Ross Riskin, un expert en finances personnelles, décompose quelques stratégies intelligentes pour financer les études de votre enfant, ainsi que l’importance de FAFSA et les changements potentiels de l’épargne-études à prendre en compte sous la nouvelle administration Trump.
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The cost of college tuition at some universities is fast approaching $100,000 per year, and the rise in higher education expenses shows no signs of slowing down, according to Ross Riskin, the chief learning officer of the Investments & Wealth Institute.
And yet, even though saving and paying for college continues to be a top priority for most families, many still make suboptimal decisions that put other goals at risk, such as saving enough for their own retirement, Riskin said in a recent episode of Decoding Retirement (see video above or listen below).
Riskin discussed the benefits of families saving early for future education expenses and making sure all family members understand their roles.
For instance, if grandparents or aunts and uncles plan on helping out, it is best to capture that information early on to create an optimal and efficient funding plan, he noted.
“We need to know who’s actually going to be involved in the funding process,” he said. “Understanding that early on helps us build a more accurate plan of how much we actually need to save.”
Talking to family members about contributing to education costs might seem challenging, at least on paper. However, according to Riskin, the actual difficulty of the conversation “depends on everybody’s education funding philosophy and, really, college funding philosophy.”
Morehouse College graduates arrive ahead of a commencement ceremony in Atlanta on May 19. REUTERS/Elizabeth Frantz · REUTERS / Reuters
Time horizon plays a key role in helping parents choose the most suitable education savings options, such as 529 plans and Coverdell education savings accounts, among others.
A 529 is a tax-advantaged savings account specifically designed to help individuals save for education expenses, whereas a Coverdell account is a trust or custodial account designed for paying a beneficiary’s qualified education expenses.
According to Riskin, households should consider four main factors when evaluating these vehicles and their underlying investment options.
The first two criteria are operational flexibility and investment flexibility. Operational flexibility refers to how the account is opened and managed, how funds are added or withdrawn, the ability to change account owners or beneficiaries, and overall ease of operation.
Investment flexibility, meanwhile, considers how much money can be contributed, what types of investments are available, any limitations on changing investment allocations, and how frequently adjustments can be made. For instance, 529 plans may have limited investment options and restrict changes to twice per year.
The next factor to consider is tax efficiency, which involves understanding any tax benefits or other implications when contributing or withdrawing funds from an account. Some accounts, like 529s and Coverdells, offer tax advantages that other options may not.
Read more: How do education tax credits work and who qualifies?
Lastly, families should consider financial aid efficiency, or how the account affects financial aid eligibility. Some accounts can be treated as an asset for aid calculations and certain withdrawals may count as income, which can negatively impact aid. Who owns the account — whether it be a parent, student, or other family member — also influences this factor.
Riskin generally favors 529 plans due to their advantages across the four key criteria. However, individuals who want a wider range of investment choices might find Coverdell ESAs or taxable brokerage accounts to be more suitable options.
In other cases, it might be appropriate to consider saving for college costs using a custodial account, often referred to as Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts.
Such accounts make it easy to give financial gifts to a child without the cost of setting up a trust. However, the account must be transferred to the child once they reach a certain age and could reduce college financial aid eligibility.
Given that there’s no one ideal education savings vehicle, Riskin suggested exploring all options.
“It really is this puzzle that you’re trying to put together,” he said, noting that he’s a big fan of using multiple savings accounts. “I’m not an all-or-nothing [person]. I’m not putting everything into [a] 529 or putting everything into a brokerage account. … You want to have flexibility.”
Riskin also highlighted the importance of filling out the Free Application for Federal Student Aid (FAFSA), even for families who don’t expect to qualify for aid.
He noted that the FAFSA is required to access federal student loans — which may be eligible for forgiveness — along with work-study programs. And some schools, he said, even require it to consider students for merit-based scholarships, regardless of financial need.
Additionally, with rising college costs, families who previously assumed they earned too much may now qualify for need-based aid at higher-cost schools.
Looking ahead, Riskin also suggested that some education-related policies may remain stable while others face uncertainty under the incoming Trump administration.
Riskin expects the policy allowing 529 funds for K-12 tuition (up to $10,000 per year currently) to remain in place and potentially expand — a move that would reflect the Trump administration’s support for private education options.
Students study at a library on the campus of Ocean University of China in Qingdao, China, on Oct. 21. (Li Ziheng/Xinhua via Getty Images) · Xinhua News Agency via Getty Images
However, one of the income-driven repayment plans, the Saving on a Valuable Education (SAVE) plan, as well as the tax-free income status of loan forgiveness plans might be at risk. In July, a federal court issued an injunction blocking the implementation of certain aspects of the SAVE Plan and other IDR plans.
At present, public service loan forgiveness is tax-free, but forgiveness under IDR plans may be taxable after 2025 unless Congress extends the current tax exemption, which Riskin believes is unlikely.
Read more: Will I be taxed on student loan forgiveness?
There are other implications for colleges as well. Changes to immigration policies could reduce the number of international students in the US, which could financially strain colleges that rely on their tuition. This may lead to increased tuition costs or budget cuts in other areas.
Ultimately, Riskin advised against making sudden moves, like paying off student loans immediately, and recommended waiting to see how policies evolve, as federal loans offer flexibility and potential forgiveness options that private loans may not.
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
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