Secret College Funding Strategies

**SPEAKER_1** (0:01)
Welcome to the Money Tree Investing Podcast. Stock market, wealth, personal finance, value stocks. Invest in your life.

**Kirk Chisholm** (0:11)
Hello, Smart Money Tree Podcast listeners. Welcome to this week's show. My name's Kirk Chisholm, and I'll be your host. Today, I'm joined with Fred Amrein. How you doing, Fred?

**Fred Amrein** (0:18)
Hey, Kirk, how you doing today?

**Kirk Chisholm** (0:20)
Doing well. Maybe you could tell us a little bit about your background.

**Fred Amrein** (0:22)
You know, I came out of corporate finance and started my own RA, and then evolved into specializing. My niche was College Funding Institute Loan Repayment, and then I evolved to just focusing on that. So we have software. Think of it like tax software for College Funding Institute Loan Repayment. I think the biggest view or difference that makes us unique is, we look at the entire picture so I can take you from how to save to loan repayment and anything in between. So graduate school, undergraduate funding. How do we do that? And there's big changes, probably the biggest changes we've seen in 20, 25 years in higher ed.

**Kirk Chisholm** (0:55)
Well, let's talk about that. So the one big beautiful bill was passed recently, a lot of changes to that. Maybe you can give us a little bit of perspective here for kind of like the before and the after for what people experienced.

**Fred Amrein** (1:09)
You know, everything is so highly political, but this has been talked about over multiple administrations. The government is currently losing about 20 cents per dollar lent right now under the current rules. So there had to be changes made. According to two studies, one is the Cato Institute. The other one is the Congressional Budget Office. That's where the 20 cents, that's 19 and 20, you know, between the two of them. We've seen some efforts to make it more affordable. And it started back in 1992, where they made PLUS loans unlimited. So there were caps, they were established in 1980
And in 1992, they became unlimited, basically up to the cost of attendance. So I think the colleges took advantage of that and parents kind of didn't look at what was really affordable. They just were looking at getting an education.
In 2006, that same rule came in effect for Grad PLUS loans. And so we've had this enormous inflation in college costs for families. I think the biggest difference now is we're gonna go back to where there's limits and it will change how parents have to make this decision. It will no longer be by child because now your other decisions because of a formal underwriting process will now impact your other children. So if you have significant debt now and you try to get underwritten, there will be no consequences. So that's probably the biggest change that we've seen that will be really replacing. Affordability will now replace access. I always talk about access and affordability. The system is currently built on access and now affordability will come in the primary reason of affordability to get into the schools.

**Kirk Chisholm** (2:40)
So basically what you're saying is prior to this, pretty much anybody could get access to anywhere because they would just take out a loan and just pay it back for the rest of your life. Now, you're limited on what loans you're going to be able to get.

**Fred Amrein** (2:52)
There's a formal underwriting process. Under the federal system, the two PLUS programs, so there's Parent PLUS and Grad PLUS, you could basically borrow up to what's called the cost of attendance. So it was cost of attendance less, whatever financial scholarships or awards you received, you could borrow up that if your credit was just decent, you could qualify, just fog up the mirror basically, and that loan will be cash.

**Kirk Chisholm** (3:13)
My understanding is even grad school, you're limited there too.

**Fred Amrein** (3:16)
There's three separate groups. So parents, we call it the 92,000 rule.
Between the student and the parent, they can get $92,000 over the first four years. There's annual limits and there's a lifetime limit. So that's the first phase. For graduate school, it's broken up into two pieces. One is called the master's programs. That's going to be your MBAs, your history, sciences, and things like that. They can only get up to the $20,500 per year with a $100,000 limit. And then there's the professional schools, which are your pharmacists, your doctors, your lawyers, your dentists, your veterinarians, your psychology majors. That may change over time. Can get $50,000 per year, up to $200,000 over the four years.

**Kirk Chisholm** (3:59)
Okay. So that's severely limiting for certain professions.