Your Questions, Answered: Expensive Educational Costs

February 11, 2021

On this week’s episode of Your Questions, Answered Valerie Escobar and Brian Leitner discuss the expense of education and financial plans, and answer the following question:

“How can I make expensive education costs more realistic?”

Do you have questions you’d like answered? Email them to QA@marinerwealthadvisors.com, and we’ll provide answers.

Transcript:

Brian Leitner: You have questions. We have answers back with another quick clip. Valerie, a question came into the show today and it says, “Help! Education costs are incredibly expensive. What or how do I make this realistic in my own financial planning situation?” What are some of your thoughts? 

Valerie Escobar: So, tuition is absolutely crazy. That is a good question to be asking because there is so much to think about. I think a great way to put it into perspective is to think of it as an investment. So, you consider how much you’re putting in and what kind of returns you’re going to get as a result. 

Brian: You know, I love what you’re saying and most people would say, “well, of course it’s an investment.” But, you know, after speaking to so many people over the years, I think a lot of people view college as “well, that’s just something I’m sort of supposed to do, or I was told to do, or it’s part of my responsibility.” So, I love how you break it down. So how do you think about maybe a return on investment as it relates to that, that education? 

Valerie: Yeah, it’s really, I think the easiest, cleanest way to think about the return is to look at the kind of income that you would expect from the degree that you’re going to pursue. So, for example, if someone is going to take on a trade. For example, become an electrician, they don’t need a formal degree. They probably have a training school with a very minimal tuition bill. The expected income would be maybe $50,000 coming right out of the gate, but there is no tuition bill to look at. Compare that to someone that wants to go to an Ivy league school and they’re going to study theater. They become an actor making $35,000 a year, which is fine, but if you’re strapped with a $200,000 debt bill from going to the Ivy league school is going to make your life much more challenging. 

Brian: Yeah. It’s really interesting. It’s about ultimately trying to figure out what you want to do, what that’s going to cost, and then there are so many schools, whether that be on the private side or the public side and what makes sense. But at the end of the day, you know, there are so many folks that are just struggling with all the debt that they’ve taken on and it’s a problem even for affluent families. 

ValerieAbsolutely. 

Brian: And then there’s a whole other conversation right about, it’s very expensive, what are some of the best ways to save and what that looks like? Do you have any thoughts as it relates to maybe accounts of strategies from that perspective? 

Valerie Absolutely. There are just so many different ways. 529s are of course the hot topic, the good place to save when you’re looking at tax-advantaged savings accounts. And it depends on what state you live in. But that is a way that you can at least grow the money as long as you’re going to dedicate it towards that higher education. But you don’t even have to limit yourself to 529s, just even a brokerage account that would allow you to build up the money and just keeping it earmarked somewhere separately I think it makes a huge difference, even if you’re not completely sure of which vehicle you choose. 

Brian: Yeah, I think that’s great insight. The 529 offers a lot of benefits, whether it be being able to contribute more than the amount that you are for your annual exclusion dollars and just really super funding that, if you will, and some of the tax-free nature of what it offers you. But it’s not just all about a 529. You can include other types of vehicles. Like you just said, that brokerage account to give you options and optionality as it relates to your planning, because we never know what’s going to happen, and frankly, just having options is sometimes worth its weight. So, Valerie, thank you very much for being here. Greatly appreciate you joining the show today. 

ValerieNo problem. Thank you for having me. 

Brian: And if you or anyone else has questions, please feel free to email us at qa@marinerwealthadvisors.com. Thanks for watching. 

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