Expert Spotlight: Melissa Sotudeh, Halpern Financial

How can parents afford to pay for the ever-increasing cost of a child’s college education without depleting their retirement savings?

SAT and ACT prep is only one part of preparing for college. Without proper financial planning, all of the SAT and ACT test prep classes can only help them get a spot. You need a roadmap to success, and that must include saving for college. That’s why we turned to Melissa Sotudeh, Director of Advisory Services at Halpern Financial. Melissa has spent two decades delivering practical guidance on how to manage college savings as part of the bigger picture of life’s financial goals. As a mother of a recent college grad and with a daughter still in college, she herself has experienced this important rite of passage.

Families find the whole process of saving for college really intimidating. What is your top-line advice to parents on how to navigate college savings?

I always tell people: the sooner you start, the better. Even if it’s just a very small amount, you can take advantage of the power of compound interest. When the time comes, you may have saved enough to pay room and board, or even cover the cost of books. Every little bit counts and can help you avoid taking out massive loans.

Thankfully, people seem to be getting the message. I’m seeing a lot of millennials starting families and asking questions about college savings as part of a bigger conversation on financial health over multiple life stages. It becomes a conversation of: How do I save for a house? How do I save for college? How do I save for retirement?

That holistic way of thinking is really helpful, even for parents of my generation who tended to wait until kids got older to start thinking about college savings. I tell them: it’s never too late. Do your research, make small incremental savings, and don’t let the process overwhelm you.

We hear a lot about 529 Plans. What are they and why are they a good college savings option?

Most states have a 529 college savings plan. It’s an easy-to-use investment vehicle that enables families to save money for college while taking advantage of tax savings. While rules in every state are a little different, in general, contributions to a 529 are state income tax-deductible (up to a certain limit). Then, any growth in that investment is also tax-free for both state and federal taxes when you distribute it for qualified expenses (such as tuition, room and board, and books). In short, that means there are opportunities for tax savings on both the front and back end.

While many state 529 Plans are open to anyone, I generally encourage families to select the plan for the state they live in, as they are more likely to benefit from savings on their state income tax. If you live in DC, Virginia, or Maryland, I recommend selecting your state plan.

Some 529 Plans allow you to pre-pay for tuition at a state university. I caution families who want to use one of these plans. It may be limiting, so read the fine print. It’s usually wise to find a plan that allows the broadest possible usage.

Can families do all this investment themselves, or do they need to hire a financial advisor?

I always tell families: just get started. I find that people procrastinate when it comes to talking to a financial advisor. Don’t wait. States have made their 529 websites very user-friendly. You don’t need an expert to enroll in your state’s 529 Plan and start regular, small contributions. Most plans have an aged-based investment option, which makes it even easier.

That said, I do encourage families to think about paying for college as one piece of their larger financial puzzle. That’s where a financial advisor might be helpful. They can help you gain a better understanding of your true financial goals—not just college savings, but also buying a house or planning for retirement. One of the biggest mistakes people make is not to prepare for retirement. A financial advisor can help you think broadly about your goals, how to maximize what you’re able to save, and then identify the available resources.

Students and parents understand they need to spend a remarkable amount of time preparing for the SAT and ACT with prep classes and practice tests. Sometimes, the students don’t think as much about how to pay for it.
How do you encourage families to come to an understanding of what they can actually afford to spend on college?

I recommend that parents take an inventory of all the resources at their disposal – from 529 savings to family gifts – and establish what they can realistically afford. It’s prudent to have that number in mind early in high school.

Then, there needs to be a family conversation that involves the student. Parents need to say: okay, here is what we can afford. Above that, there are a lot of options out there: loans, scholarships. But the student needs to understand the long-term impact of borrowing, and plan to complete the extra applications for institutional scholarships.

I’m a wealth advisor for families who want help looking at the bigger picture. It might feel hard for parents to acknowledge that their resources aren’t limitless. But I think there’s a real advantage to this kind of frank and mature family discussion about finances. I find that when families have this conversation with their children early, it makes a lasting positive impact on the mindset of these young adults. It not only helps guide their college search in a more financially-prudent way. It also sets up the next generation to be more financially aware throughout their lifetime.

What resources are out there for budget-conscious families who want to learn about scholarships and financial aid opportunities?

The good news is that you’re not alone. Most families are worried about the spiraling cost of college, which means there are a lot of online resources. A few examples are and the net price calculators available on each college’s website. But it’s incumbent on the family to do the legwork and begin research early.

There are a lot of schools that offer more financial aid. You can find a list of some very generous schools in the Need-Based and Merit Aid excel sheet created by Jennie Kent and Jeff Levy, who are international education consultants. I encourage students to look at these schools and see what they have to offer. The good news is that often there are some very appealing options that the student might not have considered. It’s a misconception to assume having a budget means you have to compromise on quality. You just have to be a smart consumer!

I encourage students to divide their college list into three: financial safety schools fall into or below your family budget; target schools are those you could pay for with some careful planning; and reach schools are those that offer institutional money or discounts that you might be able to access, subject to legwork and some good fortune.

Some students want to go to their dream school, no matter the cost. How do you help families understand the long-term impact of taking on substantial student debt?

The rule of thumb I share is that students should limit borrowing to the equivalent of their first-year post-graduate income. For a student who wants to be an investment banker, that number will look different than for the student who wants to be an artist. But be cautious, because sometimes career plans change over the course of college. You might start in English, and make your way into Calculus. Who knows?

Few 18-year-olds really understand the impact of heavy debt. So I urge parents to sit down with their young adults and look at the numbers. Parents also need to speak frankly about their ability or intention to contribute financially after the student graduates from college. Including help paying off student loans. Talk to your children about the amount they may have to take on as debt, what the average salary is for this degree, and what they will need to spend each month to cover that debt.

There are a lot of websites that help walk students through this thought exercise. Such as this student loan calculator from And once your student has an idea of what the typical salary might be, it’s very eye-opening to plug the numbers into this visualization.

The key takeaway is that when students incur debt without a lot of education, they can find themselves in a hole. The good news is that with advanced planning, honest family conversations, and early research, students can find a wonderful school that meets both their academic goals and their budget while learning a lasting life lesson along the way!

It’s important to remember that SAT and ACT prep is only one component of college preparation. Whether you intend to take Math, Languages, World History, or Chemistry in college, you still need to pay for it. If you want to maximize the chances that you could bring in scholarship money or grants, getting a high mark on your SAT or ACT can be a smart move. If you’re looking for SAT and ACT test prep near D.C., please feel free to contact Tungsten Prep for a free practice test today!

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