The Formynder Field Manual

From the field

Welcome to the August edition of the Formynder Field Manual! As I look back at July, it's been quite an eventful month. Along with many exciting and fun events, we also witnessed devastation. I am of course referring to the disastrous flooding in Texas, to which my heart and prayers go out to those affected by such loss.

Other big news included the signing of the One, Big, Beautiful Bill Act (OBBBA). At the bottom of this newsletter, there's a link to my assessment of the Act for how it will affect military families.

As we look forward to August, several milestones come to mind like back-to-school (for most), peak heat with weird weather events, and a dip into college and pro football!

Feel Good Moment

From 2017-2020, while on loan to the Royal Air Force, our family lived in England and were joined by a few other "exchange" families. We weren't all from the U.S., but we've remained close since our experiences there. This past month, we got a chance for a mini-reunion as our friends from Australia flew over to the States to spend some time with us before we collectively then road-tripped down to Alabama to join additional friends we met while in the UK. It was a fantastic time of stories and catching up. While there, we had a simultaneous bridal shower for our soon-to-be daughter-in-law AND caught up with even MORE of our family there in Alabama. WHEW! It was awesome and what living our ideal lives is all about.

My wife and I, the Aussie, and USAF exchanges to the Royal Air Force, all reunited!

Monthly Focus

This month's focus on is on saving or paying for your child's higher education. So when should you start planning and saving for college? Well, shortly after your child is born is ideal, but as the saying goes, better now than never!

Before I move on to actual saving tactics for college, I would encourage you first to frame your thoughts around how important college is to you. In other words, are you one to say that you'll help fund what you can, but you aren't going to let saving compete with your family experiences? Or do you want to do whatever you can to fund your children's college? Maybe, you leave it completely up to your child. There isn't a right answer about the importance you place on college. I simply mention that you frame your thoughts now so you then place a matching emphasis on savings.

One of the most difficult aspects about planning for college is simply knowing whether your child will want go to college. In those cases, I generally encourage parents to plan as though it will happen. Ultimately, I would rather parents have the option and not need it than need the option and not have it. With both of the college paying options below, there are ways to plan to pay and if your child doesn't go to college, you can pivot.

Use Your Military Education Benefits

So if we assume your children are going to college, step #1 for active duty military members is to consider transferring their Chapter 33 benefits. Just a quick point of clarity; Chapter 33 is the Post 9/11 GI Bill (PGIB).

If for nothing more than options, if the service member is over 6 years of service, I encourage them to transfer at least 1 month of their benefits to each of their dependents; spouse and children. The first time they do this, they start a 4-year service payback clock. If they transfer benefits to additional dependents later, there is no additional 4 year service obligation.

By giving dependents 1 month, they now have funding options before and after separation or retirement. The service member can transfer more than 1 month of benefits once a dependent decides they want to go to college. Dependents don't have to use the benefits you transfer and the service member can always revoke benefits and pass them to another dependent or use them, themselves. But once separated from service, a service member cannot add dependents.

The service member can start the transfer process through their milConnect account. There are more details about the nuances of transferring the GI Bill on VA.gov.

Once benefits are transferred and you are really looking at which schools to send your child to, be sure that the school is at least approved for PGIB, but also look to see if the school is "Yellow Ribbon" which could provide additional funding assistance!

Find and Fund a 529

Outside of your PGIB benefits, the heavyweight of education savings accounts is the 529. The 529 account is a state-by-state sponsored tax advantaged account where saved contributions and earnings can be used for qualified education expenses, tax-free! Additionally, contribution allowances are usually significant, but they do vary by state. 529 accounts are great ideas for relatives to help fund if they are looking for gift ideas.

As of today, you can use a 529 for tuition, fees, books, room & board, meal plans, equipment, and even student loan repayment. 529s can be used for higher education, technical schools, apprenticeships, and up to $10k per year on K-12 education. I say, "as of today", because the recent passing of the One, Big, Beautiful Bill Act (OBBBA) adds more ways you can pay for educational expenses, tax free. Those aren't enacted quite yet, so there will be more to follow.

Because 529 accounts are sponsored by each state, there's a chance that the state may give you a state tax incentive to use their 529. For instance, here in Virginia, you can get a dollar for dollar state tax deduction up to $4,000, per child/account for your contributions. There are some caveats, however. The most obvious is that you likely won't get any tax benefits if you don't pay taxes to that state. So, if you aren't a resident of Virginia, you wouldn't file a tax return, and therefore have no opportunity to take a deduction. With that said, I would first point you to the 529 for your state of legal residence (where you pay taxes, vote, hold a driver's license, etc) to see if you can get any tax benefits. If not, then have a look at another state's 529 account to look at investment options. You can find out more about expenses, tax benefits, and state options here.

Other Options

There are other tax advantaged options such as the Coverdell Education Savings Account, which I would encourage you to look at, but for the most part, the Coverdell's relevancy has declined significantly with it's $2,000 per year, per child contribution limit given today's cost of education.

I won't get into the new MAGA accounts created by the OBBBA quite yet, but I'll just note that higher education expenses may designated as "qualified" for the purposes of receiving long term capital gains treatment when money from MAGA accounts are distributed. We'll have to see how these accounts play out.

Even MORE Options

If the military member passed away while active duty, is missing in action, or was rated 100% permanent and totally disabled, the spouse and children each rate Chapter 35 benefits. Chapter 35 gives the dependent up to 36 monthly payments, adjusted for their college load status, at an approved higher education location. You can learn more about Chapter 35 benefits here.

Additional benefits for disabled veterans can often be found within each state. Be sure to look at the state of your residence to see what you or your dependents may have access to. In some cases, it may be worth planning to change your state of residence if you are separating shortly anyway. College Recon is a helpful website to the various veteran benefits in each state.

Wrapping This Up

This is a high level overview of ways to pay/save for college and is only the tip of the iceberg. You could be a lot closer to paying for college, maybe already paying for college, or maybe even already have student loans. In any case, this is a complex topic with a lot of "it depends" answers, particularly with how often the rules change for borrowing (if that's the route you take). Bottomline, the topic is huge! If you have any questions regarding paying for higher education, please reach out.

Field Tips

Like taking your own neck pillow to the field, here are a few things to review during the month of Aug:

✅ Be sure you have access to your milConnect account without a CAC (you won't have one when you leave service).

✅ Once logged into milConnect, check out your education benefits. Are they accurate? Are your dependents listed? Are you eligible to transfer your benefits, understanding that you will incur a 4-year service obligation and if so, transferred at least one month to each dependent?

✅ Do you have more education requirements than one GI Bill can fully fund? What is your next savings/funding source? If a 529, what state works for you - your state of tax residence or a different one with better investment options?

✅ If you know your disability rating already, does your state of legal residence have any programs you or your dependents can take advantage of to help pay for higher education?