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Paying for Your Kids’ College, Lessons for the Sandwich Generation

December 01, 2017 View all posts by Atlas Wealth Advisors Atlas Wealth Advisors Sandwich Generation, Steward

One of the biggest questions that young people of any generation face is “what happens after high school?” Chances are your children have been counting down the days to the age they think will make them adult, but they most likely not have fully considered the financial costs that entails.

You may have purposely shielded your children from financial responsibilities so they could enjoy their childhood or so you could give them the childhood you wish you had. You may have also given them an allowance so they could learn to make choices for some less costly expenses. Either way, it can be difficult to talk about money as adults, so knowing when to broach the subject with your children can be even more challenging – especially as they are trying to establish their independence from you.

You’ve probably been considering the finer points of paying for their education from the time they were born. Planning for that expense is one thing, while talking to your kids and getting them on board with your plan is another matter entirely. Of course, you are fully aware of what it took you to prepare financially for this goal, but your child is going to want what they want – and that may not align with your plans.

College Isn’t the Only Option

Conventional wisdom says a four-year university is the only choice after high school, but that’s not necessarily the case. Even before the gig-economy penetrated nearly all walks of life, many young adults explored alternative paths. If you’re a foodie and have raised your kids in a household that cherishes cooking and eating finer foods, you may find yourself with a child that wants to pursue a career in that direction.

If your son or daughter is gifted in a particular craft or simply wants to pursue a less traditional route, you might consider a trade school, specialty college or completely unique experience. For example, Cornell University has an alliance with the Culinary Institute of America, which provides undergraduates with an opportunity to learn about foodservice operations and culinary techniques.

Your child may be interested in a subject that would benefit from them leaving the United States to study. Even if that’s not the case, many have found that spending a semester overseas is worthwhile.

Allowing your student to temporarily move overseas may be the right move, but if you want to subsidize their post-high school experiences, it’s important to realize that while it’s appropriate for you to set timelines and limits on expenses, that doesn’t have to limit your child’s journey of self-discovery after high school.

There is also an opportunity to help your child realize that financial constraints do not have to limit their desire for self-discovery. They can learn to earn money in school or in between semesters. They can start to save money that’s been gifted to them instead of spending it on the latest technology or fashions, etc.

It can be difficult to let go of our own expectations for our children’s future, especially when we have worked so diligently to provide for them. One of the few things more difficult than coming to terms with the reality of who your children want to be is the potential long-term damage your relationship could sustain if there is disagreement in this area that does not get resolved.

When it comes to helping prepare your children for their future, it’s a good idea to start discussing realistically which option will be the best fit for your child, along with how much you’re willing to help them out with tuition and living expenses.


Applying to colleges can be a headache. Much has changed since you prepared your own college application. Don’t hesitate to reach out for help. College application tutors can help your child land the school they really want. However, if the schools to which they are applying have less rigorous application processes, outside help may not be necessary.

If you are managing the process yourself, you’ll want to figure out where you can help and what you want your child to handle. You may want to help them make a spreadsheet with calendar reminders to meet deadlines. This can be overwhelming for your child, but keep trying to find the balance between letting them figure things out and being a resource or partner for them in this process.

If you are part of the sandwich generation, you’ve got your hands full already, so reaching out for help is a good idea.

Financial Aid

While the expense of college may be fully within reach, there is no reason to pay more than you need to for higher education. Although need-based scholarships might not be available to you, it’s worth your time to see if your child qualifies for financial aid at the institutions you’re interested in. Fill out a Free Application for Federal Student Aid (FAFSA) form even if you know you will not qualify. There’s quite a bit of nuance to financial aid offers and they vary from school to school, so make sure you fully understand what’s being offered.

529 Plans

Using a 529 plan to fund college is an increasingly popular option. After all, the assets in them grow tax-free, contributions are often tax-deductible, and 529s are flexible in a way some other investment options aren’t.

But they’re far from a silver bullet solution. For instance, any money you want to put in a 529 beyond your annual exclusion gift of $14,000 will eat into the beneficiary’s lifetime exclusion of $5.49 million. One nice feature of 529s is that you can contribute five years’ worth of gifts at a time ($70,000), but the downside is that you can’t contribute anything else for the next five years without also eating into the individuals’ lifetime exclusion total.

To some people it might seem crazy to worry about a $5.49 million threshold, but keep in mind that this lifetime exclusion includes anything that person may inherit from your estate or that of others down the line. It might be a great solution for college right now, but it could create a nightmare of taxes down the line.

One simple solution to the lifetime exclusion problem is to simply pay your child’s tuition directly to the college. While contributions to a 529 are considered gifts, writing a check directly to their university is not.

Another issue with a 529 is that once you put money in it, the government considers those funds to be earmarked exclusively for education costs. If you reach into it too early or to pay for something other than college, you will likely incur a 10 percent fee.

If that last factor is a sticking point for you, you may want to consider a trust.


Setting up a trust is a great way to prepare for the expense of college, and it can help sidestep some of the potential issues a 529 presents. For instance, money in a trust doesn’t have to be earmarked for anything in particular, so if you end up withdrawing money from a college trust for some other purpose, the government won’t hit you with a fee.

While that’s a good thing, it doesn’t mean this is the answer for every family. Since the funds don’t have to be used to pay for education, it leaves the possibility open that your child will gain control of the trust and want to use it for something else.

The trust or 529 conversation is not about one being right and the other being wrong. While a trust provides estate plan benefits down the line, it lacks the income tax benefits of a 529. For that reason, it’s important to take your entire financial journey into account by sitting down with a trained financial guide before deciding which way to go.

Living Expenses

Whether your kids are headed out of town, living in the dorms, or staying at home during college, it’s time for them to begin taking account of their living expenses. In our last post, we discussed the importance of helping your child start a budget. Regardless of how much money you have, financial independence can be a challenge for children who are on their own for the first time.

It’s a Process

Remember that independence is a goal best attained gradually. As you keep moving your children in the right direction, you’ll know when they’re ready to take the training wheels off for the last time and head down the path on their own.

Next time, we’re going to discuss how to establish healthy boundaries with your adult children after college.


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