In this episode of Motley Fool Answers, Robert Brokamp and Alison Southwick interview Brock Jolly and Tim McFillin from TheCollegeFundingCoach.org to dispel five common myths about paying for college. Seized by the academic spirit, Alison quizzes them on their knowledge of bizarre college traditions. Plus, Robert explains how contributions and returns play their part in your retirement account.

A full transcript follows the video.

This video was recorded on April 10, 2018.

Alison Southwick: This is Motley Fool Answers. I'm Alison Southwick, and I'm joined, as always, by Robert Brokamp, personal finance expert here at The Motley Fool. Hi, Bro!

Robert Brokamp: Well, hello Alison!

Southwick: I noticed you're keeping your distance from me at the table.

Brokamp: That was not intentional at all.

Southwick: Not intentional, but probably smart, because I do have the flu. In this week's episode, we're going to combat five common myths about paying for college with the help of Tim McFillin and Brock Jolly from the TheCollegeFundingCoach.org. Bro is also going to talk about the point at which investment returns become more important to your retirement savings than the amount you contributed. All that and more on this week's episode of Motley Fool Answers.

So, Bro, what's up?

Brokamp: Well, Alison, as you know, your retirement savings will be made up of two components, and that is the amount that you save and contribute to those accounts, and then the investment returns that you earn in those savings. But at different stages in your life, one will be more important than the other, so when you're starting out, the amount that you save will by far have the biggest impact on your account balances. But as those accounts get bigger, investment returns become more important and at some point, they'll have a bigger influence on the ultimate amount that you have for retirement.

But at what point does that happen? When does that crossover point occur? Well, it turns out that a recent article in Money magazine by Walter Updegrave provided an answer based on a hypothetical worker who makes $45,000 a year, gets a 2% raise each year, saves 10% of her salary, and earns 6% annually on her investments. So, here are the numbers according to Walter.

After that first year, investment returns are not a big factor. They account for just $20 a month or 5% of the total. Again, getting money into the account is what's important. But by year eight things start to change. Returns equal more than half of the monthly contributions and then a little more than 13 years into saving for retirement, that's when you reach the crossover point. Investment gains exceed the amount that you contribute to the account, at least based on this scenario, and then it just snowballs from there.

23 years in, gains are doubling the amount that you save. By year 30 gains are tripling the amount. Year 35, gains are counting for four times more than you put into the account, and then by year 38 gains are five times bigger than the contributions.

What are the key takeaways? First, when you're young, focus your energies on saving as much as possible, and that includes what you put in but also making sure that you're taking advantage of the employer match. Not surprisingly, the person who saves 10% of her salary will have twice as much for retirement as the person who saves just 5%. That's the math.

One of my roles, here, at the Fool is meeting with individual employees who have retirement questions or any sort of financial questions, and I'm often meeting with new employees. They tend to be young and they don't know a lot about personal finances or investing. They come in and ask what they should be prioritizing, and I always tell them at that stage focus on budgeting. Focus on finding ways to save money. You ideally want to be saving 15% total out of the gate when you start saving for retirement.

But gradually, you've got to learn to be an excellent investor because the investment returns that you earn eventually will have a huge impact. In that first year you're saving whether you earn 6% or 8% or 10% really doesn't matter. But at some point, earning just 2% or more a year on your portfolio, especially over the long term, is going to add up to tens of thousands of dollars.

Another lesson, here, is that it's a different way of thinking about the importance of starting early. If you start at 25 -- according to this scenario that Updegrave created -- you'll be just 38 at the point that your portfolio is doing more of the heavy lifting. But if you wait until you're 35 to start, you're going to be almost 50 by the time returns exceed contributions and for many people, they'll have to compensate by either saving more or retiring later.

[...]

Brokamp: If you pay enough attention to the personal finance news, you'll see that some things seem to never change. Americans don't save enough. The current savings rate is just 3.2%. People have too much debt. For example, credit card debt is at over $1 trillion, now. At an all-time high. And the cost of college just keeps going up, often at a rate that exceeds inflation.

According to the College Board, if you were to look back 30 years to the 1987-1988 school year, tuition at a four-year public college cost $3,190 [and that's adjusted for inflation $2,017, so $3,000]. Nowadays, it's almost $10,000, so the cost has tripled on top of inflation, and that is just tuition. The all-in costs these days for the current academic year for a public institution -- if you're in-state -- are about $21,000 and at a private school it's $47,000 a year. That's the sticker price.

Fortunately, you can ideally attend at a discount through something called financial aid, and to talk about that with us today we have Brock Jolly and Tim McFillin. Welcome, gentlemen!

Brock Jolly: Thank you! Appreciate it.

Tim McFillin: Yes, thanks for having us!

Brokamp: You guys are here from TheCollegeFundingCoach.org and Brock, you founded the company. Tell us a little bit about it.

Jolly: Sure, it's interesting. I usually tell the story that I started in the financial planning business around 1999-2000, that time frame, which I think coincides with about the time you started The Motley Fool.

Brokamp: That's right.

Jolly: So, you remember those days, well. Think about it. In the late '90s, what was going on in the stock market?

Brokamp: Everyone was making money.

Jolly: Everybody was making money. I always say untrained monkeys were throwing darts at dart boards and making money for people. I got into the financial planning business and then what happened?

Brokamp: People stopped making money.

Jolly: People stopped making money.

Southwick: So, it was your fault. I was wondering about that.

Jolly: Alison, I always tell people it was not entirely my fault.

Southwick: Well...

Brokamp: Just partially.

Jolly: The question I kept getting from parents was, "How in the world are we going to pay for our kids' education?" You had two sets of parents. You had those who had done a good job of saving and through the .com bubble crash lost it, or those other parents where other [things] had taken priority and they just didn't have enough money. I started to research it and, long story short, in about 2002 we started The College Funding Coach with that goal.

I figured out a few things. I figured out, No. 1, most financial advisors really don't know this material and No. 2 is that for most families, their money was in the equity in their homes and in their retirement plans, which is great for retirement. It's not great when you need to send one, two, three, or maybe seven kids to college. You need liquidity. You need cash flow. So, the opportunity to be able to educate parents and use that as a door opener to do comprehensive planning was a really great opportunity for us.

McFillin: And so, it was Brock's fault that the .com bubble burst and then I started in this business, graduating from college in May of 2008.

Brokamp: So, that was your fault.

Jolly: There's a trend here.

McFillin: So, if you recall, everybody had recovered their losses. Everybody said, "Oh, well, the key is you have to be diversified. You can't just be in tech stocks or you risk losing large amounts of money when there's a crash." Well, how did being diversified turn out for everybody in the end of 2008?

Brokamp: Every stock went down in 2008.

McFillin: Exactly. So, that was his fault and this one was my fault, but we've worked hard, since then, and we've recovered a lot of those losses.

Brokamp: Anything going on with you guys that we should know about now before the market crashes?

Jolly: We're hiring.

Brokamp: Exactly. Someone else coming onboard with you guys.

Jolly: In the beginning it was just me, and now we've got about 80 advisors around the country, like Tim, who work in our local markets to be able to bring this information to the parents in those communities.

Brokamp: Great. Well, we're going to talk a little bit about how to pay for college, mostly in terms of financial aid, so we're thinking about people more in high school, but hopefully we'll be able to pass a few tips along for people who have younger kids, as well. We're going to talk about five myths about financial aid, so let's get to it.

Myth No. 1. "I make too much money to qualify for need-based aid, so there's no reason for me to complete the Free Application for Federal Student Aid, also known as the FAFSA."

McFillin: I hear this one almost every time I'm sitting down with families. We're in the D.C. area. We've got a lot of families where it's two incomes. They make a good living, but if you live in the D.C./ New York/ San Francisco market [my family lives in San Diego], your income goes a lot first to pay Uncle Sam. Then what's left over goes to the mortgage and then the bills, and after you put money into your 401(k) and everything else, it's hard to find those dollars, so we have a lot of very successful families that don't feel wealthy. They feel like everybody else in their neighborhood. They don't have extra dollars for college and they think, "I don't know what we're going to do, but there's no point in me completing a FAFSA. My family income is over $200,000. What's the point?"

People are forgetting that there's some very valuable assets, if you fill out the FAFSA, because you are eligible to receive the unsubsidized Stafford loans from the government. These are very unique loans that no private bank is going to offer a 17-year-old student that has no credit history. These loans are typically lower interest. Usually if it's for an undergrad, it's 4.45% interest for an unsubsidized Stafford loan. Unsubsidized just means you're going to accrue interest while your student is in college. If you have a lower income, then you can get the subsidized ones which, again, have the same interest rate but don't accrue interest while the kid's in college.

Here's the thing. If you kid takes out the Stafford government loans that pretty much anybody's going to be eligible to get regardless of family income, they may end up graduating with anywhere from $25,000-30,000 of debt. But, if they graduate and they get a low-paying internship job [maybe the pay is $30,000-40,000 and just barely enough to make bread and buy ramen noodles], they can do an income-based repayment with early pay and 10-15% of their discretionary income. That's defined as income earned over about $22,000.

If your income is $30,000 as an intern coming out of school, you're not going to have to pay a whole lot on your student debt regardless of the amount. And then as your income rises, and you get to a better, higher-income position, you can afford to pay that debt back.

Or, if you're like my stepsister who got an engineering job right out of college and is making $7,000 a month as a 22-year-old, the debt that she had she could pay off within a year or two because you'd go from being a broke college kid and all of a sudden having money, and she's going to be in a great financial position. So, whether or not you make a good income out of school, when you have government loans, even if it's a small amount, those have income-based repayments, they're flexible, and can work no matter what the situation is. If you go to graduate school, you may also be able to defer some of those loans, as well.

I would say that's the most important reason that families should do that, because you're never going to get offered a loan that's that good of a deal for a student, really, until graduate school and for graduate school those interest rates are much higher if they're unsubsidized Stafford loans.

Jolly: I'll give you a great success story. We had a family a few years ago that, like Tim was suggesting, never would qualify for need-based aid on paper, but we recommend to all of our parents, at least in the freshman year of college, to fill out that FAFSA. You might not get anything, but it's important to do it because you might get something.

In this example, she went to what, at the time at least, was the No. 1 public high school in America. She was a good student. They regularly send about 100 kids to the Ivy Leagues, and she really wanted to go to a school called Harvard. The problem was Harvard really didn't want her to come there. She loved Boston as a college town, and long story short, she ended up going to Boston University.

One weekend I think Dad was bored. Dad filled out the FAFSA. Long story short is she ended up getting a $19,500 Presidential Scholarship based purely on merit -- based on her GPA and her test scores -- that she never would have gotten had they not completed the FAFSA. Think about it. The schools want to make sure that you're not eligible for some of the federal money like Tim was discussing before they give you their money. It was not need-based aid. It was merit-based aid that she would not have gotten had they not completed the FAFSA. So, always complete it.

Brokamp: For families who are curious about whether they would get need-based aid, how can they figure that out? On the internet there are calculators that calculate what's known as the Expected Family Contribution. Do you recommend that people do that? Are those accurate?

Jolly: Absolutely. It's the line in the sand, and it may not get you to the penny accurate, but it will get you pretty close. And there's two formulas. You mentioned earlier the FAFSA [Free Application for Federal Student Aid], and what's interesting is every single college and university in the country requires the FAFSA.

There's a list of [I think the number is 226] schools that also require a form called the CSS Profile, and that's going to dive a little bit deeper. It's going to figure out some of the questions that maybe the FAFSA doesn't ask. Things like how much money do you have in your home equity and in your retirement plans, and that sort of thing. It tends to be the more elite, more selective schools. There are seven public schools that also require it.

You want to know as you go into it what forms your school requires. But what's really important is you draw that line in the sand. Figure out the rules of the game. Figure out whether you're going to be eligible for need-based aid, and it may vary school to school, meaning you may be eligible for need-based aid at one school and not at another based upon the cost of attendance or the sticker price at that particular school.

If you go onto our website, which is just TheCollegeFundingCoach.org, in the upper right-hand corner there's a big red button. You can click that, and you can calculate your Expected Family Contribution. That's your starting point to determine if you'll be eligible for need-based aid. If so, we're going to take this path. Or you're never going to be eligible for need-based aid, in which case we're going to take this path.

Brokamp: One quick question about the FAFSA before we move on. What year is that based on? If you are, let's say, a high school freshman, at what year do you look at in terms of your net worth and income to [know] what's going to be figured into the FAFSA?

McFillin: Great question because this is a recent change last year. Now if you're a senior in high school, you can start completing the FAFSA on October 1st. It used to be January 1st. If you're a senior in high school in the fall, and you fill it out on October 1st, they're going to look at your tax returns for your parents from the previous year. You're essentially looking two years back from when you start freshman year.

Jolly: In other words, if you've got a child who would be a junior now and therefore a rising senior in the 2018-2019 school year, they're going to complete that form in October and they're going to look at income from 2017 to determine that. They look at the assets as of the day that you complete the form. So, it's income from what they call the "prior- prior" year. Assets as of the day that you complete the form.

McFillin: Right. So, if you hypothetically have an 11th grader in spring...

Brokamp: Hypothetically...

McFillin: Hypothetically right now...

Brokamp: That's me, by the way. I have an 11th grader.

McFillin: If you're looking at some great Virginia schools like UVA and Virginia Tech, you're going to want to complete that FAFSA on October 1st, because not only is it going to get the ball rolling quickly, but some scholarships are first come, first served. And some institutions, if there's early admission, want to see it early and often.

If they see that you've completed the FAFSA, there's a lot of stuff I've read that says that admissions officers are more likely to even accept you, because it shows that you're a little bit more committed than somebody that's not even completing the FAFSA. It probably means you're not that interested in the school and they don't want to send an acceptance letter if they think there's low probability of you considering it strongly.

Jolly: Just a quick point on that, too. Most schools are need-blind. There are schools out there that are not need-blind. I'll give you an example. We've got a family that we work with. Mom and Dad were making a little over $1 million a year. We said to complete the FAFSA, and the reason is those schools know definitively, beyond a shadow of a doubt, that they will never need to tap the resources of the financial aid office to help pay for or subsidize that child's education. In other words, Mom and Dad are making great money. And by the way, they also may like that for future endowment purposes and things like that. Maybe this child will inherit some money. That sort of thing.

Brokamp: Let's move on to Myth No. 2. "If I have a lot of assets in my 401(k), IRA, and home, my student will never get any aid."

McFillin: Yes, this is a big part of college financial aid planning if you're in this situation. A good example I can give you of this is a family we've worked with recently that essentially has a home that they own. Their primary home is free and clear and it's worth over $1 million. They've got a lot of money in their 401(k)s and their IRAs.

The dad, who is the main income earner, stopped working last year and is essentially semi-retired and he's 60 years old. He's a much older parent than the average we see, but he's got all these assets we totaled to about $3 million, zero of which count against them on the FAFSA. And he's over age 59 1/2, so he has access to this money should he need it or want to spend it on college.

But on paper, their family income is $15,000 and they have an 11th and a 10th grader. We mentioned earlier how it's difficult for families with higher incomes to get financial aid. That can change dramatically if there's two or more kids in school simultaneously, because most schools will take what they expect you to pay and divide it by two.

So, if you've got one kid going to Virginia Tech and you've got one kid going to Georgetown, right now that is, combined, nearly $100,000. So, even if you have a high income, but they're in school simultaneously, your Expected Family Contribution may be $60,000 because your family income is $150,000. So, if your kid is going in-state [just one kid], you have no chance of getting financial aid.

But, because those assets don't count on the FAFSA, you have a good chance when two kids are in school simultaneously, particularly if one is going to a more expensive private school. It may cost $100,000 total. You're only expected to pay $60,000 and so there's a $40,000 need-gap potential, there. It doesn't mean you're going to get it, but it means you have the opportunity.

Brokamp: Now, is that a difference with the CSS, by the way? The CSS does factor in retirement and home equity?

Jolly: It can.

Brokamp: It can.

Jolly: What I always tell people is draw that line in the sand. Figure out what your Expected Family Contribution is, and then if your child is applying to or attending a CSS Profile school, you want to know what questions they ask. To put it in perspective, the CSS Profile is actually a pool of about 700 questions of which each school can ask 10.

Brokamp: So, it varies from school to school.

Jolly: It varies from school to school. The schools like it, because it allows them to customize and there are some schools that even have their own institutional forms that tend to ask CSS Profile style questions. All you want to know when you're going into it is understand what forms your school requires. The FAFSA is pretty cut and dry. We understand it. We know what it asks. We understand what counts and what doesn't. But if a child is considering or strongly considering a CSS Profile school, we want to understand at that school what questions they're going to ask.

The income is always the biggest driver in the formula, regardless of the forms that they use, and in a lot of cases, as Tim mentioned, if you've got a family that's earning [maybe over $200,000 is a good threshold], they're probably not going to qualify for need-based aid, but if they've got a low income, as the example that Tim just gave, we might be able to do some things [and I always say legally, morally, ethically] to shift those assets in such a way that it could allow you to qualify for even greater amounts of need-based aid.

Brokamp: And you can't wait until your senior year of high school to do that.

McFillin: No.

Brokamp: You've got to do that planning sooner.

Jolly: Absolutely, and I think the key is for so many families they do wait until junior or senior year. The sooner you start, the better. You can draw that line in the sand. Make it up. Let's say you've got a fourth grader. Draw the line in the sand, now. Now, inevitably things will change, but at least you understand the rules of the game and you've got a game plan that you can start to implement.

McFillin: Also keep in mind that it's not the income that you earned 10 years ago or five years ago. It's only the calendar year that they're looking at for your taxes. So, if you choose to take a sabbatical one year, you could precisely choose one to do it wisely. If you're a business owner, you could choose to depreciate something in a certain year [buy equipment in a certain year] to lower your income for that particular year. So, another important part of this is if you are in a situation where you may have a lot of assets but a lower income, and you may have multiple kids in school simultaneously, try to apply to some schools that are FAFSA only.

Just as an example -- since we're sitting here in the D.C. area -- UVA, William & Mary, Georgetown, GW; all these schools require the CSS Profile, so you are less likely to get financial aid from these schools than you would a FAFSA-only school if you're in that situation with high assets and a lower income. Virginia Tech, University of Maryland, James Madison are FAFSA only.

My stepsister went to Georgia Tech, another great school. FAFSA only. You want to make it a specific part of the financial aid planning process if you're talking about college funding, and I think that's really where we try to add more value, [as] most people [aren't] even thinking that far ahead.

Brokamp: Myth No. 3. "529 plans will dramatically reduce any chance my kids have of receiving merit or need-based aid."

McFillin: This one comes up all the time. Parents say, "Why would I do a 529 plan? This could hurt my eligibility for getting financial aid." I understand their logic, but like Brock mentioned earlier, the biggest driver, by far, of the formula for the FAFSA that determines your Expected Family Contribution is your income. After they make the deductions and depending on the parents' age and some other factors, your income essentially counts at roughly 47% against you; whereas an asset, a parental asset [which is what a 529 plan is considered] only counts at up 5.64% against you.

Let's say you've got two kids or three, and let's say you've got $100,000 in combined family 529 plans. It doesn't matter which kid it's in. It's considered a parental asset. That $100,000 will reduce your financial aid eligibility on the FAFSA by $5,640 if your income exceeds $30,000-35,000. For most families in this area, even if you have a significant amount in there, it's not going to necessarily completely bump you out of getting financial aid.

The other thing is if your income is high enough, you don't want to be planning for need-based financial aid. You need to be planning for reducing costs, taking on subsidized Stafford loans, finding ways to get grants and scholarships, and doing whatever you can to reduce those out-of-pocket costs. That's more of the important thing. And I use my stepsister as the shining example. I'm sure I've mentioned her before.

She got into Stanford, and she got offered zero dollars. My stepdad went to Stanford, so he wasn't going to tell her no, but I know they were sweating bullets because Stanford costs $70,000 a year, roughly, times four years. There's no way they could help her afford it. They need to retire at some point. They're behind on retirement. They know that. And fortunately, she also got into Georgia Tech, and they offered her a 100% free ride. Why? Because Stanford doesn't need to.

Brokamp: Right.

McFillin: Everybody's top of their class. Everybody's near valedictorians that's going to Stanford. They don't need to incentivize students with necessarily a ton of merit aid, but they will give you a lot of need-based aid if your family doesn't have the income. You've got the brains but not the bucks; otherwise they know you're probably willing to pay to have that red bumper sticker.

Brokamp: Exactly.

McFillin: Georgia Tech knows Tim's stepsister Lydia is not going to Georgia Tech unless we heavily incentivize her and guess where my parents wanted her to go? Georgia Tech. She graduated with the same engineering degree. Got the same consulting job with Deloitte. Living in Atlanta, now. Has zero dollars of debt vs. having $300,000 of debt at 5-7% interest.

Brokamp: Any advice about the timing of 529 withdrawals? This might have more to do with who owns it. I know a lot of people who have grandparents, for example, who have opened up 529s for their grandkids.

Jolly: It's interesting. I always say to parents that a 529 plan is a great tool, but it's not necessarily a great strategy. You think about those parents who were sending their kids to college in 2000-2002 and 2008-2009 and, all of a sudden, the market went down in value significantly and parents thought they had done a good job of saving. That's just one example.

But to your point, with grandparent-owned 529 plans, generally speaking [and this could be grandparents, or aunts and uncles, but somebody other than Mom and Dad], in the financial aid formula, a 529 plan is always considered a parental asset, even if it's funded with custodial account money, which is sometimes a little confusing.

But if it's a grandparent or a [529 plan owned by an aunt or uncle, or a neighbor], it doesn't show up on the formula until the point at which distributions come out of the plan. When distributions come from the plan, it can be considered untaxed income for the benefit of the child. And untaxed income can count at a rate as high as 50%. So, again, the key is, and the strategy here is to draw that line in the sand, and then you can [make a determination]. If you're not going to be eligible for need-based aid, it doesn't matter. But if there's a chance that you may be eligible for need-based aid, it matters a lot.

I've seen situations where very well-intentioned grandparents put money into a 529 plan, or even gifted stocks and things like that. There's lots of strategies, there. Again, very well-intentioned and a good objective, but the problem is it can really prevent that child from maximizing their need-based aid eligibility. So, caveat emptor. Buyer beware. Before you go down that path, just make sure you understand the rules of the game.

McFillin: I would add that if your kid is getting some form of financial aid and you're going to use [529 plans from] grandparents or aunts and uncles for the benefit of the kid, use it toward the end of their college, because it counts as income the following year. If you use the 529 plan their senior year, and they're getting financial aid, it counts against them, but not until the next year anyway.

Brokamp: Ideally, they have graduated.

McFillin: Exactly. That's the other rule. Get your kid to graduate in four years, because the average matriculation rate is closer to six.

Brokamp: Yes, it's kind of crazy. Let's move on to Myth No. 4. "In-state colleges are the only affordable option for families that cannot qualify for aid."

McFillin: Well, I just gave you an example of my own family. Now, not every kid is going to have the type of grades that she had and get accepted to Ivy League schools and turn them down to get a full ride. That's kind of a best-case scenario. But for a lot of other kids, there are big state schools, particularly in the middle of this country, that are not getting flooded with applications from kids from the East and the West Coasts.

Just as an example, when we get questionnaires back from families, they'll say where their kids are looking at colleges. How often do you think they say University of Arkansas? Alabama?

Brokamp: From Northern Virginia, probably not that many.

McFillin: Exactly. I know we've got a national podcast, here, and there's plenty of applicants that are getting in those states, but those schools want diversity among people from all over the country because all it does is help with average GPA. All it does is help with the whole environment of the school. Schools like Alabama, Ole Miss, Kentucky are going out of their way. University of Vermont is another good one.

They offer very generous out-of-state packages if you've got the grades. If you've got over a 1350 SAT and you've got over a 3.5, at Alabama they're going to give you a significant discount to the point where you could go to the University of Alabama and pay $18,000 a year all-in, vs. going to James Madison and paying $25,000 or Virginia Tech and paying $26,000 a year. Multiply that by four years, and you're talking about a significant amount of savings for another very good school.

If you're top of your class at any major state school, it's all about you. You're the one that makes it work. I've seen that a lot. Parents are getting even a better deal than they may get going in-state, because especially in certain states like Virginia or California, they're getting so many applications that they can essentially decline a lot and not have to offer as many generous aid packages, if that makes sense.

Jolly: And a lot of these schools [whether official or unofficial] have quotas. In other words, they want to be able to say we've got kids from all 50 states and 47 foreign countries, so some of the states that Tim just named want that child from Virginia. And the same is true for the Virginia schools of kids from Wisconsin and North Dakota and Idaho.

As an out-of-state student who went to the University of Virginia, I'm willing to admit that maybe I was that quota. They needed the kid from Indiana. The point is...

McFillin: Just one, though.

Jolly: Play the cards you're dealt, right?

Brokamp: Right.

McFillin: The other thing I would throw in there is parents that have kids with good grades above a 3.0 will start getting letters in the mail -- 11th and 12th grade -- from schools they probably haven't heard of before. A lot of private schools that on paper cost $50,000 a year but, like Brock said, a lot of these colleges, especially private ones, are run like a business. They have seats to fill -- they've got dorm rooms to fill -- and the marginal cost of adding a student does not cost them $50,000. It may only cost them $10,000-15,000.

If they can charge your student $25,000 they're still making a net profit that's beneficial to them, so there are a lot of private schools where even if your kid doesn't have a 4.0 and a 1400 SAT, there are still a lot of good options out there where private schools will bring the price tag way down to match closer to what you would get in-state.

Jolly: Another good thing to know -- a little tidbit here -- is if your children are considering out-of-state public schools, look at tuition reciprocity programs. As an example, here on the East Coast there's a program called the "academic common market." There's 15 states basically from Delaware down to Florida, across to Oklahoma and Texas. In the Midwest there's a program. There's the Western Undergraduate Exchange. There's a New England program.

If your child goes to school in one of those states and majors in a major that is not available in your home state [that's generally the requirement], they may be eligible for in-state tuition at that out-of-state school. So, don't think your child is a total derelict simply because they're talking about out-of-state schools, but look at those tuition reciprocity programs.

McFillin: Just one more example of why the college planning process has gotten more and more complicated. I know the last thing high school seniors want to do is 10 applications, but you can really negotiate with these schools. If one school is offering a $10,000 package, and they really want your student, and you tell them that the University of Vermont is offering this [I use that as an example because I had a family I worked with do this], all of a sudden the University of Vermont will take out $5,000 if they really want your student enough.

So, having multiple offers on the table where you can negotiate is valuable and I think a lot of parents don't realize that you can do that. They just think the offer that you get is what you get, but these admissions offices are very flexible, especially if your kid is in good standing, has good grades, and they want them enough.

Jolly: I think the sooner that families realize it's a sales process -- the schools are selling to them and they're selling to the schools, and it's big business -- the sooner that they can approach it with that mindset, the more successful they'll be.

McFillin: One of the advisors at our office went to Bucknell and he worked with a family that goes to Bucknell. Bucknell is a very expensive school. The first year they just took the offer that was given to them, which was like $8,000 less than the full price. The student wrote a letter during the spring semester and said, "My family is really struggling to make this. They're scared they're going to have to downsize their house and not be able to retire when they want."

He had done that three years since. He graduated last year. He got a $10,000 discount at Bucknell the following three years, just because they didn't want to lose him. They thought he was going to have to transfer and they did what was in their best interest, because they wanted to retain a good student. If you spend time and go out of your way to contact admissions offices, it can be well worth your time, especially with a school that has some money and that has a high sticker cost.

Just a quick example to wrap up on this one. At the University of Southern California -- I looked this up for one of the families I worked with -- only about 3% of people pay the full tuition, and room and board costs, at USC. That means 97% of the people are getting work study, FAFSA loans. They're getting some sort of merit aid or financial aid. Just remember that. Now, unfortunately 2-3% of those people live in this area, but you can really negotiate with these schools if they want your student enough.

Brokamp: And moving on to our final myth, Myth No. 5. "For divorced couples, aid is based on the income of the parent who claims the student on her or his tax return."

Jolly: Well, it's a very common misperception. The reality is there are seven questions that determine who the custodial parent is. And I won't go through all seven, but what I will tell you that the starting point is who provides greater than 50% of the support for the child. The second question is who does the child live with more than 50% of the time? So, there's a series of questions.

The last or seventh question they ask is who claims them on the tax return. The point of that is do not think just because Mom or Dad claims them on the tax return is necessarily considered to be the custodial parent. And again, there are ways of strategizing it. If in divorce proceedings they say, "You've got equal custody," maybe one parent, who coincidentally might be the parent who earns less money or has less in assets and maybe provides an extra dollar or two during the course of the year could be considered the custodial parent. Understanding the cards that you're dealt, understanding how the rules work, and being able to approach it from the mindset may, in fact, allow you to qualify for more need-based aid as a result.

McFillin: So, besides a leap year, there's an odd number of days in the year [365 days]. The custodial parent, based on the first question, would be which one has the kid for one more day than the other, and if it's 51% to 49%, that's the custodial parent for colleges. So, if you've got one parent whose income, as the custodial parent, is $50,000 and the other parent is $150,000; if it's a FAFSA-only school, like we have mentioned before, then they will only count that custodial parent's income and assets.

Not only that, there's a couple of CSS Profile schools out there that will not ask about the non-custodial parent. Boston College and Boston University are two examples of that. In other words, even though they have the CSS Profile, which is just additional financial questions like we had mentioned previously where they typically ask about retirement assets, home equity, other things that FAFSA may not count; there are some schools that do not ask about the custodial parent.

Again, where you're applying to school, and specifically your financial situation in your family in that given time [because all that matters is that one year], is very important in determining where your kid should apply and where they should try to maximize aid. Unless you're taking the time to do this, you have your full-time job. We all have the same limitation of 24 hours in a day. How much time do you have to look up all this stuff? How much effort does your exhausted high school senior, after taking all the SATs and all the stress of applying for college want to look up this stuff?

That's where we really try to add value. I think that's why so many people come to our workshops nationally, because there's so much information, and it's hard to sift through it all as a parent. To find the time.

Brokamp: Well, thanks for coming in, guys!

Jolly: Absolutely! Thanks for having us!

McFillin: A pleasure. It was great!

Brokamp: It was very helpful. If you'd like to learn more from Tim and Brock, you can visit their website: TheCollegeFundingCoach.org.

Southwick: But we are going to ask you to stick around a little while longer.

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Southwick: You guys obviously know a lot about paying for college, but what do you know about fitting in once you're there? So, pop quiz time. I'm going to test your smarts about some of the most bizarre college traditions.

Brokamp: Very exciting!

Southwick: Some of these will be easy for you. After alcohol was banned on Penn's campus, students resorted to throwing what baked good onto the football field when the pep band plays the school's anthem, Drink a Highball, during the third quarter?

Brokamp: What was thrown on?

Southwick: A baked good.

Brokamp: A baked good.

Southwick: A baked good is thrown onto the football field every time the pep band plays the school's anthem, Drink a Highball, which is a heck of a school anthem.

Brokamp: A baked good.

Southwick: Bro, do you want to go first?

Brokamp: Sourdough bread?

Southwick: OK. I'm not going to give it to you, but you're in the ballpark.

McFillin: I'm way off, then. I figured the Penn Quakers. Oatmeal raisin cookies.

Southwick: Oh! Delicious!.

Jolly: A loaf of bread.

Southwick: Very close. It is actually toast, because, after all, when you drink a highball, you're going to toast.

McFillin: Get toasted.

Southwick: It is estimated that 20,000 to 30,000 pieces of toast are thrown on a good day, and Penn actually had to buy a toast Zamboni to pick up all of it off of the football field.

McFillin: Not a gluten-free school.

Southwick: So, sorry! Nobody got any points on that one.

Brokamp: We don't really keep score.

Southwick: I'm really bad at keeping score.

McFillin: We'll put the fool in Motley Fool.

Southwick: Students at the University of Maryland leave offerings at the feet of Testudo, the statue of the school's mascot [sometimes frisbees, couches, fruit, stolen flat screen TVs, and more], in an attempt to get some good luck. What kind of animal is he? If you don't get this, you don't live in the DMV.

Brokamp: Well, it's almost too obvious.

Southwick: Well, not all of our listeners live in this area.

Brokamp: That's true.

Southwick: The answer is?

Brokamp: I put either turtle or Kermit the Frog because there is a Kermit the Frog statue at the University of Maryland.

Jolly: Turtle.

Southwick: Turtle.

McFillin: Terrapin.

Southwick: Terrapin. So, I asked Rob Burnett...

Brokamp: Who went to the University of Maryland...

Southwick: ... should I accept turtle over a terrapin, because there is a difference.

McFillin: Well, I'd have written terrapin, but terrapin is a type of turtle.

Brokamp: What did Rob say?

Southwick: Rob said he would accept terrapin, but there is a difference. I'm going to give you an extra point.

Brokamp: You get extra credit.

McFillin: Thank you!

Brokamp: Jim Henson went to the University of Maryland, by the way. That's why they have a statue of him.

Rick Engdahl: Bro only gets a half a point because he split his vote, there.

Brokamp: I'll take a half point for Kermit. I'll die on that felt sword.

Southwick: The last day to drop classes has become a more musical tradition at MIT. Every year, on this day, students push what instrument off the roof of the Baker House Dormitory?

Brokamp: For dropping classes?

Southwick: The same day as dropping classes, students get together on top of a dormitory and they drop what musical instrument off the roof?

McFillin: Can I call my stepdad, who went to MIT?

Southwick: No, you may not.

Brokamp: Or a friend. I'm going to say tuba, just because I heard recently about how there is an increased theft of tubas, so I'm blaming all the MIT students.

Southwick: OK. You're wrong!

McFillin: I thought tuba. I went bass drum.

Southwick: Also wrong.

Jolly: Guitar.

Southwick: Piano is the correct answer.

Brokamp: What?

Southwick: The tradition started when some students in 1972 bought two non-functioning pianos and combined them to make one functioning piano, and then they hurled the leftover parts of the other piano off the roof.

Brokamp: That sounds dangerous and expensive.

Jolly: Only at an engineering school.

Brokamp: Can they use their school loans for that?

McFillin: Then they can put it together afterwards. That's the fun part.

Brokamp: That's true. There you go.

Engdahl: Why do I imagine that Daffy Duck is walking on the sidewalk at a very unfortunate time?

Southwick: Let's head to Oregon where at Reed College they celebrate this element for its tendency to be overshadowed by flashy elements such as oxygen? Regardless of how many years they've been doing it, it's always the Seventh Annual with traditions of eating hot dogs and freezing things, like socks. Oh, someone's feeling confident.

Brokamp: Tim's looking confident.

Jolly: My stepsister went to Reed, so if you give me a phone I can phone a friend.

McFillin: No, she gave a good hint there in the beginning.

Brokamp: Phosphorus.

Southwick: No.

Jolly: Carbon.

McFillin: Nitrogen.

Southwick: Nitrogen! Yes, that's right.

McFillin: Freezing, come on!

Southwick: The tradition goes back to 1992. I found this on the website Thrillist. They didn't mention it in their article, but I also have to assume that sales of whipped cream cans and nitrous cartridges are also very popular on this day.

Jolly: That's a different podcast.

McFillin: When I worked at Starbucks, they had a lockbox for those.

Southwick: They eat hotdogs for the nitrates and they freeze stuff in liquid nitrogen and all of that. Flu, mono, and meningococcal meningitis invariably sweep the dorms in the days following a Stanford tradition called "Full Moon on the Quad." Despite attempts by the school to ban it, thousands of students show up on the quad at midnight under the first full moon of the academic year and seniors do what to freshman?

Brokamp: This has the potential to be really gross.

Southwick: It has potential.

Brokamp: Can we start at the other end of the table this time?

Southwick: As long as you have your answer. Do you want me to write your answer? Because I don't want you to steal his answer.

McFillin: They're naked and they pour water on them.

Southwick: Oh, no! No, they don't.

McFillin: It must have just been me and Brock.

Southwick: What you do in your own time...

McFillin: Streak the lawn at UVA.

Jolly: I was close on that. I said pour beer on them.

Southwick: No.

McFillin: That would be preferable.

Brokamp: All I have is sputum-related activities.

Southwick: Bro! Come on! They smooch. Was that what you meant by that?

Brokamp: Isn't sputum a catch-all term for any kind of bodily fluid?

Southwick: No. I'm not going to give it to you. I think you're being overly gross.

Jolly: Do they still do this?

Southwick: Yes. Smooch!

Jolly: Oh, man!

Southwick: According to The New York Times, many kissers wear bingo boards, and they'll name 25 different types of kisses they want to get. One from each freshman dorm, or a rower, or a fencer, or a redhead, or a pothead, or someone over 6'5", or whatever.

Jolly: I want all three. Redhead, pothead, 6'5".

Southwick: Also, apparently the most popular one to kiss is the tree.

McFillin: The mascot.

Southwick: Someone is deemed the mascot -- I don't know if it's the actual mascot or if someone's like, "I'm the mascot for the day" -- and everyone has to kiss that tree. That tree ends up kissing hundreds and hundreds of people under the moonlight, so that's the flu, mono, and meningitis.

Brokamp: And that's why they don't have to offer any financial aid.

Southwick: So, there you go. Smart people there, at Stanford.

McFillin: And that's why I said that about that. Ask him what his list was and then share it with my mom.

Southwick: So, that's what I've got. And yes, you are definitely the winner, Tim!

Brokamp: Congratulations, Tim!

McFillin: Thank you!

Southwick: Thank you so much for putting up with us!

Jolly: This was awesome. We really appreciate it. This was a lot of fun. So much fun. Thanks again!

McFillin: Thanks, guys!

Southwick: I want to thank Tim and Brock for joining us, again, from TheCollegeFundingCoach.org. If you want to learn more about what they offer, again it's TheCollegeFundingCoach.org.

So, that's the show. It is edited collegially by Rick Engdahl and I also want to thank Austin for helping us out this week, as we've just all been on crazy schedules, and in and out, and it's been a mess. Somehow this episode came together. I feel like I say that every week.

Brokamp: It's getting to be a trend. I swear, people, we do plan on this stuff.

Southwick: I swear I am also healthy from time to time, as well. Next week I'll be healthier, right?

Brokamp: Sure.

Southwick: Thanks. For Robert Brokamp, I'm Alison Southwick. Stay Foolish, everybody!

Alison Southwick has no position in any of the stocks mentioned. Robert Brokamp, CFP owns shares of Starbucks. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool recommends The New York Times. The Motley Fool has a disclosure policy.