Press
“..Ann Garcia is a professional -- a trained assassin in this area, really...”
– Ron Lieber, New York Times Money Columnist and Author of “THE PRICE YOU PAY FOR COLLEGE” - 2021
“Why doesn’t the formula just take all of your savings? Well, the people who wrote it know you have other priorities, which may include other children who are not yet in college. Ann Garcia, a financial planner in Portland, Ore., suggests another likely explanation: Part of the point is to encourage families to save, not penalize them for doing so.”
“Ms. Garcia says she hears about the savings penalty myth all the time, so much so that she recently took to her blog to try to explain it away with some numbers. By her calculations, the E.F.C. for a typical family with two children and $41,000 in college savings would rise by $1,322 because of that savings. That’s a nominal amount, given the considerable balance. “Not saving for college penalizes you a whole lot more,” she said..”
“There are differences between using a Roth IRA and a traditional IRA for higher education expenses.
A Roth IRA is funded by post-tax dollars while a traditional IRA is funded by pretax dollars. Though both types of IRAs can be used to pay for educational expenses without facing the typical 10% penalty for early withdrawals, those who do take early distributions from a traditional IRA will still have to pay income tax on that amount.
For this reason, the Roth IRA is preferable over the traditional IRA when paying for higher education expenses, says Ann Garcia, a certified financial planner and author of The College Financial Lady blog.
"Since a Roth is after-tax money anyway, you can always take your contributions back out for any reason, and there's no tax," Garcia says.
However, she notes that if an individual has had the Roth IRA for less than five years and withdraws not just the principal amount contributed but also the earnings to pay for college, those earnings are taxable. In the case of a parent who has contributed $30,000 into a Roth IRA that has grown to $45,000 with earnings, for example, he or she can use up to $30,000 – the contributed amount – to pay for school expenses without any tax liabilities if five years have not yet elapsed..”
– U.S News & World Report - 2021
“Meanwhile, colleges like Mount Holyoke and Dickinson College in Pennsylvania, for example, will provide grants to replace work-study aid for some students in cases where they are learning online and cannot work remotely. Other schools are issuing revised financial aid packages that rescind work-study aid entirely and replace it with larger student loans, says Ann Garcia, a certified financial planner and principal owner of Independent Progressive Advisors in Oregon who works with students and their families.
"It would be very unusual for a school to offer a financial aid award under normal circumstances and then change it to the detriment of the student after the fact," Garcia says, "but this year the vast majority of acceptances were sent out before the pandemic hit and before we had any idea fall would look like it does now," which may result in more limited aid options.”
