – Laura Russo

•  “A huge change is that it is great to have grandparents own 529 accounts now because now not only are those income distributions not counted as income for the student, but it’s off the books for FAFSA.” – Laura Russo

• “A lot of these kids get suckered into the TikToks and the marketing of some schools that are extremely expensive. The return on investment just isn’t there in all honesty. So, if you can help them to learn that and to know the difference, you’re going to set them up to maybe save hundreds of thousands of dollars in the future.” – Laura Russo

Interview Resources

• University of Massachusetts Amherst
• Free Application for Federal Student Aid (FAFSA)
• MassHealth
• Clemson University
• MEFA

[INTERVIEW]

Matthew Peck: Welcome everyone to another edition of SHP Financial’s Retirement Road Map podcast. I’m your host, Matthew Peck. Joined today by Laura Russo, really actually through popular demand because everyone has been watching our quarterly market updates. Everyone’s watching, both watching it as well as on the podcast. And we’re getting this incredible feedback. People are like, “Okay, Matt, you’re doing a great job. You’re explaining the markets well, ah, but could Laura do more? People want to hear from Laura more.

Laura Russo: I get that a lot. I know, Matt. I know. It’s hard. It’s hard to be next to this shining, right?

Matthew Peck: Yeah, absolutely.

Laura Russo: We got to get you some sunglasses.

Matthew Peck: Exactly. All that spotlight, and we need to really shift it over there. And so, we said, you know what? Let’s dedicate this podcast to something that’s sort of near and dear to your heart. I know your husband obviously works in this field as well. And what we’re talking about folks is college planning, 529s, FAFSA, affordability, options. I mean, when I say options about where to go and things along those lines, I mean, I don’t think you can read a headline today without getting amazed at the cost of education and higher education. I mean, some of these schools are pushing six figures now, which is just mind boggling to me.

And so, our clients, our listeners on the podcast, our clients, I’m sure everyone is wondering what’s the best way of funding colleges? What’s the best way as a grandparent to help out? What’s the best way as a parent to help out? Again, what’s FAFSA? What’s loans? How’s it working together? So, long story short, listeners, this is what we wanted to do. Laura has been so kind to rejoin us, done a whole lot of research into this particular area, and I’m really excited for you to join us.

Laura Russo: Thanks, Matt. It’s great to be here. And again, I think you hit the nail on the head. This is a subject that, just because you might be in retirement, doesn’t mean it doesn’t quite hit you. A lot of our clients, a lot of the people we speak with have grandchildren who are entering into college, and it’s a whole ‘nother beast, a whole ‘nother area to plan for that we feel like there’s some opportunities and there’s also some misconceptions out there that we want to kind of unpack a little bit today. So, I think let’s just dive right in. And a big area that I think we see as a missed opportunity or an area that people aren’t taking advantage of is having direct tuition payments for a grandparent over two colleges directly.

Matthew Peck: Okay, so let me pause you there. So, that’s usually like the first place you start when you’re explaining to people, okay, here’s something you need to know about 529s or college funding, is this idea of paying directly to the college?

Laura Russo: Yes.

Matthew Peck: Okay. So, how does this work?

Laura Russo: Yeah. So basically, and it is a good point. A lot of people come in and say, “Hey, how can I help pay for college from my grandchild?” And the first area, you already hit it, 529s. That’s the one everybody knows about. That’s the one everybody’s saying, should I do this? We’re going to definitely unpack that a little bit more, but actually, I think one of the friendliest ways is these types of direct tuition payments to a college. So, as a grandparent, you are writing the check directly to University of Massachusetts Amherst. I’m using that as example because that’s my alma mater. And you are not letting that money go to the parent, to the child. It’s going directly to the institution. Now, you might be asking that, why would we do that?

Matthew Peck: Yeah, absolutely. Well, Laura, why would we do that?

Laura Russo: So, the reason why you would do that is because it’s so tax friendly, it’s tax free, it’s a gift, but it doesn’t have the constraints of the annual gift exclusion amount. And Matt, pop quiz, what’s the annual gift exclusion amount?

Matthew Peck: Ooh, $13,500, or since we’re in 2026, has it gone up?

Laura Russo: It’s $19,000 that we can give, $19,000.

Matthew Peck: Oh man, that was way up.

Laura Russo: That’s okay. It was a little bit of a trick question there.

Matthew Peck: Well, but let me ask you this, though, because we talked about the gift exclusion, $19,000 that we can give per person. What about tax deductions? I mean, so let’s say someone cuts a check to UMass for whatever, $30,000, I’m not even sure how much UMass is for instate or out of estate.

Laura Russo: A lot more than that.

Matthew Peck: Is it really? Oh, gosh, I’m dating myself again. Is there any tax deductions for the person that’s like, does that end up as an itemized deduction or anything like that?

Laura Russo: Good question. So, it’s not a tax deduction. We can talk about tax deductions on 529s. It’s actually more for heavily leaning into the idea of that gift exclusion amount or gifting, right? So, we talk about this a lot with our clients when we have clients who might have a net worth that’s starting to maybe touch the line of, uh-oh, we might be hitting over and above thresholds for now, we might be susceptible to the estate tax, right? So, you have a lifetime gift exclusion amount. So, basically, Matt, you have an amount that you can use for your lifetime that you can gift away without paying any taxes or without paying anything over and above that.

Now, people don’t actually know this, and many people don’t truly hit this, but the gift tax amount over and above that exclusion is pretty hefty. It can go up to 40% on the high end. So, yeah, it costs money to be charitable. So, by having an avenue where we actually don’t even have to think about any limitations with tuition. So, you could have a $70,000 tuition payment that you want to pay for as a grandparent, you don’t have to worry about it borrowing against your lifetime gift exclusion amount, and you don’t have to worry about it on the annual basis of that $19,000 per person.

Matthew Peck: Well, and I think too, a lot of times, clients will ask, obviously, they want to have an impact on their kids or their grandkids lives specifically. And this is a direct, I mean, because you talk about gifting and doing the annual exclusions. Well, when you gift it directly to the child, there’s no real strings attached, right? I mean, officially, when that kid becomes 18 years old or becomes a legal adult, whatever gift that the grandparent gave can be used for a hot rod. Yeah, exactly, which is something that wouldn’t exactly be the most productive or constructive for their careers, whereas this gift directly, or I shouldn’t call it a gift or not, but the idea of paying tuition directly to the college, it basically guarantees that it has to be used for education.

Laura Russo: Absolutely, Matt, you just hit the nail on the head. That is a huge part of it is you, as a grandparent, have that control where you can say, you know what? Little Johnny really likes hot rods and guns and cigarettes and, no, I’m just kidding. And I really don’t want my money going to cigarettes and booze.

Matthew Peck: Right. Absolutely. All the sin stocks, yeah.

Laura Russo: Yeah, little Johnny lives on the edge ever since he was a toddler.

Matthew Peck: Yeah. No, exactly. This guy’s wild.

Laura Russo: Yep, yep. You’ve had to have really sharp eye on Johnny, but instead you could say, “Hey, little Johnny, I want you to turn your life around. I will give $20,000 directly for your education if you go to school.” And that might be the moment where little Johnny says, “I’m giving up all life.”

Matthew Peck: Yeah, he’s turning his life around right there with that one gift.

Laura Russo: That one gift might change his life.

Matthew Peck: But I love that idea because specifically, it’s the fact that it’s direct, it’s sort of like off the record pretty much, because just for everyone to know is that if you gift more than $19,000, it’s not necessarily a taxable event, but you have to report it, it’s a reportable event, whereas, so you could gift, let’s say again, $30,000, or not even gift or whatever, pay the tuition for $30,000 or $50,000 and you don’t report it anywhere. So, you just pay the bill.

Laura Russo: Exactly.

Matthew Peck: Interesting.

Laura Russo: Yep, exactly. Now, if you were to just gift that money away instead, like you said, you would have to report that. There’s a special form, Form 709, I believe what it is. Don’t quote me on that. But it’s a special form that lets the IRS know, “Hi, IRS, just an FYI, I borrowed against my lifetime gift exclusion amount,” which right now might not seem like a big deal, but let’s say down the road, they really shrink that exclusion amount, because right now, most people federally are not going to hit that limit. Maybe on a statewide, some people are definitely seeing that. But if they shrink that down, let’s say the federal limit goes down to more of what the state levels are, let’s say $2 million, $4 million, that’s a lot easier to hit. And if you’ve already borrowed a good chunk against it, who knows? Down the road you might be kind of kicking yourself that you utilize that, where in this case you’re still accomplishing, reducing your total estate, but gifting directly to the college institutions.

Matthew Peck: Okay. So, to kind of reframe it, client comes to you and they say, “Okay, Laura, I’d like to help out my grandson or daughter,” or we’ll go back to little Johnny. “I’d like to help…”

Laura Russo: Well, now he’s good, right?

Matthew Peck: Yeah, right. Absolutely. Now, he’s good little Johnny. I’d like to help him out with college tuition specifically. So, number one, you say option A is this idea of paying tuition directly. Okay? So, that’s the best because it’s most tax efficient, kind of again off the books, doesn’t affect your gift exclusion or whatever it may be. Okay, what’s option B when you’re talking to the parents or the clients?

Laura Russo: Yeah. And option A is great if we’re looking at a kid who’s a couple years out from college, right? But if you have a brand-new grand baby and you want to do something now, 529s are that area where we talk about them a lot, but that’s a really strong area for you to be able to gift into. Now, 529s are education accounts. They’re very strict about having it be for very certain things. It has to be for tuition, room and board, books, supplies, certain K through 12 expenses. In previous years, they were even more stringent. It was very strict and they’re kind of just starting to open up that avenue a little bit.

But this is really going to be money that is allowed to grow tax free. And when you take money out for those specific uses, you don’t pay taxes on it. So, you can put money in here and you can have that grow tax free as opposed to, let’s say you had that same amount of money growing in an after-tax account. As you have growth and you have realized gains, things like that, you can quickly start to see some of the taxes adding up there.

Matthew Peck: Okay, so 529s are an account that grow tax free. There’s no tax deduction on the way in.

Laura Russo: Correct.

Matthew Peck: But it grows tax free and as long as it’s used for these qualified expenses, it also grows tax free and you would draw it tax free, right? So, it has that level of it, but how do we get money into it? Who’s the owner? Who are the beneficiaries? How is it invested?

Laura Russo: Yep, good question. So, contributions going in are not tax free in some states, and others they are. So, we do have some states that are a little bit more friendly, and luckily for us in Massachusetts, we do have a little bit of a deduction that can be taken there. So, you can take a thousand for single filers, $2,000 for married couples, but definitely check in with your financial advisor. In some cases, a grandparent contribution might not count and might have to be a parent only, but that’s going to be an area you definitely want to check in specifically on.

Now, when it comes to the 529s, there’s a lot that we see here where people say, well, I don’t know if I really want to put money in there because what if little Johnny was going back on the bad side? Poor little Johnny.

Matthew Peck: Yeah, right. Exactly. And just gets on and off the wagon each time.

Laura Russo: Exactly. He’s having a rough time.

Matthew Peck: Just hypothetically speaking, of course.

Laura Russo: Okay, hypothetically speaking, little Johnny says, “I’m not going to college. I want to do something else,” which is a great path in certain areas for some families, but let’s say now we have a good chunk of money in a 529 and the worry is that, well, what’s going to happen to that money? Well, we have some options now that are actually relatively new to us, where if a 529, let’s say, that person, that child does not want to go to college, we can actually start to roll over into a Roth. So, they can have the annual amount, $7,500 for this year that they could roll over into a Roth account, Roth retirement account or a Roth IRA that they can use for retirement. So, it’s not necessarily strictly within the 529 anymore. Now, there’s a certain amount that you can do up to, I believe it’s around $32,000 if I remember correctly, like the actual, like the life…

Matthew Peck: The annual lifetime maximum.

Laura Russo: The lifetime max. So, $7,500 until you hit that max. So, you can’t do that full amount in one year. but you can do it every single year until you hit that max amount. You can also transfer the 529 to a different beneficiary. So, let’s say little Johnny has a sister who is on the straight and narrow and is headed straight for college. She might have a 529 that they used up quickly because maybe she went to an Ivy League school or something like that. Well, any amount that was left over, we can start to, to roll over.

Matthew Peck: Okay. So, grandparents become the owner in this situation. Grandparents are the owner and controller of the 529 account, again, in this example. And then they choose sort of a beneficiary that the fund is going to be used for. And then whether or not, so let’s say little Johnny, back to that situation, little Johnny uses it, great. Little Johnny doesn’t use it, he can fund his Roth with up to an annual, or I’m sorry, lifetime maximum. And then if there’s still funds left over, you could transfer it from Johnny to his sister, call it Mary in this situation. So, that’s the little bit of the mechanics on kind of how it works.

But what are the differences between like a grandparent owning it versus a parent owning it? Let’s say I’m a grandparent and say, no, I’m just going to give my son, little Johnny’s dad, I’m just going to give him $15,000. And he’ll put it into the 529. I mean, what’s the best for ownership of the 529, the person that’s actually controlling it?

Laura Russo: Great question. So, if you were to ask this question in 2024, the answer would be different. 2025 actually just recently had some changes to legislation, the simplification of college savings act, something along those lines. But basically, a 529 owned by a parent versus by a grandparent have a little bit of a different treatment in that when it’s owned by a parent and the parent then starts to apply for FAFSA, which we’ll go there in a little bit, that’s an asset, that’s going to be counted in FAFSA.

Now, previously, if it was owned by a grandparent, it’s off the books, still off the books technically, but any distributions from the 529 that was grandparent owned would be counted as income to the student. And that is actually an area where it’s been a pitfall for many people because let’s say, they say, oh great, I have this huge 529 that my grandparents own for me. I can take money out. I don’t have to worry about it on my FAFSA. But then the year that they take that money out, let’s say they took $40,000 out, that was counted towards their income. So, the following year for FAFSA, they were reduced basically.

Matthew Peck: Well, the withdrawals counting towards?

Laura Russo: Correct.

Matthew Peck: Okay. I thought it was just like interest or gain or whatever, but the actual withdrawals. Ouch.

Laura Russo: So, that’s an area where…

Matthew Peck: I’m glad they fixed that. So, that’s no longer the case.

Laura Russo: Exactly. And that’s an area where we would see a lot of times people saying, oh, shoot, now I almost don’t want to take money out of here because it’s starting to affect the eligibility that we were getting for certain financial aid. So, that’s a huge change and a huge green flag for us that it is great to have grandparent-owned 529s now, because now not only are those income distributions not counted, but it’s off the books for FAFSA. So, it’s not on the parent’s name, it’s on the grandparent’s name.

Matthew Peck: And just to kind of combine two things we talked about, the gifting exclusion, if you don’t mind, Laura, the 529s, I believe, have a Superfunding ability. I don’t know if you’ve seen that before, but that five-year Superfund.

Laura Russo: Yep. You can Superfund it.

Matthew Peck: So, okay, grandparent opens it up and now that the FAFSA situation is a kinder treatment where there’s no income or anything like that, it’s basically off the books if the grandparent owns it. And again, it’s for the benefit of little Johnny. And we talked about how there’s these annual gift exclusions of 19,000 and different things like that, but 529 is kind of unique in regards that they allow for something called the Superfund. So, if you don’t mind walking our listeners through what that is.

Laura Russo: Yep. A Superfund is basically when you’re bunching up a few years’ worth of your contribution amount, so that $19,000, couple years all bunched up together so that you can do one large contribution into it. I don’t remember the amount off the top of my head. I believe it’s $130,000, I want to say, within that range that you can put into the 529, all at one big shot. And it’s still not going to count as a large, like, over that gift exclusion amount.

Matthew Peck: Right. So, imagine that, ladies and gentlemen, it’s like, let’s say again, you’ve done very, very well. You want to help out your grandkids. You’re bumping into these state tax limits and you say, okay, I’d like to gift to get my estate lower, and I want to gift in a very targeted way towards education. With the Superfund, you open up the 529 and it’s not like $19,000 a year for the next five years. You can put all five of those years all once. Once little Johnny was born, you can do a hundred and whatever, call it 120 just to round up. You can do that all at once, and so, suddenly, your state’s lower by $120,000.

Little Johnny’s account is sort of accelerated. It’s like gasoline on that, where now, by the time he’s 18, it will hopefully cover most, if not all. Now, we’re all getting back to the affordability issue, it’s a different, like the rising cost is a different story. We’ll leave that for a different podcast, but just the idea that you can open it up and really get it going fast. That’s something I really wanted to get across. Okay, so now we’ve opened it up. We’ve either funded it a little bit at a time or we Superfunded it. And now, we just talk about how it’s not impacting the FAFSA. Okay? What’s FAFSA?

Laura Russo: Okay, before we jump into FAFSA, one little point I do want to make, just kind of the difference between doing the direct tuition payments and the 529s.

Matthew Peck: Okay. Option A and option B here.

Laura Russo: Yeah, exactly, because you just triggered that in my mind that that’s a good point to really lean in on is that if you wanted to do those tuition payments directly, that’s great. Like I said, if you have a grandchild who is of college age or close to college age, the 529s would be great for someone who has younger grandchildren. And maybe this is more of a kind of legacy piece because you can’t guarantee that you might be there when they enter into college.

Matthew Peck: Well, and also too, I mean, it’s not like these are mutually exclusive. So, let’s say you have a grandson that’s 16 years old, and then you have a granddaughter that’s 16 months old. Okay, go for option A in regards to that, consider, obviously, talk to your financial advisor. These are not blanket recommendations for all. But for the 16-year-old grandson, you probably explore direct payments. For that 16-month, year-old granddaughter you should explore 529s to kind of oversimplify it a bit.

Laura Russo: Definitely. And one other area that’s very cool that a lot of people don’t know about is there’s actually another type of 529. This is a 529A.

Matthew Peck: Okay, I’ve not heard of that before.

Laura Russo: Okay, so 529A, also known as an ABLE account is an account very similar to a regular 529, but it’s specifically for people with disabilities, and it can have actually a little bit more flexibility to it. So, these types of accounts, the recipient must have disability onset before age 46, so a lot more flexibility there, right? Previously, it was 26 and they changed that, so that it allows for more money to go into these types of accounts and it can be used, again, money goes in tax free, gross tax free. It has more flexibility for what it’s allowed for. So, people with disabilities may not be going to a traditional style college, right? But it allows for more flexibility with health programs, with education or job training support, which is amazing.

So, if you have a grandchild that has a disability, and you might not know how to give to them because they have very stringent means as far as sometimes, they’re getting some benefits from the state and getting some really great and needed benefits to help them. If you give too much to them, you might exclude them from those benefits. So, this 529A account, you can have up to $100,000 into this account and it’s excluded from them losing any of those really important and necessary benefits that they’re getting.

Matthew Peck: Oh, that’s fantastic. And think about that too, I mean, because we– not to get too far off topic and we talk in terms of special needs trusts and when it comes to estate planning for a grandson or a granddaughter does have special needs, we work with attorneys to set up special needs trust so that upon the death, they’re funding this account that is also outside of benefits and things along those lines. But you can now kind of combine a 529A with special needs trusts to really round out the benefits and the services that they can receive while not disrupting MassHealth or Medicaid or whatever benefit program they’re on. So, that’s fantastic, especially for people that are battling or working with their way through what can be a challenging situation.

Laura Russo: Yeah, because they might not feel like they have the same ability to give to grandchildren. They feel like they might not have that same freeness to say, oh, I’d love to give my grandchild this money, but I don’t want them to lose any of their benefits. So, a hundred thousand in that account, a lot can be done there. So, that’s huge.

Matthew Peck: No, absolutely. Thank you for sharing that.

Laura Russo: Now, Matt, go back to your question on FAFSA.

Matthew Peck: So, let’s talk about FAFSA mainly because everyone, and actually, as a parent of a 16-year-old son, I need to know this. So, that’s the part. So, I’m dutifully taking notes the entire time, Laura. I was very selfishly like, ooh, we’re talking 529s. This is great. But okay, so what is FAFSA? How does this work? How does it interact with the 529s? How does it interact at all with direct tuition? Yeah, now, show us this world.

Laura Russo: Absolutely. So, I am very lucky I’m married to a man who works in the college system, and this is sometimes for fun with the Russo household. We love to talk about this stuff, right? We’re weird. Okay? so, some nights over dinner, we put the little one down.

Matthew Peck: Yeah. If you ever wonder why, like, the invitation to come over for dinner, like, I don’t show, I’m suddenly sick.

Laura Russo: Yeah, exactly. Oh, no, she’s going to start talking about this.

Matthew Peck: It gives you a little indication.

Laura Russo: So, I love to pick his brain. I love to really ask these questions. And this is a while back really, started sparking the idea. So, this would be a great podcast for us. Because FAFSA, it’s a whole ‘nother beast, and people are familiar with the name, but they really don’t understand some of the mechanics of it. And I’m by no means the expert here. But anything that we can do to better prepare ourselves is going to make a lot of strides towards positioning yourself to be really in good shape.

Matthew Peck: And just to interject quickly, this is almost like the first chunk or first section of the podcast was really focused on grandparents. FAFSA really is the parents themselves, right? Okay, so it’s not like grandparents are helping out with the FA– unless they’re obviously caring for the child, but assuming that’s the normal order of things, FAFSA really becomes the parent of the student, this is their world, this is when they need to listen up.

Laura Russo: Absolutely.

Matthew Peck: Okay. All right, go ahead.

Laura Russo: Okay, so FAFSA is the Free Application for Federal Student Aid (FAFSA). And it is something that everyone has to apply for when they are applying for colleges. So, you might not necessarily think that you are going to receive any financial aid, but you still have to apply in the beginning. And basically, what this does is it helps us parents and it helps us to understand how much we would be eligible for financial aid.

Now, the misconception oftentimes is that financial aid is just that check that they write out of here’s fully paid tuition, you’re all set. That is becoming more and more rare for people because as people are saving money and as they’re really doing a good job building up their careers, it’s no longer a thing where you can get that, hide money, hide and try and be really savvy about it. It’s hard to do that. That’s a big misconception is that you can plan ahead and somehow get that to be zero.

Matthew Peck: Yeah. I get to kick at it when people sit down, whether it’s FAFSA, whether it’s nursing homes, taxes, so forth, and like, what about this? What if I do this? And it’s like, no, my friend, they thought about that too. They have people, they’re good at their jobs. And I appreciate the thought. Like, I always love that effort. Like, oh, what if we do this? And it’s like, nope, they thought of that too. So, as you’re saying, FAFSA, there’s no really hiding from it anymore. Just accept what it is. But what was interesting, and you taught me offline is that different things are weighted. Okay, so let’s talk at time in terms of a grandparent-owned 529 versus a parent-owned 529 versus money…

Laura Russo: Money in the kids’ account.

Matthew Peck: Yeah, exactly.

Laura Russo: Yeah, okay. Grandparent-owned 529 is going to be a golden ticket there because it is not included on a FAFSA application. So, all intents and purposes and what we kind of jokingly said beforehand is it’s off the books. Okay? So, it’s completely on a separate silo. They don’t have the access to see how much is in there. And now that that change has come through where income provisions aren’t heavily weighted towards the student, that’s the Willy Wonka golden ticket right there. So, those are huge. Now, having a parent-owned 529 isn’t a bad thing. It’s great too. It is going to be having some weight within the application, but it’s not as heavily weighted as certain other accounts.

Matthew Peck: Does it do the income thing where if they would do withdrawals, does the withdrawal impact?

Laura Russo: Nope.

Matthew Peck: Okay.

Laura Russo: So, that’s been the new change for 2025.

Matthew Peck: Okay. Because a lot of these government applications will split up assets into or split up number accounts into, is it an income? Or is it an asset? So, so far, the grandfather-owned account is neither income nor an asset. Now, a parent-owned 529 is an asset. It does get weighted, but the income still is an impact.

Laura Russo: See, you got it. He can be talked. Perfect.

Matthew Peck: Absolutely. Again, I’m dutifully taking notes here, ladies and gentlemen.

Laura Russo: Now, if you have money in a student account, that is the worst place to have money because they are going to have the heaviest weight. Now, think of it, these kids, I mean, we see them as kids, but they’re coming in as individuals. And so, therefore, any money in their own account is going to be weighted heavier than a parent account, and then the grandparent account, which is completely off the books there. So, having assets there is probably one of the worst things you can do. And the hard part is, and I don’t think that the man or the– wants people to know this, but think of how much money some college students get on their graduation party, right?

Matthew Peck: Yeah, absolutely.

Laura Russo: And where does that money go?

Matthew Peck: Usually into their pockets or no?

Laura Russo: Into their pockets, into their checking accounts.

Matthew Peck: Yeah, right. Absolutely. I see what you’re saying. Yeah.

Laura Russo: And then all of a sudden, all that money that they just received as a gift is now heavier weighted on their FAFSA for the next year that they’re applying.

Matthew Peck: Well, and I think just to kind of broaden the conversation, I mean, so I love what we do is because we’re not magic workers or magicians or anything like that. It’s just the fact that if you know the systems and you know what’s this, this is law, this is how the accounts work. I mean, obviously, it changes a lot, right? But the main point is the fact that, again, it’s not like rocket science. It’s just doing the homework and the research to know, okay, here’s your goal and what’s the most efficient way of achieving that goal?

And really, at the very, very basic level, that’s what it is. And a lot of people have very honorable goals of giving a gift to their grandson or granddaughter at graduation. But next thing you know, it kind of blows up in their face. And it’s like, no, no, okay, stop. Okay, we want to do a gift, that’s great, but here’s a better way of doing it. And this podcast really symbolizes that.

Laura Russo: Exactly. Exactly. So, definitely want to avoid having large amount of money in the student’s name. And of course, every family’s different. We get it. It’s not that clear for every single family dynamic. But if possible, having that money, at least in the parent’s name, maybe a separate account that’s just earmarked for the child can be helpful. And what is going to be actually used on these types of applications for the parents, that’s going to include their checking accounts, brokerage accounts, 529s. And that’s going to be under the expected family contribution, the EFC.

So, your EFC is your expected family contribution, and that’s essentially what it’s going to be is that magic number that they populate at the end of the application. Once they process and say, all right, your family is expected to contribute X amount, $20,000, $15,000, $100,000. It depends.

Matthew Peck: Okay, so they give you a final number, not like a percentage where we’re going to give you a 15% off the tuition or whatever that may be. And is FAFSA the same as, oh, sometimes I’ll hear about like, oh, this school gave me this and this school gave me that, right? So, there’s the FAFSA system and then the schools that the colleges themselves have like a separate system?

Laura Russo: Correct, yeah.

Matthew Peck: Okay, there it is. Great.

Laura Russo: So, if you think of, especially being in Massachusetts, we have some amazing colleges, in New England, amazing colleges, and they’ve been around a long time, right? So, there are some big endowment funds. There’s some big grants there that students can apply for. So, that’s a completely separate application, and each school might have their own and it’s actually a lot more rigorous. So, if you’re…

Matthew Peck: I mean, do the same rules apply though, or are they different? So, it’s different rules.

Laura Russo: A little bit different. Yeah, a little bit different. So, for example, for FAFSA, they don’t really care about your property as much. They’re not going to ask you how much the value of your residence is. They’re not going to ask you much about your family business, whereas that second level of application is going to ask you that. So, that’s where you’re going to see it’s a bit more of that rigorous testing because they obviously want to make sure money is going to students who need it. So, if you live in a $10 million home, let’s say, on FAFSA, they don’t care, right? On the other secondary type of school specific, they’re going to ask you that.

Matthew Peck: Okay. But at the same time, let’s just say you do make it through there. You’ll sometimes get sort of two benefits. You’ll get a federal student loan, if you will, and then a loan from the college or the college will just give you a grant. But there are, if you pass those tests, you’ll receive aid from both parties. Is that right?

Laura Russo: So, yes. And this is where that’s very confusing.

Matthew Peck: Yeah, I didn’t know if one like canceled out the other if FAFSA’s like, whoa, whoa, you’re getting money from Harvard or whatever. Like, we’re not going to– now you have to pay more because now we know that Harvard’s giving you however much money.

Laura Russo: Yep. So, FAFSA is going to have potentially some money that they might help to cover, where it’s saying, okay, we see some need here, we’re going to give you $20,000. Okay? And that is just money that you get as kind of that aid, right? But it also is what’s in connection towards federal loans as well. So, it’s going to say, we are going to give you aid, but we are going to give you federal loans, which you will go forward with. And most people have some type of federal loan. And that’s what’s going to be used to, after graduation, you’re going to start seeing that student loan balance.

Matthew Peck: Yeah. It’s like, what, six months after you graduated, whatever that may be.

Laura Russo: Yeah, they do give you a lot of time.

Matthew Peck: Yeah, absolutely. Time to pay back.

Laura Russo: And that’s where a lot of people, a lot of the students, and it’s hard as I think we see generations come through where they’re starting to say, “Oh, wow, I paid a lot of money and now I have student loans for the next 15 years.”

Matthew Peck: Well, and that’s what I was going to say too. I mean, it’s separate podcasts in regards to the value of college education based on how high it’s been when you compare it to the trades, when you compare it to what it once was. I mean, that’s a whole other podcast, and I don’t want to go too far down that rabbit hole, but especially with AI too, you can bring AI into it in making certain jobs potentially obsolete. I mean, it’s a very problematic area right now, and I’m specifically saying from a parent, right?

I mean, I like the fact that we’ve obviously have a good handle on how to fund it and how to navigate the system. It’s just sometimes, you can be frustrated with the system simultaneously. Understanding it and still being frustrated is possible. That’s also not mutually exclusive, I’d like to point out.

Laura Russo: Yeah. Matt, you make such a good point there, and this is an area where I think parents and grandparents can really do a good job, is that you are the guiding person for these students, right? Many students start to apply to colleges just based on, I like this one because I think it has a cool campus. I like this one because it has a great recognition and name.

Matthew Peck: All right. Just because, again, I’m talking about as a parent from a 16-year-old, that it’s like TikTok, all these like TikTok videos and like, it’s like, oh, that guy’s got a great football program. That’s literally what I’m getting. I’m like, hey, why do you want to go to like Clemson? He’s like, oh, well, they got good football. And I’m like, okay. Is that really the decision that we’re trying to make here?

Laura Russo: I know, coming from one of my nieces in Clemson, it is expensive. It’s not a cheap school and…

Matthew Peck: But literally, it’s like, my main point is the fact that social media is influencing where these kids want to go, not because of education or what. It’s like, oh, I want to major in this, so this is where I want to be. It’s like, no, no. They had a really cool, snappy social media video.

Laura Russo: Yeah, yeah. So, MEFA.org is a Massachusetts-based education, I don’t want to say lending system, but it’s a program that’s Massachusetts based. They have an amazing calculator online that you can go on and basically sit down with the student and say, here are all the packages that you received. Let’s plug all of them in. And it will tell us how much this college is actually going to cost.

But again, I think this is the opportunity for many times, and Matt and I were talking about this a little bit offline, is that this is actually kind of the gateway in the first time that a parent and student may have a conversation about parents’ finances. So, this is a really important moment for them to be able to set themselves up and their children up for success. And I get it, it’s not an easy conversation to have, but if a parent can sit down and say, hey, listen, these are the options. This is what we can afford as a family. Here’s the pros and cons of going to the big shiny school that has the great name, the great campus, the great football program. Here’s the benefits of long term, maybe going to shockingly a community college for the first few years.

Now, I’m a huge, huge proponent of community college. Not only because my husband works at one, but because it is one of the best things you can do financially for yourself. If you go to community college, it’s free in Massachusetts. Are you kidding me?

Matthew Peck: Yes. I’m sorry, wait, it’s what?

Laura Russo: Free. So, that means you can get your gen eds done. Do you really need to pay $60,000, $70,000 a year to take math and English and get your basically level two of high school done. Or can you be really savvy about this, say, hey, you know what, I’m going to get everything out of the way for the first two years and then I won’t feel as bad going to that bigger, brand name school? But what’s actually incredible about Massachusetts is that we have a program that if you go to community college, you have guaranteed acceptance to any Massachusetts state school. That’s huge.

And when you graduate, when you walk, you get that diploma. So, I think that’s huge. I think that is an area that a lot of parents really should be, I don’t want to say pushing towards, but helping to really explain and say, listen, and coming from the millennial side, which you know, all of my counterparts, I will tell you right now, I guarantee you, you’re going to see huge surges of that because we’ve paid student loans. We’ve seen how much it, for a lack of better word, sucks to see 40% of your paycheck go to a student loan. And for many, many people, they went to college and they might not even be using their degree in the way that they thought they would be.

Matthew Peck: No, and it is part of like a general, I’ll go back to that word, affordability issue because let’s say, hey, we want these young kids, I want these little guys to– but all joking aside, we want them to get their first home. We want them to sort of put a down payment on and really put roots down. And how can you possibly even consider putting roots down when you still have hundreds and thousands of dollars or however many thousands of dollars in student loan debts? It’s like, it’s this massive anchor that holds back.

So, it isn’t necessarily a failure to launch here, ladies and gentlemen. This is people who have loans. Like, I’d love to launch, I’d love to not live with my mom and dad, but guess what? I have $75,000 or as you said, 40% of my paycheck is going towards this loan. So, its, yeah, don’t hate on the younger generation because they might be dealing with stuff that you did not have to deal with, right?

Laura Russo: Correct, yeah.

Matthew Peck: Okay, all right. So, let me go back to the top. So, we started this conversation with just sort of strategies on 529, strategies on, in regards to financial aid, FAFSA, 529, 529As, giving directly to the college themselves. So, really covered a lot of areas. Is there any area that we didn’t cover, Laura, that you wanted to? Or any kind of final thoughts on each of those strategies?

Laura Russo: Yeah. One other area that I would highly recommend people explore is doing scholarships, doing grants, and applying for them. Now, a lot of these have early applications. Highly recommend being early applicants. Back in the day, it wasn’t quite as important. Now, it’s almost like if you see early application deadlines, think of that as your deadline because they are going to get preferential treatment and it is getting more and more competitive.

But utilizing things outside of the student loans, like, if you have a student work base where you can get money basically to work at the college and you can use it for whatever, but using those are going to just help add a little bit extra cushion there and applying for any scholarship under the sun. There are so many foundations out there, private foundations, nothing to do with the college that are local within your town. So…

Matthew Peck: Yeah. So, how do they find them? Is that MEFA too or no? Because you mentioned, MEFA does that in regards to like how much you can afford, but does MEFA have a list of scholarships as well?

Laura Russo: So, I don’t know if they necessarily have private foundation scholarships, but everything’s online these days. So, like, look up, town of Plymouth, private foundation, private scholarships, and see what pulls up. High schools also have these lists, so go to your guidance counselors, go to the administration office and say, hey, do you guys have a list of private foundations for the state or for the town? And do all of the applications. Not only is it great reps for the student because they’re learning how to write proposals almost, if you will. They’re learning how to do these essays, quick turnaround time, but that’s free money that’s completely off the table from what you would just naturally get through FAFSA. So, scholarships, foundations, they just give away money to local kids. So, why not take advantage of that?

Matthew Peck: Oh, that’s fantastic. And so, I mean, this has been great. I kind of want to like as I want to download all of this to make sure I understand it, but to really summarize, folks, if you are a grandparent and you want to help out your grandson or daughter and it’s really college focused, one thing you consider is giving directly to the college itself, works very, very well for people that are two years away from college and you might not have a chance to get them savings accounts really started.

Now, if you have a 16-month-old grandson or granddaughter and you want to do 529s, things to consider is who is the owner of that? How much do you want to fund per year? Do you want a Superfund? Do you not want a Superfund? Knowing that there’s flexibility now, these can be rolled over into Roth IRAs. They can be transferred to different grandson or granddaughters as well. So, some interesting strategies there.

Then for parents, FAFSA, the whole world of FAFSA, understanding what counts and what doesn’t count. Go ahead and hit repeat or rewind a couple times and Laura will walk you through all of that right there. But two things, and then also, again, looking into scholarships, I think is great.

Laura Russo: More study scholarships.

Matthew Peck: Yeah. But I really wanted to hit that point that you talked about that I really want to kind of, I want to end with is that any opportunity that you have to talk to family about finances, about sort of just financial literacy, right? Walking your kids or grandkids or whomever through this world, I mean, there are such decisions that have these long-term consequences. And to understand how they work, to understand the pros and the cons and the trade-offs, to say, okay, hey, I can go to community college and two years transferring to a state school and I’m getting that state school diploma, not the four C’s or whatever it may be if you’re afraid enough, if you don’t want that kind of– because you want that sort of state school diploma.

But I mean, people sometimes don’t talk about finance, like, it’s like politics and it’s like, look, you really have to, I mean, I know it’s awkward conversations and whatnot, but people need to understand the consequences of these decisions and compounding interest working against you, double compounding interest working for you, which is what we want to do. But it all boils down to just making wise decisions, making well-informed decisions, making decisions in the most efficient manner for you, for the family, for everyone involved. And that’s something we just love doing every single day. So, hopefully, you enjoyed the podcast. Any final thoughts, Laura, at all?

Laura Russo: No, I think we covered it, and you’re right, those conversations, it’s going to be the difference between someone who has such huge financial success towards others who have to fight and learn their way through it. So, if you’re a grandparent listening to this, saying, yeah, this doesn’t quite feel like it hits me, well, the big takeaway would be, yes, it does, because you might have actually a little bit more weight to a grandchild than a parent does, because a parent-owned, Matt, you know this, like you could talk certain things. So, you’re blue in the face to your kids and they’re going to be like, oh, whatever, dad.

Matthew Peck: Yeah, good point. Absolutely, yes.

Laura Russo: But if grandpa, grandma said, it sounds like, okay, let me– they’re not my parent, I might have a little bit of a different attitude towards them. You might be able to help them really make a huge difference with their decisions on where they go to school, how much they’re going to pay. A lot of these kids get suckered into the TikToks and the marketing of some schools that are extremely expensive. The return on investment just isn’t there in all honesty. So, if you can help them to learn that and to know the difference, you’re going to set them up to maybe save hundreds of thousands of dollars in the future.

Matthew Peck: No, absolutely. Laura, again, thank you so much. You accomplished that goal too, which was to let me speak less and you speak more. So, I think we also accomplished that goal in a very efficient manner. But thanks so much for this great information, to say the least. Thanks so much for joining us. You’re a repeat guest, so I guess joining us again. But thank you for all of our listeners for listening to the SHP Retirement podcast. And everyone else, be well.

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