Most Families Think There Are Only Two Ways to Pay for College. There's Actually a Third...
- Sun Group WP Team
- May 30
- 4 min read
Congrats, Your Kid Got Into College. Now What?
A financial advisor's guide to funding higher education, including one strategy most affluent families don't know exists.
Congratulations to the Class of 2026! And a special shoutout to the parents out there who just survived four years of college prep, applications, and acceptances. You made it. Go celebrate, you've earned it.
But once the confetti settles? It's time to have the money talk. Because how you pay for college matters just as much as where your student is going. And there may be smarter options for your family than you realize.
Start Here: The FAFSA
If there's any chance your family qualifies for financial assistance, your first stop is the FAFSA. Don't skip it, don't assume you won't qualify, just complete it. It opens the door to federal aid, grants, and need-based scholarships, and you can't access what you don't apply for.
From there, look at the full picture of funding options:
Federal student loans
Grants and scholarships (free money first, always)
Private student loan options if additional funding is needed
For many families, combining these sources is the path forward. But for some, particularly those with significant investment assets, there may be another strategy worth knowing about.
The Option Most Affluent Families Don't Know Exists
Most people assume there are only two ways to pay for college: write a check or take out loans. But there's a third approach that some families with substantial investment portfolios may be able to consider.
It's called a securities-based line of credit, essentially, a line of credit backed by eligible non-qualified investment accounts.
Instead of selling appreciated investments to cover tuition, this strategy may allow families to access liquidity while keeping those assets invested and intact. That means holdings like company stock, trust accounts, taxable brokerage accounts, or diversified investment portfolios don't necessarily have to be liquidated to fund education expenses.
A Real-World Example
Let's say a California family has $3 million in appreciated company stock, a child heading to a private university, and significant unrealized capital gains sitting in their portfolio.
If they sell investments to pay for tuition, they could be looking at a large tax bill, potentially disrupting both their tax situation and their long-term investment strategy in one move.
Instead, they might choose to use a securities-based line of credit backed by that portfolio , accessing the liquidity they need for tuition while keeping their investments working for them.
It's not the right move for everyone. But for the right family, it can be a genuinely smart one.
A Few Important Things to Understand
I want to be straightforward with you here, because this strategy comes with real risks that deserve your attention.
Securities-based lending is not appropriate for every investor. If markets decline, the value of your collateral can fall, and pledged securities may be liquidated to meet requirements, potentially at a time and price you wouldn't choose. This is a decision that needs to be made carefully, with a full understanding of your complete financial picture.
At Sun Group Wealth Partners, this is the kind of conversation we have with families regularly, walking through the options step by step, making sure the strategy actually fits. This particular approach is generally best suited for clients with $500,000 or more in non-qualified investment assets.
The Bottom Line
There's no one-size-fits-all answer when it comes to funding college. The smartest approach is the one that's right for your family, your assets, your tax situation, your long-term goals.
Start with the FAFSA. Explore every form of aid available. And if you have significant investment assets, make sure you're at least having the conversation about all the options on the table.
Because getting your student to college is just the beginning. How you fund it can shape your family's financial picture for years to come.
FAQ Section
What are the best ways to pay for college?
The most common ways to pay for college include federal financial aid, scholarships, grants, student loans, savings, and family contributions. Families with substantial investment assets may also explore securities-based lending strategies with a qualified financial advisor.
Can I pay for college without selling my investments?
In some cases, yes. Affluent families with eligible non-qualified investment accounts may be able to use a securities-based line of credit to access liquidity without immediately selling investments. This strategy involves risks and may not be suitable for everyone.
What is a securities-based line of credit?
A securities-based line of credit is a loan secured by eligible investment assets held in a taxable brokerage account. Borrowers can access funds while keeping investments in place, subject to lending requirements and market risks.
Is a securities-based line of credit better than a student loan?
It depends on the family's financial situation, tax considerations, asset levels, and risk tolerance. A financial advisor can help compare available funding options and determine the most appropriate strategy.
Should affluent families complete the FAFSA?
Yes. Even higher-income families should consider completing the FAFSA because eligibility rules change and some colleges require FAFSA information for institutional aid and scholarship consideration.
How much investment assets are typically needed for securities-based lending?
Requirements vary by lender, but these strategies are generally considered for investors with substantial non-qualified investment assets. Many advisors begin discussing this option when portfolios exceed several hundred thousand dollars.
Borrowing against securities – commonly known as margin lending—carries inherent risks and may not be suitable for all investors. This strategy involves using the value of your investment portfolio as collateral for a loan, and while it can provide liquidity and financial flexibility, it also introduces significant exposure. Market volatility can impact the value of your pledged securities, which may adversely affect your financial position.
In the event that the value of the underlying securities declines you may be subject to a margin call requiring you to deposit additional funds or securities to maintain your position. Failure to meet a margin call could result in the forced liquidation of securities in your account, potentially at a loss, without prior notice and have potential tax consequences. Investors should carefully review their risk tolerance, financial objectives, and the terms of any lending agreement before engaging in margin borrowing.
Winnie Sun is a Managing Partner and Co-Founder of Sun Group Wealth Partners and a Founding Member of the Forbes Finance Council. This content is for informational purposes only and does not constitute financial, tax, or legal advice. Please consult with a qualified professional regarding your individual situation.
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