The 2025 Guide to Planning & Paying for College: Is It Worth It?
By Brian Seay, CFA | Capital Stewards
It is back-to-school time, which means it is time for our annual deep dive into planning and paying for education.
In 2025, the landscape looks different. We are facing new legislation under the OBBBA regarding student loans, changes to the FAFSA (now the Student Aid Index), and rising tuition costs that now range between $80,000 and $300,000 for a four-year degree.
As a fiduciary financial advisor in Huntsville, AL, I believe America needs a "great reset" on how we value college. Before we talk about savings accounts and tax strategies, we need to answer the most important question: Is college the right choice for your child?
Part 1: Is College Actually Worth It?
College is often the second largest purchase a family makes, trailing only their home. Yet, we often spend more time researching cars than we do the ROI of a degree.
While averages show college grads earn more, no one is "average." The return on investment depends on two factors:
The Major: It is intuitive that doctors earn more than ballerinas. Paying high tuition for a high-earning field is a good economic trade-off. Paying $300,000 to study a field with limited economic opportunity is not.
The Engagement: Students who apply themselves improve critical thinking. Students who drift do not.
The Trade Industry Alternative Consider the alternatives. The average starting salary for a plumber or HVAC technician is competitive with many liberal arts graduates. Mid-career business owners in trades often earn well into the six figures—without the student debt burden.
Does "Elite" Status Matter? According to research, school prestige matters for business and some liberal arts majors. However, for STEM fields (Science, Technology, Engineering, Math), earnings are largely the same whether you go to an expensive private school or a state university. Companies like Google and Tesla have publicly stated they care about skills, not the name on the diploma.
Part 2: Paying for Private K-12 (School Choice)
Before college, many families are navigating private K-12 costs. In 2025, new state laws have opened up funding opportunities.
Alabama: The Choose Act sets aside $7,000 per child.
Tennessee: The Education Freedom Scholarship sets aside approximately $7,200 per child.
Georgia: Limits are around $6,500.
Important Note: These programs have application windows (usually Feb/March) and income prioritizations. However, limits are often based on taxable income, so don't assume you won't qualify without checking.
Using 529s for K-12 You can use 529 plans to pay for private K-12 tuition. In states with income tax (like Alabama and Georgia), contributing to a 529 and then using it for tuition acts like a ~5% discount due to the state tax deduction. Just be mindful of the annual gift tax limit ($19,000 in 2025).
Part 3: Strategies for Saving for College
If college is the right path, how do you pay for it?
The 529 Plan (The Core Strategy)
Think of a 529 plan as a Roth IRA for education. Contributions are taxed, but growth and withdrawals for education are tax-free.
Strategy: Open one account per child.
Grandparents: Have grandparents contribute to your owned accounts. If they open their own, it can negatively impact financial aid calculations.
Flexibility: If one child gets a scholarship, you can transfer the funds to a sibling.
Roth IRAs and "Good Start" Funds
We love flexibility.
Roth IRAs: If you will be over age 59½ when your child is in college, you can withdraw from your Roth penalty-free for any reason.
Taxable Brokerage: We call these "Good Start Funds." You lose the tax-free growth of a 529, but you gain the freedom to use the money for a business, real estate, or a wedding if your child skips college.
2025 Update: 529 to Roth Rollovers
New laws allow you to roll unused 529 funds into a Roth IRA for the beneficiary (up to a $35,000 lifetime max). This removes the fear of "over-saving" in a 529 plan.
Part 4: Financial Aid & The OBBBA Changes
When it comes time to apply, the FAFSA now uses the Student Aid Index (SAI) instead of the old "Expected Family Contribution."
Warning for Business Owners: The SAI is tougher on small business owners. Your business assets are now considered potential sources of funding, regardless of liquidity.
The OBBBA Impact on Loans The OBBBA legislation passed in 2025 has tightened the student loan market:
Grad PLUS Loans: Being phased out.
Parent PLUS Loans: Now have more restrictive repayment plans.
Borrowing Limits: Generally reduced availability of federal credit.
This makes saving early and choosing a school with a manageable price tag more critical than ever.
Summary
Investing in college is like buying a house—you need to be on the same page as a family. Have the conversation with your kids early (8th or 9th grade). Focus on options. The more effort they put in during high school, the more options (and scholarships) they will have.
If you are looking for a strategy to fund education without derailing your own retirement, we are here to help.