Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Baldridge Wealth Management and Baldridge College Solutions are affiliated.

Cambridge and the Baldridge companies are not affiliated. 6-13

The Impact of Divorce on College PlanningThe Impact of Divorce on College PlanningThe Impact of Divorce on College PlanningThe Impact of Divorce on College Planning

Taming the High Cost of CollegeTaming the High Cost of CollegeTaming the High Cost of CollegeTaming the High Cost of College!!!!

Presented by:

Brad Baldridge, CFP® Baldridge College Solutions, LLC 10521 W. Layton Avenue Suite 200

Greenfield, WI 53228 414-529-9400 Ext. 107

Brad@BaldridgeCollegeSolutions.com

www.BaldridgeCollegeSolutions.com

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Taming the High Cost of College!

Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Baldridge Wealth Management and Baldridge College Solutions are affiliated.

Cambridge and the Baldridge companies are not affiliated. 09-12

Brad BaldridgeBaldridge College Solutions, LLC

10521 W. Layton AvenueSuite 200

Greenfield, WI 53228(414) 529-9400

www.BaldridgeCollegeSolutions.com

The Ingalls Family

Charles, age 50, Mill Worker, Salary $45,000Caroline, age 52, Office Manager, Salary $40,000

Mary (2014) age 17, Junior#2 in her class GPA: 4.4ACT 32Interested in Math or Engineering

SCHOOL LIST: MIT, Northwestern, Madison, MSOE, Bradley, Valparaiso

Laura (2015) age 16, SophomoreStrong Student (not quite as strong as Mary), the writer in the familyGPA: 3.7Laura wants to go to South Dakota State with her boyfriend Almanzo Wilder

Carrie (2018) age 13, 7th gradeStraight A’sStrong soccer player – top 5 of all 7th graders in the state.

The Huxtable Family

Cliff, age 54, self employed doctor , Salary $75,000Additional $100,000 as draws from the medical practice

Clair, age 52, office manager, at medical practice, Salary $40,000

Theo (2012) age 19, College Freshman at MadisonBiology major….doing well.

Vanessa (2015) age 16, SophomoreGPA: 3.87ACT: 29Class Rank: 19/225Musician

SCHOOL LIST: Dreams of Juilliard, considering Lawrence University, NYU, Boston College, Carroll, Carthage

Rudy (2019) age 12, Sixth gradeGood kidWill go to college

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The Connor Family(divorced 10 years)

Sarah, age 47, works two jobs, Salary $35,000

Bill, age 49, Sales Rep in Texas, Salary $50,000

$25,000 behind in child support

John (2014), Age 17, Junior at Marquette High School

GPA: 3.9

ACT: 29

Class Rank: 15/225

SCHOOL LIST: Marquette University, Carroll

Grandpa has $40,000 in an UTMA at Vanguard. Grandpa is the custodian and John is the owner.

Late Stage College Planning

College finances– Financial aid planning– Financial aid forms– Offer letters– The appeal process– Saving and investing– Tax planning– Cash flow

College selection– College visits– College fairs– Finding the “good fit” school

College testing– ACT– SAT– PLAN/PSAT

Athletics– Division I, II, III– NAIA– Marketing

Academics– High school curriculum– GPA– Class rank

Career/life planning– Choosing a major– Career planning– Learning life skills

Admissions– Applications– Essays– Recommendation letters– Early decision/early action

Scholarships– Need-based scholarships– Merit-based scholarships– Institutional– Private

2011-12 College Costs

• Average cost of public school: $21,447 per year*

• Average cost of private school: $42,224 per year*

Includes: Tuition and fees, room & board, transportation, books & supplies and personal expenses (COA)

* Based on data from The College Board, Trends in Pricing, 2011

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Cost of Wisconsin Colleges

• Alverno College $33,216

• Lawrence University $50,370

• Marquette University $46,644

• University of WI-Madison $23,774

* Based on data from College Board, Fall 2012, living on campus

College Costs

• Does everybody pay the same price for College?

• Who Pays Less?

Which Would You Prefer

Attending the Best School

-or-

Attending the Best School for your Student

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Finding a School that is a Good Fit

• College Visits

• College Fairs

• College Reps at the High School

• Websites

• Social Media

Divorce Issues with High School Students

• Who does all the leg work...i.e., testing, visits, research?

• Who participates in the decisions or has veto power?

• Who will pay for all pre-college expenses?

This process can overwhelm a

single parent!

Selection Criteria

• Academics

• Majors

• Distance from Home

• Urban, Suburban or Rural

• Large or Small

• Finances

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Advanced Strategies

• What can the student do to increase the odds of receiving admission or scholarships?

Common Financial Aid Myths

• We earn too much.

• Our child has poor grades.

• We have too much equity in our home.

• There is nothing we can do. We will pay for college ourselves.

• Financial aid is easy to understand.

Where is the money going to come from?

• Current Income

• Savings / Investments

• Financial Aid

• Loans

• Scholarships

• Reductions in other expenses• Taxes

• Interest Expenses

• Unnecessary Expenses

• Life Style / Retirement

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Financial Aid

• Need based Aid� Income and Assets

� Parents and Student

• Merit Aid� Academics

� Talents

� Geography

� Others

Three Types of Families

Type 1: Those families who will qualify for large amounts need-based aid.

Type 2: Those families who qualify for some need-based aid. Good planning may increase the amount of aid received.

Type 3: Those families who will not qualify. These families need to focus their planning on other areas. (i.e. Tax, Merit-aid, Athletics, Cash Flow, Investment)

Need-based Aid

Cost of Attendance

- Expected Family Contribution

=Financial Need

COA - EFC = FN

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Top 5 Need-basedAid Factors

• Student Income

• Student Assets

• Parent Income

• Parent assets

• Number of Students in College

Who’s my Parent?

Free Application for Federal Student Aid (FAFSA)

“If your parents are divorced or separated, answer the questions about the parent with whom you lived more during the past 12 months.”

Download the fact sheet at www.studentaid.ed.gov/pubs 2012-13

Income

• Based on taxes from the prior year (AGI)

• Un-taxed income is added to AGI

• Student income is assessed more heavily than parents

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Divorce Issues Income

• If recently divorced or separated, tax return may be joint.

• Reconstruct as if you were single.

• Child support, family support, and alimony are all forms of income that may be assessed.

Assets

• Values reported are the values on the day you sign the forms

• Not all assets are assessed

• Student assets are assessed more than parent assets

Divorce Issues Assets

• Prior to finalizing divorce, probably divide things done the middle, 50/50.

• Post divorce – the assets belong to whoever received them from the divorce.

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Divorce Issues Assets (continued)

• Who should own 529 accounts

• What’s the proper mix of assessable versus non assessable assets for each spouse

• Who should have control of the college assets

2 Need-based AidSystems

• Federal Aid System

� FAFSA- Free Application for Federal Student Aid

• Institutional System

� CSS Profile

� Approximately 300 Colleges

CSS Profile Schools(Non Custodial Parent

Form Required)

• Northwestern University, IL • Principia College, IL • University of Chicago, IL • Saint Mary's College, IN • University of Notre Dame, IN • Wabash College, IN • University of Michigan, MI • Carleton College, MN • Macalester College, MN • St. Olaf College, MN • Lawrence University, WI

See CSS Profile handout for the entire list or visit http://student.collegeboard.org/css-financial-aid-profile

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Examples of Federal EFC

FAMILY #1 FAMILY #2Parent Income $75,000 $150,000Student Income $0 $0Parent Assets $20,000 $20,000Student Assets $1,000 $1,000Students 1 1

EFC (Est) $10,500 $31,500

*Hypothetical example for illustrative purposes only

The 6 Federal Programs

• Pell Grant

• Supplemental Education Opportunity Grant (SEOG)

• Work-Study

• Perkins Loan – 5% fixed

• Stafford Loan –Subsidized 3.4% fixed Unsubsidized 6.8% fixed

• PLUS Loan – 7.9% fixed

Increase Your Need

• Are there things that you can

do that will increase your need?

YES !

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How Does Your Family Apply for Aid?

• The FAFSA

• The CSS Profile

• The College’s Own Institutional Forms

• Additional Forms:� Business / Farm Supplement

� Non-Custodial Parent Form

When Do You Apply for Aid?

• The first FAFSA application is generally due in February of the senior year of high school.

• Each college sets their own deadline.

• You will apply every year.

• You cannot file the FAFSA before January 1st of each year.

• The CSS Profile form can be filed before the end of the year.

When do you plan for Need-based Aid?

• When would you like to know how much aid you can expect?

• Before the Base Year

• NOW !!

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Merit Aid

• From the Colleges� Mostly Private

� Some Public Schools (out of state)

• Who gets Merit Aid� Students in the top ~25%

� Students the College wants• Athletes

• Musicians

• Diversity

Merit Aid

• Usually has an impact on need-based Aid

• May need to be earned year over year.

� Athletic Performance

� Maintaining grades

Cash Flow

• College expenses can be more than we can afford in any one year.

• We may need to spread 4 years of college expenses over 6 or more years to make them manageable.

• Multiple students make things worse.

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Cash Flow

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Saving

Parents

• Retirement

• Taxable

• Other

Student

• UTMA

• Retirement

• Other

Gifting Assets

• Gift assets that have appreciated to your children or grandchildren

� Stocks

� Real Estate

� Mutual Funds

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Before:Parents’ Capital Gain $10,000Capital Gains Rate x 15%Parents’ Tax $1,500

After:Child’s Capital Gain $10,000Child’s Effective Rate X 0%Child’s Tax $0

Tax Savings $1,500

Gifting Assets

Shifting Income

• Pay your student from your business or rental property

• The student must do meaningful work

Shifting Income

Income Shifted $5,000

Parents’ Tax Rate (Fed & State) x 31%

Tax Avoided $1,550

versus

Shifted Income $5,000

Child’s Tax Rate X 0%

Child’s Tax Liability $ 0

equals

Tax Savings $ 1,550

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American OpportunityCredit

• $2500 Credit

• Must pay $4000 in Qualified education expenses.

• Phases out $160,000-$180,000 Married.

• Phases out $80,000-$90,000 Single.

Divorce, College & Taxes

• American Opportunity Credit goes with who claims the student as a dependent

• Other tax breaks are based on qualifying child rules (head of household, low income tax credits)

• Financial aid and the American Opportunity Credit are currently not in the MAC Davis or DFS tax calculation software

Please fill out the Evaluation

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We offer a College Funding Report

• Determine the cost of college

• Recommendations of dos & don’ts in the divorce settlement relative to college

• Need-Based aid analysis

• Merit aid analysis

• Address questions and concerns

Thank You!

The Impact of Divorce on College Planning

Taming the High Cost of College! Workshop

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