Q. I have children who will soon be starting high school. What do I need to know about financial planning for college?
A. There are a few key pieces of information emergency physicians need to know regarding paying for the college education of their children. The first is that by virtue of their high income, their family situation is likely to differ significantly from that of the average student. Average students and parents will fill out a Free Application for Federal Student Aid (FAFSA) or the similar College Scholarship Service (CSS) application and discover a difference between the parents’ expected financial contribution (EFC) and the cost of attendance at their chosen school. That is not the case for the typical children of emergency physicians. What this means is that your children will not receive any need-based grants or scholarships, nor will they be able to take out federal and state student loans, at least as undergraduates, unless they are able to be considered independent from you (marriage, military service, or children). The children of many physicians will have to pay for school in a different manner than their parents did! It is still worth filling out the FAFSA just in case, especially if you will have multiple children attending expensive schools at the same time, but don’t expect much. In addition, some schools require the FAFSA be filled out in order to receive merit-based scholarships.
Financial-aid planning is the process whereby some middle-class families may benefit from making the difference between the EFC and the college’s cost of attendance as large as possible. This requires an understanding of what counts on the FAFSA (or CSS) and what doesn’t. Then you transfer your assets from those categories that count (taxable investing accounts, savings accounts, 529s) to assets that do not (paying off debt, retirement accounts, life insurance). The theory is that this will allow students to get need-based grants and scholarships as well as to be eligible for loans. Most physicians will not benefit much from this process due to their high income. They will be much better off spending their time, effort, and money increasing their savings to help pay for college.
There are four pillars to successfully paying for children’s education. Every situation is different, and it is likely that one or two of these pillars will be more important in your scenario than the others, but the larger the contribution from each of them, the easier the task will be.