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Education Funding
Learn What You Need to Consider When Funding Your & Your Family's Education

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Education Planning

There are a number of education savings strategies available to assist you in making a well-informed decision when trying to determine the best approach for meeting your or your child(s) future educational goals.

First and foremost you must realize that "time and the amount of your monthly savings" are the key components and they must be at an acceptable level if your goal is to fund your educational future and/or that of your family's.

There are many financial issues that you should be concerned with if you are planning for your educational needs and/or that of your family's.

Whether you are a homeowner now or anticipate becoming one in the future, it is important that you consider your education funding needs because the time factor could be critical in reaching your targeted educational funding needs.

Financial Aid Programs That Are Available Include the Following:

Federal Pell Grant

Stafford Loan (Direct and FFEL)


Campus Based Student Financial Aid:

FSEOG (Federal Supplemental Educational Opportunity Grant)

Federal Work Study

Federal Perkins Loan

For a clear explanation of the Financial Aid Programs listed above Click Here...

State Government Aid:

  • Contact the school you or your child plan on attending in your state

  • Go to your States Department of Education Website

  • In the State of Georgia there is a Hope Scholarship Program that will assist students if they meet eligibility requirements, check with your state to see what they offer

Other Sources:

  1. Aid directly from the Institution
  2. Aid from the Armed Forces
  3. Other Scholarship such as academic, athletic, civic organizations, merit, churches religious organizations etcetera.
  4. You should realize that it may take effort on your part but could prove worthwhile.

Educational Funding:

Listed below are some of the more pressing financial issues that you should be concerned with if you are planning for your or your family’s educational future.

If you are seeking Federal Financial Aid you should become very familiar with the term “Expected Family Contribution” or the more commonly used acronym “EFC.”

It is a formula created by Congress that analyzes your “taxable & non-taxable income, your assets, your retirement funds and other benefits you may be receiving such as unemployment, social security and the like.”

Although the formula tends to favor lower-income families over higher income families—it may still make sense for you to apply.

The formula also takes into consideration the number of your children in private school or college, the size of your family, the number of years until retirement, large financial burdens and other factors that “may” be favorable to your family situation.

The “EFC” (Expected Family Contribution) calculation is used to determine eligibility for Federal Financial Aid programs.

Unsubsidized Student Loans and PLUS Loans are provided “regardless” of financial need.

At some colleges and universities the Financial Aid Administrator can adjust data when they are calculating a student’s "EFC" if circumstances allow.

Let's say you were to receive a $250,000 inheritance you would have to include the amount as income in the year you received the funds, however in future years it would possibly be classified as an asset.

If your child was to apply for aid in the year you received the inheritance you would more than likely not be eligible for aid. In future years the inheritance would possibly be classified as your assets and your child would possibly be eligible for aid.

It could get complex as you could put the funds in retirement accounts up to a limit and make other strategic moves as the EFC formula normally does not count your retirement savings.

You could also consider paying off some or all of your debts to possibly help improve your odds of getting financial aid.

Other ways to reduce your family's EFC (Expected Family Contribution) are listed below.

Go to: to learn more.

Ways to Reduce Your Family’s EFCs (Expected Family Contribution):

Your Income & Assets will only be considered if your child is considered your dependent.

If you or your child apply as “independent” only—the students (you or your child) income and assets would be considered.

For you or your child to be considered “independent” you or your child must meet any one of the following criteria:

1) Are over the age of 23

2) Married

3) Enrolled in Graduate or Professional Educational Program

4) Has legal dependent other than a spouse

5) Is an Orphan or Ward of the Court

6) Is a Veteran of the U.S. Armed Forces

Other Ways Of Reducing EFCs

Another method of reducing EFCs is creating a “Trust” for your child and diminishing the family’s estate through gifts.

Be aware that your child’s own assets would be considered—therefore you should seek competent legal and professional advice if you are considering this—or any EFC reduction strategy.

EFC can also be reduced if your family has high medical bills or if more than 1 of your children attends college.

You could also attempt to get the Financial Aid Officer to adjust your EFC if you are able to provide compelling and convincing evidence of your circumstances and why you feel your EFC should be reduced.


  • Qualified State Tuition Programs (Prepaid Tuition and Savings Plan)
  • Coverdell IRA
  • State 529 Plan
  • Roth IRA
  • Employer Education Assistance
  • HEL (Home Equity Line of Credit)

To learn more about the above funding vehicles—click here...

Always consider the TVM (time value of money) as Education funding is often one of the largest financial burdens a family will face.

The key is to get your plan in place early, contribute consistently, consider increasing your contributions when you get a pay raise or other financial windfall and be sure to factor in inflation as you will need returns well over inflation to meet the rapidly rising higher education expenses that are now the norm.

Historically tuition costs have increased at a rate higher than that of inflation and in the current environment it does not look like that trend will change.

Also set realistic goals that you are likely to attain. In addition, if you are considering private elementary & secondary school, undergraduate, graduate or professional school be sure to factor it "all" into your educational planning and funding.

Some parents also have a desire for their child to pay some of the costs of their own education to help them build responsibility and character.

Be careful with this strategy if student loans are involved as they have the potential to saddle your child with debt for years.

There are work-study programs and/or part-time jobs that are normally available at or near most campuses and they should be considered as an alternate to saddling your child with possible long-term debt if you and your family feel that it is a good option that will work for your situation.

Forecasting Costs:

• Call Schools Administrative Offices

• Utilize Current College Guides

• Utilize Local Libraries

• Utilize the Internet

Be sure to include housing, books and supplies, transportation, travel, entertainment and other fees in your forecasts. 

Even with a full scholarship their will be out-of-pocket and other fees that can be costly over the period of attendance!

Evaluating Potential Schools:

• Request a copy of documents describing the school's education and licensing

• Request or get current school tuition rates

• Request on campus room and board rates

• Request and get the Loan Default Rate

A school with a high default rate may be ineligible for federal aid or assistance, so you want to know early if this applies to the school you or your child is considering.

A high default rate shows—or more often than not—means that administrators are improperly matching applicants with their school and that should be reason for caution on your part.

Other Things to Consider When Evaluating Potential Schools:

• Job placement rate

• Employment statistics in your or your child’s field of interest

• Graduation statistics

• Refund Policy

• Other (Whatever you consider important)

• Is pre-payment of tuition offered

Be sure to keep in mind that there are inherent risks in participating in a pre-paid tuition or savings plan so use caution, do meticulous research and seek legal or other competent professional advice.

Tax Effects:

Tuition Credit (Deductible from your AGI—while you or your child attends college)

Student Loan Interest {Deductible from your AGI after you graduate, leave college or go to < 1/2 time status and start paying the loan(s) off}

Roth (Contributions tax-free at withdrawal)

Hope Credit (Reduces your taxable income—while you or your child attends college)

The student loan interest deduction listed above is deductible if the loan was used for tuition, enrollment fees, books, supplies, equipment, room and board, transportation, and other necessary expenses.

Be aware of the UGMA (Uniform Gift to Minors Act) which allows the parents the option to put assets into a custodial account for a child.

If used to pay for college tuition it would be considered an asset of the child and would be considered in determining financial aid.

In some states 529 plans may be deductible on state tax return and at the federal level non-taxable at withdrawal if used for educational expenses from the elementary level up through college.  If 529 proceeds are not used for designated child, it can be passed down to another siblings.

For those who are not in position to finance their or a family members education in whole, the starting point for determining your EFC would be the FAFSA (Free Application for Federal Student Aid).

The amounts awarded are based upon the financial needs of the student. You can mail or electronically submit your FAFSA application.

Be aware that most colleges normally appoint an “AGENCY” to conduct an analysis of the financial need of the student applicant and the student’s family. The completed FAFSA is sent to colleges requested by the applicant.

Also, be aware that some colleges may conduct their own needs analysis on a student, therefore other applications would have to be completed and submitted if that was the case.

Once the student is accepted to the college the college will normally inform the student (at that time) of any available financial aid.

In many cases the educational goals of you or your child may change.

Based on my experience in assisting many past families it is not uncommon for financial pitfalls and windfalls to occur.

Your child may end up with an academic or athletic scholarship (full or partial). These are just a few of the unknowns.

A major increase or decrease in your finances could curtail or even end your educational funding dream—or make the need for educational saving unnecessary.

A major illness or a major tuition increase at the school of your choice may cause you to have the need to make adjustments.

You may find yourself in a position where you can no longer contribute and will have to find other educational funding means where you will have to lean heavily on financial aid.

Information on a FAFSA application is used in a formula established by Congress. The amount of assistance is based on EFC (Expected Family Contribution) and takes into consideration:

1) Taxable& Non-Taxable Income

2) Assets

3) Retirement Funds

4) Benefits

Always keep in mind that in educational planning and funding you will have to make many assumptions as there will be many unknowns involved so you should have a mindset of being flexible and open to the possibility of having to make adjustments.

Be sure to review your educational funding accounts on an annual basis—if not more frequently.

By starting early and making the proper adjustments along the way you will give yourself and your family the best chance for success.

Plan your education funding in a clear and coherent manner and know the resources that are at your disposal.

Proper Educational Goal Setting is central to your Educational Funding Plan along with constant evaluation and adjustment—where—and if needed.

Unlike many who send their children on to higher education you have had the opportunity to clearly look at some of the educational funding options available.

It is our desire that you have started early in the educational funding process and will now be better armed to provide a quality education for you and your family.

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About This Article:


The above article was written by Thomas (TJ) UnderwoodThomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia. 

He is the writer behind The Real Estate & Finance 360 Degrees Series of Books that include The Wealth Increaser, Home Buyer 411 The Smart Guide to Buying Your Home, Home Seller 411 The Smart Guide to Selling Your Home, and  Managing & Improving Your Credit & Finances for this MILLENNIUM.

In addition he is also the writer who created The 3 Step Structured Approach to Managing Your Finances, and CREDIT & FINANCE IMPROVEMENT MADE EASY—NEW GUIDE that you can download right now "(at MIMIMAL cost $3.95)" to learn more about his writing style and how you can achieve "more" success in the current economy.

He is the creator of where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. 

He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. He was the first financial planner to coin the phrase "financially alert mind"  and he consistently writes in a style that is designed to provide consumers the ability to take control of their lives and achieve great results.

You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page.  You can also get highly relevant tips on "living your life more abundantly" and link to and possibly earn revenue by logging on to

He is also an IRS registered tax planning professional with over 30 years of tax experience and can be reached at:



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