Nikki Foley: Imagine two students each receive $20,000 to help pay for college. One receives scholarships and grants, and the other relies on loans. Both walk onto campus with the same amount of money available for tuition. Four years later, their financial futures look completely different. Why? Because not all financial aid is created equal. Welcome to Paladin Financial Talk. I’m your host, Nikki Foley, and today I’m joined by featured guest William Nusser. He is an enrolled agent and owner of Simmons & Simmons Public Accountants. Today we’re unpacking the rules, the tax consequences, the repayment requirements, and plenty of planning opportunities behind scholarships, grants, work-study programs, and, of course, student loans. Welcome to the show, William.

William Nusser: Thank you for having me, Nikki.

Nikki Foley: Absolutely. Okay, William, our topic today is part of a series that we have been doing for this entire month. You’re our fourth or fifth guest, but you’re getting into the real details here. As part of this series, we’ve been exploring how families navigate education, financial decisions, leadership development, and how all of that plays into life beyond the classroom for students. Today, we’re going to talk about the college funding portion, and you have the best perspective on the impact of taxes and what that might look like. So let’s talk a little bit about your background. You’re the owner of Simmons & Simmons Public Accountants. We’ve just finished our first tax season together, and that has been fantastic. We’re sitting here together face-to-face because you’re visiting us in Minnesota. We have our client appreciation event tonight, and you’re here to mix and mingle with everybody after a big tax season. I’m just glad you’re here and glad we have this time together today.

William Nusser: I’m really looking forward to it. It looks like the event tonight is going to be a lot of fun. Who doesn’t enjoy some time out in the community, seeing clients, and showing that appreciation? A lot of times we’re in the weeds, and taxes aren’t always the most fun conversations to have with people. But sometimes getting to meet them and know who they are outside of that setting is important. That’s really what we’re focused on as a firm, and I think you guys do a great job, too. We want people to know the firm they’re working with, who we are, and that we’re people with faces behind the names. So that’s what’s important, and we’re glad to come up here and spend time with the clients.

Nikki Foley: As you talk about that, I’m going to bring in a study from the University of Kansas that I went over on our program probably almost three years ago. It was about how adults get to know people and how people often complain that it’s hard to make new friends as they age. The study talked about how many hours it takes with another adult to create a new friendship. The first tier was something like eight hours, then sixteen, then thirty, and so on. When you think about it, how often as an adult are you spending eight or sixteen hours with another adult? It just doesn’t happen like it used to when we were children or students. I bring that up because hosting events like client education events or client appreciation events gives us an opportunity to have real conversations outside of the workplace conversation we might have about finances. It isn’t just across the table once a year. We look forward to these events, and that’s one of the reasons we put them on.

William Nusser: It gives us a chance to be on the same side of the table, versus the adviser-to-client relationship we’re usually in. When you cross over and you’re on that same side of the table, it’s easier to have a more common conversation instead of saying, ‘We’re here for this task, I have another appointment coming up, so let’s get through this.’ I think it’s important to know who clients are, because for us, guiding people isn’t just about the numbers. It’s emotional. When we talk about college, there’s uncertainty, and understanding where people are coming from is critical to our role as advisers in the tax world and also in accounting. The same is true with business owners. I had a client call me this morning about business structures they’re considering, and some of it is emotional. It’s not just what the building is worth, what they’re going to get, or what the taxes are. There’s an emotional component to a lot of what we do, and it’s important to walk people through those steps.

Nikki Foley: Absolutely. Spending time together is a big piece of who we are as an organization. We’re looking forward to tonight. We’re at Forgotten Star Brewery, and we’ve been doing the same event for the last few years. We have Nelson’s Ice Cream, which is famous from Stillwater, with another location here in the Twin Cities. They give enormous scoops of ice cream, and everybody loves that part. We’re doing music bingo this year, we have food trucks, and it’s a fun event for everyone to kick back and enjoy. With that, should we go ahead and dive into the conversation? I like to have structure around a topic like financial aid because it can go all over the place. I want to start with a parent claiming a child as a dependent versus a student filing independently, including the pros and cons. That isn’t as easy to achieve as one might think. So let’s start with the scenario of why a student can’t just start claiming themselves and move on.

William Nusser: There are a couple of pieces there. A lot of times when a kid graduates high school, people think, ‘You’re on your own now.’ But no, the parent can still claim the student through the college years if the eligibility is there. Secondly, the student can’t just decide they’re independent. They may feel independent when they graduate high school, but they actually have to support themselves. The IRS has tests related to claiming dependency, and you would have those same rulings from when a child is born through the college years. One major piece is the support test. That means providing over half of the support, including housing, food, vehicle expenses, cell phone, health insurance, medical costs, and those kinds of things. If a student is going to claim themselves, they have to prove they’re providing over half of their own support. Scholarship money and student loan money generally do not count as the student supporting themselves. That’s important. The IRS wants to see that the student is providing their own support. In the FAFSA world, if a student tries to claim themselves as independent and they have low income, they could become eligible for other things. That’s why the rules are critical. Your parents may be supporting you even if you have a job and can pay for your own night out. Paying for your hamburger doesn’t mean you’re supporting yourself. True support is room, board, housing, car, cell phone, health insurance, and medical costs.

Nikki Foley: That’s a good perspective, and I didn’t realize scholarships and some of those items do not count as supporting yourself. We may get into that again, but the support test is one piece. I think you also mentioned residency before we got started.

William Nusser: Yes. When they look at residency, they want to make sure the dependent is staying more than half the nights with the parent. In the college setting, they allow dormitory or temporary college housing to still be considered as residing with the parent. But in a split household where the mother and father are no longer together, the residency test becomes critical. If you’re a parent who has every other weekend, you’re probably not going to get over half the days. If we have situations where it’s critical and we’re trying to determine who can claim the student, sometimes it’s as simple as getting a calendar and circling the days where the student stayed. When you get to college age, it’s a little different because dormitory or college housing can be treated as if they stayed in the parent’s home.

Nikki Foley: I thought we were starting with the basics, and I already feel like we’re diving into complications. You also had an example related to earned income that plays into this conversation, especially when students get a little older, including some athletes around age twenty-three or twenty-four. Walk through that scenario as well.

William Nusser: When you get into dependency rules for under age twenty-four and over, there are income limitations. In the nineteen- to twenty-year-old range, there may not be issues with the amount of money a student can make. But once you get older, those rules can change. Outside of college, for example, if someone has special needs and is always going to be at home, you may still have other layers of rules. But generally, once you get to certain ages, income limitations matter. If you’re a college athlete or you’re working a part-time job later in your college career, or if you’re thinking about grad school, the dependency rules and income rules can change quite a bit.

Nikki Foley: Right out of the gate, we’ve covered three strong things: the support test, residency, and age or income considerations. Is there anything else people should be aware of?

William Nusser: The biggest thing is to start those conversations during tax appointments if you have a college-age dependent or soon-to-be college-age dependent. FAFSA information needs to be current and accurate, and pre-planning matters. The hardest thing to do is unwind something that’s already in place. If college is going to be part of your dependent’s future, your child’s future, or even your own future, make sure you’re having those conversations before you’re all the way in. You don’t want to start talking about financial aid and then, ten years later, wish you had done something differently. We try to be on the front end instead of the back end.

Nikki Foley: Absolutely. Planning is such a big part of this. I’m doing coursework through The American College, which is one of the premier providers of coursework on the financial side. In a recent class, they were talking about the difference between using savings and using loans. It’s incredible how much more you pay when you’re paying back interest and how much time goes into that. It’s a big deal to plan ahead. Anytime the government is giving us money, it seems like there are usually limitations that go along with it. Talk about that piece.

William Nusser: When we look at loans or education credits, there are thresholds you have to meet. There are hoops to jump through and eligibility requirements. When we look at adjusted gross income, and in this case modified adjusted gross income because certain income scenarios are added back in, you may or may not be eligible. My dad had a famous saying when we were going through college: ‘The government says I can afford to pay for your college. I’m certain I can’t.’ That was his frustration, because we tried to go through those loops, but there just wasn’t eligibility. Those AGI numbers are low today. They haven’t adjusted the way they probably should. When you’re talking about a married filing jointly household around $160,000, that’s not necessarily a ton of extra money if you’re trying to keep your household going, pay tuition, and cover housing.

Nikki Foley: That’s a great point. We’ve already started with rich information. Now let’s move into financial aid generally. It usually falls into four main categories: scholarships, grants, work-study programs, and student loans. I like to look at it through the who, what, where, when, and how of each category. Scholarships and grants often look similar, but who is receiving the money, and what does that look like from a taxable perspective? Let’s start with scholarships. These are often merit-based, meaning a student is being rewarded for some type of performance, whether academic achievement, talent, or athletics. Who receives the money when a student gets a scholarship?

William Nusser: Generally speaking, especially with achievement-based or grade-based scholarships, the university handles that internally. It’s a little bit like left pocket, right pocket. They apply the scholarship as a credit to the student’s account at the university. It’s probably smarter for the university to do it that way. If they gave every academic or athletic scholarship directly to the student and then asked them to pay it back to the university, that probably wouldn’t work very well. The student will see that credit on the student account. A big point with scholarships and grants is that it comes through on a tax form called a 1098-T. That form shows payments received or paid in, scholarships received, and the cost of the university. The 1098-T is a primary document we use in tax preparation.

William Nusser: Anytime you have a college-age student, especially in the first year, they may need to log into the university system to get the 1098-T. Schools aren’t always great about mailing those forms anymore. It can be tricky because the school year and tax year don’t line up. A freshman may start school in August, but the tax year ends in December. Then the parent is in a tax appointment saying, ‘Johnny is at Ohio State now,’ and we need the 1098-T. The parent is texting the student, trying to get them to log in and print off the form. The student is eighteen, still learning life, and may not know where to find it. But the 1098-T is critical. It has improved over the years. Earlier in my career, those forms could be inaccurate because of manual data entry. Now computer systems have improved. But the form is still cash basis, so timing can matter. A spring semester scholarship might hit the account on December 30, but tuition might not be paid until January. It can look like scholarships exceed tuition, which could create a taxable event or affect education credit eligibility. Sometimes we have to get the transaction history to understand the timing.

Nikki Foley: What I heard you say is that even though the college may be moving money from left pocket to right pocket, there is still a tracking piece, and that’s the 1098-T form. Parents may have to be proactive to get it or ask their student to get it. It’s a key document showing that the student received money.

William Nusser: Correct. The 1098-T also has other pieces that are important when we get to education credits. There’s a box that indicates whether the student is at least half-time, which matters for the American Opportunity Credit. The university is essentially saying the student met the threshold. When we were in college, we thought twelve hours was the minimum and fifteen to eighteen hours was what you needed to graduate on time. But the half-time rules may be six or nine hours, so they’re softer than people think. The form also indicates whether the student is a graduate student. Generally speaking, graduate students are not eligible for the American Opportunity Credit because it applies only to the first four years of post-secondary education. There can also be boxes checked showing amounts from a prior year. The 1098-T is a critical tax preparation form because it includes the university’s EIN and other important information.

Nikki Foley: You brought up something we probably should have covered earlier when talking about claiming a dependent versus filing independently: the American Opportunity Tax Credit. What other credits might be available?

William Nusser: The Lifetime Learning Credit is the other primary federal credit. The American Opportunity Credit is the most lucrative. It is 100% of the first $2,000 of eligible expenses, and 25% of the next $2,000, with a maximum credit of $2,500. Only 40% is refundable, so you want to make sure there is taxable income to use it. It’s only eligible for the first four years of post-secondary education. Sometimes that gets complicated. If someone goes to college for two years, stops, works, and then goes back for two more, you have to track which tax years were used. The Lifetime Learning Credit is more broadly available, but it is 20% of the first $10,000 spent, so the maximum credit is $2,000. With the American Opportunity Credit, you can spend $4,000 and get up to $2,500. With the Lifetime Learning Credit, you have to spend $10,000 to get $2,000.

Nikki Foley: I already feel like I need to work with a professional. This is something people should know, but as a layperson it might be hard to track.

William Nusser: A huge piece is eligible expenses. People think, ‘I wrote checks to the university, so it counts.’ But maybe that was for housing. The IRS does not give an education credit for housing. Eligible expenses are tuition, books, and required school supplies. For the American Opportunity Credit, there can be some outside expenses, such as laptops, school supplies, or even flight hours for flight school. But room and board does not count. That gets confusing because everything may be intermingled in the student account. If you’re at a university, your tuition, room, board, and housing might all be billed through the same account. The university often says, ‘This is what you owe us,’ and then you have to unwind which costs were for education and which were for housing.

Nikki Foley: Let me make sure I have a good perspective. From a tax perspective, tuition, required fees, required books, and required supplies are typically recognized. But housing, meal plans, travel expenses, and other peripheral living expenses are not. Is that correct?

William Nusser: Correct. Scholarship dollars, grant dollars, and student loan money can be used for many of those expenses, but not all of those expenses qualify for tax credits. These are education credits, not living credits. Think about what is truly driven by education. The 1098-T is not going to include housing as a qualified education cost. It is driven toward tax code requirements.

Nikki Foley: Once you apply those general rules, it becomes more common sense. Before that, people may think, ‘Of course I paid room and board. I have to be there, so shouldn’t that count?’ But what I hear you saying is that the tax credit is about the educational piece. If you can tie the expense back to education, there’s a good chance it applies. But housing and living expenses generally do not.

William Nusser: Exactly. Sometimes we see 1098-T forms where scholarships and grants are in excess of the education cost. In that case, there may be no education credit eligibility. For example, if a student is an athlete and gets room and board covered, their scholarships and grants may exceed the school cost because of that room and board component. That can eliminate education credit eligibility.

Nikki Foley: You said something else I want to clarify. You want to make sure there is enough income because when you get these credits, you receive the credit, but if it is in excess of tax liability, the refund can cap out. That may not be a concern for a parent with income, but it can be more of an issue for a student. Can you explain that concept?

William Nusser: Yes. First, there’s a difference between a credit and a deduction. Clients often ask whether something is deductible or whether it is a credit. A credit is like additional withholding on your W-2. It’s worth a dollar. If you get a dollar of credit, your tax bill is reduced by a dollar. A deduction reduces your taxable income, so the value depends on your tax rate. If you have a dollar deduction and a 30% tax rate, you save about thirty cents. These education items are credits, so they are valuable. But only some of the credits are refundable. For example, with the American Opportunity Credit, only 40% is refundable. If a student has no taxable income, they may only get part of the credit, or maybe none depending on the income threshold. There is a double-edged sword: you can’t have too much income and still be eligible, but if you don’t have enough income, you may not be able to use the credit effectively.

William Nusser: That’s why when someone says, ‘I want my child to claim the credit,’ we have to look at whether the child has taxable income. With the standard deduction where it is now, the credit may not move the student’s return at all. In those situations, it helps to have access to both the parent’s and student’s tax returns so we can determine the best eligible position.

Nikki Foley: Sometimes when people are doing calculations in their heads, they forget about the standard deduction, which pushes everything down.

William Nusser: Right. The standard deduction has expanded so much. We aren’t at $5,900 anymore. For a full-time college student to earn enough to exceed the standard deduction today can be tricky. There aren’t many college students making $20,000 or $30,000 a year.

Nikki Foley: We’ve covered scholarships, and grants look very similar except grants are often need-based.

William Nusser: Yes. Scholarships are often based on academic or athletic success. Grants are more need-based. On the federal side, they generally look at the parents’ income. If the income falls within a certain range, FAFSA forms may determine Pell Grant eligibility or other grant eligibility. Then the student figures out the remaining component.

Nikki Foley: When it comes to a lot of this, working with the university can be a turnkey process. If you are far enough along with the university, they are going to help deliver what you need.

William Nusser: Yes. Financial advisers in the university world are usually very good, because their job is to get the university paid. The best universities often have strong people in those roles. Definitely work with the university, not only in academic advising but also in financial advising. Don’t start those conversations when the student is already walking on campus. Start as a junior or senior in high school. Take those trips as a family and start painting the picture. You need to know and understand what the costs will be.

Nikki Foley: One of our first guests in this series was a graduating college senior, and one of the perspectives she shared was that she didn’t know until right before college what her responsibility would be. You don’t know until you know the numbers. The more you can include your student in the conversation, and the earlier you include them, the better chance everyone has of figuring out how to pay the bills and make it work. Again, it comes back to planning instead of playing catch-up. You pay so much more when you get into loans and having to pay things back. Before we get to student loans, let’s talk quickly about work-study programs. That really looks like a job. It is W-2 wages, correct?

William Nusser: Correct. Work-study income comes as a W-2. It may look a little different on our end, but really it’s just a job. The student is earning money. Sometimes people think, ‘I signed up for work-study, and that’s how I’m paying for school.’ In essence, yes, but the school pays the student and then the student pays expenses. It’s earned income and subject to the same rules as any other job. Universities often administer work-study programs, and they may be used to provide opportunities for students, including international students who may not be eligible to work in other places.

Nikki Foley: When we talked before recording, you said there are a few things to pay attention to if a student is part of a work-study program. None of them are the end of the world, but they’re things to be aware of, such as whether federal and state taxes are being withheld and whether it counts toward Social Security. Can you go through a few high-level points?

William Nusser: Anytime a dependent is working, it’s worth discussing whether they will meet the standard deduction threshold. Instead of withholding money and then paying to have a return prepared to get the money back, sometimes the student can claim exempt on the W-4 if we know they will only earn a small amount. That can save everyone time and energy. The student gets more take-home pay, which is usually what they need. They may need to buy food or other small items, and there may be no need to withhold federal or state tax just to file a return to get it back. So W-4 planning on the front end is important.

Nikki Foley: I feel like W-4 forms are a topic people really don’t know how to handle.

William Nusser: The W-4 became more complicated. It’s a problematic document today. When the new W-4 came out, there was a lot of focus on larger net paychecks. But the tax law itself didn’t necessarily change in the way people thought. When tax season came, many people’s tax positions were different because they had already received more money during the year. We’re starting to see adjustments improve, but withholding planning is still important. The W-4 used to be much simpler. It used to be single, then you entered one, two, three, or four allowances. You could kind of say single zero meant a big refund, one might be close, two or three could mean owing. Now it has two jobs, one job, and more sections. Many people just write their name at the top and sign at the bottom, hoping it works.

Nikki Foley: I would agree that most people filling them out have no idea what they mean, if not more than ninety percent.

William Nusser: For a student, everyone’s situation is different, but sometimes claiming exempt on the W-4 can make sense. The key is to have a conversation about it. If the student roughly knows how many hours they will work and what they will earn, exempt may be better than withholding and then filing just to get the money back.

Nikki Foley: Let’s move on to student loans. I want to bring some distinction to this. The first thing is federal versus private loans. Before we go into differences between federal and private student loans, I want to talk about the terminology subsidized versus unsubsidized. That usually applies to federal loans and relates to interest. The easiest way to remember it is that with a subsidized loan, the government is subsidizing it, meaning they are helping pay the interest while the student is in school. On the flip side, an unsubsidized loan means the meter starts running immediately. From day one, interest starts accumulating whether the student is paying on it or not. Does that feel right?

William Nusser: Yes. Subsidized loans are the simplest to think about on the federal side through FAFSA. Private loans can come from banks or other companies, and those are more like going to the bank and getting a private loan. As soon as you draw the money, it starts earning interest. If you are a freshman, by the time you graduate, your initial loan could potentially have grown significantly. You may think, ‘I only borrowed $5,000,’ but by graduation, with accrued interest, it could be much more.

Nikki Foley: These topics can get complicated, but if we take them back to principles we already know, it becomes easier. Federal versus private is one distinction. If you walked into a bank and took a loan, interest would start right away. Subsidized and unsubsidized tie back to the federal loan terminology. Let’s talk through the who, what, where, and when. Who is the money paid to when you have a loan?

William Nusser: On the federal side, the money generally runs through the university. If there is excess, it can be refunded back to the student. I have a funny college story from when I was at Washburn and in a fraternity. One guy didn’t have a car and wanted me to take him to the bank because his ‘Aunt Sally’ gave him a check every semester. It was around $10,000, and as a freshman, I thought, ‘Wow, you have a really cool aunt.’ Unbeknownst to me, that was Sallie Mae. It was a loan. He was saying ‘Aunt Sally,’ and I was naive enough not to know what he meant. I was blown away that someone could take a loan in excess of college costs to cover living expenses. He had a $10,000 check from ‘Aunt Sally,’ and I thought he was fortunate to have such a generous aunt.

Nikki Foley: Did he ever own up to that in the conversation?

William Nusser: As I got older, I realized he probably didn’t fully understand it either. I probably hadn’t thought about that story in twenty years, but I remember thinking his Aunt Sally was generous. In reality, it was Sallie Mae, and she eventually wants to be paid back. Federal loans generally go through the university because the government wants to see that the student is enrolled. If there are loan balances in excess of charges, the school can refund them back. Private loans are private loans, and those funds may be distributed directly to the borrower, depending on the loan.

Nikki Foley: I feel like I also have stories of people who had excess loan money and were the best dressed in the sorority house. Something didn’t add up.

William Nusser: Right. New car, new cell phone, things like that. It may look great until the money has to be paid back.

Nikki Foley: If I receive this money as a college student, am I taxed on it?

William Nusser: No, because it’s a loan. That money has to be paid back. There can be potential taxability later with cancellation of debt, loan forgiveness, or if somebody else pays the loan on your behalf, but the original loan proceeds are not taxable income.

Nikki Foley: What about the interest? If interest is growing, do I have an opportunity for a deduction?

William Nusser: Yes, but you have to pay the interest. It’s based on cash basis. When you pay student loan interest, it can be deductible, and you’ll receive a 1098-E showing the interest paid. An interesting caveat in the private loan world is that the amount paid up to the original principal balance can be considered interest if interest accrued while in school. For example, if you borrowed $5,000 and by graduation you owe $7,500, the money you pay until you get back down to the original $5,000 may be treated as interest because it is accrued interest. The maximum student loan interest deduction is $2,500 per year.

William Nusser: That maximum is the same for single and married taxpayers. If two single individuals recently graduated from college and each had student loan interest, each might have up to a $2,500 deduction. But if they get married, the combined deduction is still $2,500. We call that a marriage penalty. And if you are married filing separately, there is no student loan interest deduction. That can be especially frustrating with income-based repayment plans, where spouses may file separately so household income isn’t combined and doesn’t increase the student loan payment. But then both people paying student loan interest may lose the deduction because they filed separately.

Nikki Foley: You just mentioned income-based repayment. Tell me about that.

William Nusser: When students graduate, especially with federal loans, they may have the option for income-based repayment. The monthly payment is based on income. When a borrower signs up for that program, it isn’t just an annual concept; there are long-term rules. After a certain number of years, depending on the program, if they have made income-based payments, the remaining balance may be forgiven. There are also programs in certain industries, especially education, social work, nonprofits, rural sectors, and public service. Some of those fields may require a master’s degree or even a doctoral degree, but compensation may not be high because the work is in the nonprofit or public-interest world. Those programs can help because the person may have a very expensive education but not a high-paying job.

Nikki Foley: Is there anything people should know about programs where an employer helps pay student loans?

William Nusser: Yes. This is common in the medical field. If an employer offers a benefit or bonus to help pay student loans, ask whether it is taxable compensation. I’ve had medical practitioners receive offers where the employer says they’ll help pay a certain amount of student loan debt each year. That can be compensation because it is being exchanged for the employee’s services. The employer may add it to the W-2 or issue a 1099. That can be hard because the tax is due on money the employee never personally received. If you win the lottery, it’s easier to pay the tax because you received the money. But if someone pays a bill on your behalf and you owe tax on it, you still have to come up with the tax. So make sure you understand how the employment offer is structured. If you think you’re getting $20,000 paid toward your student loans, but you’ll owe $5,000 in tax, maybe you need the structure adjusted so enough money is paid or withheld to cover the tax burden.

Nikki Foley: What I hear you saying is that if something looks like income coming to me, I need to understand how it shows up from a tax perspective and what I may owe.

William Nusser: Exactly. A lot of this comes down to fact-checking. Your situation may be different from your friend’s. Someone might say, ‘My friend doesn’t pay tax on Social Security, so why do I?’ Well, you may have more income. No one’s situation is exactly the same. Age, deductions, income, filing status, and other facts all matter. Even with something like the American Opportunity Credit, there are eligibility rules, phase-outs, and other provisions. If something raises a question, reach out and walk through your specific scenario.

Nikki Foley: Speaking of fact-checking, you and I were talking about how often people get tax information from TikTok, Instagram, or similar places. That information may not be accurate. What are the risks, especially with tax topics?

William Nusser: We used to joke about Google when Google first became popular. People would say, ‘I Googled it.’ But Google’s algorithm is based on what you type in. If I type that John Doe was a professional athlete, it may find John Doe the professional athlete, but that may not be the John Doe I wanted. The same is true in the tax world, and now we see it with TikTok and AI. You have to be careful. The person on TikTok may be a real estate professional or someone talking about tax strategies, but why aren’t they in the tax law business? Social media can be a great place to open a conversation or identify planning points, but you need to work with a tax professional, especially if you are a small business owner, involved in real estate, or dealing with nuanced issues. It’s too complicated to think you can guide yourself through all of these paths based only on social media advice.

Nikki Foley: As we wrap up, I think we’ve covered a lot of good information and many things people can latch onto to determine whether something applies to their situation. Again, it comes back to working with a tax professional. What is one piece of advice you would give to a parent or student?

William Nusser: When you asked me that, the phrase that came to mind was: be college poor. Enjoy the ramen. Enjoy the white rice. Eat the canned tuna. It’s fine. Outside of scholarships and grants, the worst thing I’d want to see someone do is pay for the college experience forever. We joked about the Sallie Mae story, but you don’t want to pay for that forever. College can be fun, and when students graduate high school, there is a lot of pressure. At every graduation party, people ask, ‘What are you doing? What do you want to be?’ I never woke up and said, ‘I want to be a tax accountant.’ But students get put into a tough role. I’m not saying we should let students go without a plan, but they should go with a general plan for how they will repay what they borrow.

William Nusser: Don’t just go there and pay for the college experience, and then pay for it, and pay for it, and pay for it again. I’ve had friends with student loan debt so burdensome that it changed their lives dramatically. I think there is value in embracing the grind. Later in life, you can laugh about the fact that you ate white rice, tuna, and black beans mixed in a bowl for a week. That experience may be better than taking on loans for lifestyle expenses. Because I didn’t take on all of those loans, I had more financial flexibility later to buy a home and do other things. I remember sitting with friends after graduation, and one person said, ‘Well, I had a great time.’ Someone else said, ‘Yes, but I’m going to own a house.’ That’s the difference. With today’s costs, you don’t want to graduate with a $400 or $500 monthly student loan payment. Six months after graduation, the student loan company calls and says, ‘Congratulations. Now we want our money back.’ That isn’t a lot of time to figure it out.

Nikki Foley: I often talk about how I had a misconception that retirement planning starts closer to retirement. The reality is that retirement planning starts the first time you start earning a paycheck and have an opportunity to use a 401(k). Student debt eats into that longer-term picture. Most people have a hard time connecting to a goal that feels far away, but the immediate idea is to control what you can today. That ties back to your point: be college poor.

William Nusser: We’ve done a poor job in how we handle student lending. If you’ve ever bought a home, you know how difficult mortgage lending can be. Business lending can be even harder, even if you are established. They may want 20% or 30% down and all kinds of documentation. But we give student loans to people with no income, no ability to repay, and sometimes as much as they want. Because that isn’t regulated as tightly as it probably needs to be, families have to regulate it themselves. Use your advisers and make sure you aren’t setting yourself up for a position that becomes untenable.

William Nusser: We see young clients who recently graduated and want to finance a car or buy a home. Student loan debt is some of the hardest debt because there is no collateral and no asset attached to it. Many college students graduate essentially bankrupt because their student loan debt exceeds their assets. It’s strange to think about it that way, but if you graduate with student loan debt that exceeds what you own, you’re starting out in a hole. Then you’re supposed to dig out of that hole, build financial prosperity, and retire. I used to tell myself there is no better investment than investing in yourself, and that can be true. But there needs to be balance. If you have a clear plan, a degree path, a job path, and the ability to pay it back, go get it. But if you’re wavering, be careful about the university you choose and the costs you take on. As soon as you take that first round of loans, you may be putting yourself in a difficult position to unwind.

Nikki Foley: That is almost the perfect ending to our entire series. We started with the college student perspective and then moved through building the right skill set to take beyond the college years and how that plays into financial decisions. My last aha moment is the concept of starting out upside down or starting out with the terminology bankrupt. You’re digging out of a hole. What a way to end this. Is there anything else you want to add before we wrap up?

William Nusser: If you have questions, reach out. There are no dumb questions. It’s impossible to know all the details. We may not have every answer immediately, but connecting with your university and making sure your plan is truly planned is important. When universities give tours, they show the rec room, dorms, highlights, sports teams, and the fun parts. They don’t always take you around the classrooms or talk about paying it back. They don’t always talk about the hard work. College has become expensive. When you sign loan documents, understand who is liable to pay it back. On the federal side, if the student doesn’t pay it back, the government may be able to collect in ways that affect the parents, including Social Security in certain circumstances. Don’t feel pressured to take on debt just to put your kid through college. There are other ways to make it work.

Nikki Foley: That’s something Jeff Foley, one of our advisers and the owner of Paladin Financial, has spent quite a bit of time discussing recently. He has done a series of social media posts on that topic and was recently on KARE 11 here in the Twin Cities talking about making sure you can pay for your own retirement before paying for your student’s education.

Nikki Foley: With that in mind, there’s one resource we like to offer listeners as part of this series. This month, we’re offering a checklist called ‘What Issues Do I Need to Consider as My Child Becomes Independent?’ It includes important conversations around access to financial accounts, health records, academic information, emergency planning, and more. That resource is available for download on Paladin Financial Talk.

Nikki Foley: William, it has been an absolute pleasure having you. If our listeners feel like this conversation resonates with them, one of the things we like to offer is a 15-minute complimentary consultation. You can go to our website at paladinfinancialtalk.com or paladinfinancial.com and access our booking tool for 15 minutes. We can also make the introduction to William and his team, or you can find them at simmonsandsimmonsinc.com. All of these links are available on paladinfinancialtalk.com. Thank you again for listening, William, thank you for being with us today, and we’ll see you on the next episode of Paladin Financial Talk.