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You've gotten a lot of good advice. With at least two in school at once, it is important to understand that Fafsa, the way they calculate how much your family is expected to pay for school, will expect 20% of funds in the kids name to be relegated towards your family requirement, and parents funds are at 5%. Retirement assets are excluded from this calculation. This is one reason why you are encouraged to put assets in to retirement accounts first, the other being that you need to provide for your "old" age. Though some states do mandate a kid cover your bills in old age, aka filial responsibility laws, I personally won't count on that. I would sooner make my kids pay their way through school than pay for my bills in aged form.

Fafsa calculates your EFC, Effective(IIRC,) Family Contribution, and divide that by the number of family members in school at once. That is in theory how much you are expected to pay towards schooling. Note that this does not mean this is all you will have to pay, which will vary from school to school.

So in general, the more assets you can shelter in retirement accounts, the more you can keep in the parents name, the less you will be expected to pay towards schooling.

One thing that we did for our kids, is to purchase I bonds in our names. I bonds can be redeemed for higher ed for your kids without paying taxes on the gains, subject to conditions of course. Given the interest rates on the Ibonds at the time, and knowing that after 5 years we could use this as an emergency fund without penalty, though taxed, it was a no brainer for us. Heck, we even were able to get points on our credit card to redeem for things later, something which I believe is no longer an option. But I bonds are still an option.

So while taxes are part of the calculation, think about the Fafsa calculation as well.

in the middle of the college pay out process
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