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Planning how you are going to pay for college is a lot like getting out of an escape room. If you haven’t been to one, I highly suggest you try it out. Typically, a group of 5 – 8 friends and sometimes strangers are locked in a room. The goal is to solve a set of clues in order to unlock the door keeping you in. What you’ll learn during the process is there’s typically one know-it all that may lead you down the wrong path, often times there are numerous areas that are overlooked, and lastly you probably should have used your 3 clues from the host a heck of a lot sooner than you did! Similar to college planning, I often find parents getting bad advice from people they trust but aren’t properly informed; they often overlook the bigger picture on how overspending on their child’s education impacts their other goals and get pushed into bad decisions at the eleventh hour. In today’s piece, I want to highlight mistakes we often find parents making when they put together a plan to pay for college.


Now when I say on-time, I mean early, and when I say early, I mean as soon as possible! The FAFSA becomes available for the Fall 2022 school year October 1st, 2021. Many schools and states award financial aid on a first-come, first-served basis and for those who put off completing the FAFSA, it can come at a cost. According to Saving for College, “Students who fill out the FAFSA during the first three months tend to get twice as much grants, on average, as compared with students who file the FAFSA later.”

In addition, to potentially receiving more financial aid, students and parents will have more time to weigh out their options and see which schools fall in their budget. This is especially important for families that would like to negotiate for more aid from their top schools


Whether it’s grandma’s 529 that she set up for her grandchild or the withdrawal you took from your IRA to pay the tuition bill; the strategies chosen to pay for school can ultimately leave you worse off when applying for financial aid for future years. Unfortunately, the FAFSA is not a one and done type of item; in order to keeping getting the aid you are awarded for year one, you have to continue filling out the application each October. The problem is your school or the Financial Aid Department isn’t going to tell you the plan you have in place to pay for college might not work out the way you think it will. Here are two popular snags we often see.

Grandma and grandpa are generous and nice enough to put money in a 529 plan for your child’s education. In year one after you get the first tuition bill you’re just as thankful they put some money away. However, what you don’t realize is any money distributed during the year will be counted as the student’s income when filling out the FAFSA in future years, which has one of the biggest impacts to financial aid awards (behind the parents’ income).

Another strategy we’ve seen employed, are parents’ drawing funds from are their individual retirement accounts (e.g. IRAs) to pay for higher education expenses. While you might think this isn’t a bad idea because you can withdraw from your IRA penalty free for education expenses, you are still going to have to pay income tax on these withdrawals, AND it’s going to increase your income reported on the FAFSA in future years, causing your financial aid to be lowered


  • Number of dependents in college currently – if you have multiple kids in college at the same time this could reduce your Expected Family Contribution by up to 50%, if not more. This would potentially result in a higher financial aid award.
  • Colleges you are interested in attending – When you fill out the FAFSA you have the choice to list up to 10 colleges you’d like to attend. While you can go back and edit these 10 colleges after you submit your FAFSA, if you want the best odds of receiving state grant and aid it would be wise to list any eligible in-state college as your top choice. In certain states, if you do not list any in-state school amongst your 10 choices, you will not be considered for any state grant aid (IE. the state of CA).
  • Request an appeal or professional judgement – the FAFSA requires you use your previous year’s tax return to gather your income and taxes paid. That means parents filling out the FAFSA for the fall 2022 school year will use their 2020 tax return. If your family has had a dramatic decrease in income that’s not reflected on the tax return submitted, you should consider requesting an appeal with the schools you are applying to. It’s important that current and accurate information be submitted for review.

The rules to the financial aid game are extensive and schools aren’t exactly incentivized to assist parents with finding the money they need to send their kids to college. Don’t let them take advantage of you, do the research or work with a college planning professional to review your situation in order to get the most financial aid possible!


As always, please feel free to reach out if you have any questions on any of the topics discussed above.


Chad Williamson

Koa Wealth Management

11260 El Camino Real, Unit 220, San Diego, CA 92130


[email protected]


This material should not be considered a recommendation to buy or sell securities or a guarantee of future results. Koa Wealth Management, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. More information about Koa Wealth Management, LLC can be found in our Form ADV Part 2, which is available upon request or by visiting our website at www.koawealth.com/disclosure. Past performance is not a guarantee of future results. All investment strategies have the potential for profit or loss; changes in investment strategies, contributions, or withdrawals may materially alter the performance and results of a portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.

Q3 2021 MC PDF