Any advice on college aid with substantial assets?

[youbet]

we have the good fortune to have substantial assets outside of 401K/IRA that appear to put us out of range for aid.

I agree with the others who commented that you'll not likely be able to find a way to hide your wealth to qualify for need based aid.

We have most of the money needed 529's

There ya go! Nice job. Enjoy the kids' college years stress free paying the tab with money you've already set aside for the purpose.

Has anyone been through this and have advice on increasing one's chances for a bit of aid?

You have substantial assets. You've already set aside the money outside of your FIRE plans. Enjoy your situation!

My only suggestion would be to have the kids consider doing a co-op program. Especially in engineering, these programs pay real money (compared to summer jobs) and can substantially add to the resources available to pay college costs. The downside, of course, is that it takes five years to complete an engineering program and co-op.

Our son attended a top-ten (engineering), out of state, public university. Our financial situation disqualified him for need based aid. He did receive a token small merit scholarship from the school and some one time awards from local organizations. But the real help was his co-op job with a major corporation.

 

[RE2Boys]

A
I also encourage the student works while going to school. For one son, it taught him that the rest of us work by the sweat of our brow and that dirty fingernails from honest labor is honorable. For the other son, it showed him the opportunities that exist out there that he wasn't even aware of and focused his studies toward something specific; broadcast sports.

While I knew my son's jobs would hurt his chances for need based aid, the experience of earning some of his own way and the opportunities it may open up made it well worth his time.

When a senior in HS, he signed up for an internship elective (1/4 year) where the school attempts to make available "shadowing" at some local firms. He suggested he spend time with the school districts IT department, it had never been done before! They gave it a try, expanded it to take another student, asked my son if he would consider spending more time with IT department and he spent the whole year (free labor on their part but great experience for my son). Soon they gave him access to their trouble ticketing system, he'd coordinate with the techs, and spent the second half of the year during his free period off repairing PC issues on his own. More than once he'd get into temporary trouble as a teacher walks into his/her room to find a student alone with a computer open, a big no-no, but soon the faculty recognized him as legit. High School has 2400 students so decent size.
This led to a summer job at the school district installing and reconfiguring computers at all the schools of the district and he's got the job next summer if he's interested. They've also formalized the IT internship program making in a competitive school position.
It could be a stepping stone to other internships/opportunities as he is freshman majoring in Computer Science

 

[Texas Proud]

Went through this exercise this past year as older son just started college last week. I was told that everyone should complete the FAFSA as then you would be eligible for the federal loan program. Had planned that I'd have son take out a subsidized loan so that he had some "skin in the game" and may be more cognizant of the college expenses. Didn't work out as he was only offered a unsubsidized loan which we turned down.
/snip/

Same for me... but I made DS take the unsubsidized loan as I DO want him to have skin in the game... and the total cost of interest will not be that big of deal in the long run...

I also think he will exceed what I said I will pay for his degree... so I want him to get loans from the beginning and be aware of what he is spending...

 

[pjigar]

Was this intentional? In a discussion about colleges, err uhh....collages. If it was, brilliant! If not, I'm going to shut up now.

I am so sorry about the typo. See what I mean! I neither graduated from a top college nor english is my first language.

 

[jabbahop]

Thanks to all of the replies. I just wanted to check to make sure I wasn't missing anything.


Sent from my iPad using Tapatalk

 

[CountryGal]

If the kid is a great student and gets excellent SATs, many private schools will offer scholarship. If you fill a bucket (like out of state) that they need to fill, you may get scholarship. DD was #2 in class and took AP courses. Each private school she applied to offered something. She went to a small private college she liked that offered her a nice scholarship. 1 semester in, she wanted to leave and they didn't offer the new major she wanted to take. She wanted a bigger state school. Something she would not consider during the first round, although she did apply to 2.

 

[txdoc]

One important strategy you can do is to try to qualify for a "simplified needs test." To do that, your AGI needs to be under $50k. If your non-tax-sheltered assets produce low enough income/dividends, you have little earned income, and if you plan ahead, you might be able to accomplish that. That would make your assets "invisible" to FAFSA. More info here:
FinAid | FinAid for Educators and FAAs | Simplified Needs Test Chart

 

[HillCountry]

Lots of good private colleges use CSS/Profile. They do take the asset into consideration. It is better to check out the requirement from the colleges of interest.

 

[Texas Proud]

One important strategy you can do is to try to qualify for a "simplified needs test." To do that, your AGI needs to be under $50k. If your non-tax-sheltered assets produce low enough income/dividends, you have little earned income, and if you plan ahead, you might be able to accomplish that. That would make your assets "invisible" to FAFSA. More info here:
FinAid | FinAid for Educators and FAAs | Simplified Needs Test Chart

Lets be clear on this... not as simple as it sounds...

[FONT=ARIAL, HELVETICA]An applicant qualifies for the simplified needs test if the parents have an adjusted gross income of less than $50,000 and every family member was eligible to file an IRS Form 1040A or 1040EZ (or wasn't required to file a Federal income tax return)[/FONT]
​

So, one K-1 ruins this option... one sale of stock ruins this option... if you want to itemize.... again, gone for you...

 

[pb4uski]

.....So, one K-1 ruins this option... one sale of stock ruins this option...

Not necessarily, once could have K-1 income or a capital gain and still be under the filing threshold (not required to file a return)... I'll concede it is unlikely but could happen.

 

[Texas Proud]

Not necessarily, once could have K-1 income or a capital gain and still be under the filing threshold (not required to file a return)... I'll concede it is unlikely but could happen.

Well, technically you are correct... but, since most people are going to want to get their tax credits back with that little of income.... you are back to having to file...

Now, I guess a case can be made that if the amount of money you get by not filing is more than you would get back with filing... then just do not file... you always have the options of filing in a later year... wonder if that would invalidate what you had already received

 

[panacea]

You might consider hiring a private consultant. I have heard they are well worth the money since they know how to play all the college financial games.

I would be careful with this. In my experience, the "games" they play largely involve getting after-tax assets off the FAFSA form... which means investing it in annuities. They make big money on this and the costs often hugely outweigh the benefits.

 

[sheehs1]

Quote:
Originally Posted by sheehs1 View Post
We (I) never eligible for financial Federal aid.

Not sure I can remember all the specifics but at some point, I think I allowed my daughter to claim herself on her taxes. I gave up the tax deduction for her. This allowed her to deduct some items. I was unable to deduct it on my taxes. Of course, one must have earned income to do this. She worked during summers, on breaks and minimally during college semesters.

The FAFSA is an interesting exercise and one I wish I had more knowledge of BEFORE she went to college. After all, most are 18 so parents could elect to not be legally responsible for their college tuition. Ha!

From the little I know, FAFSA does not care if you decide not to pay your child's tuition.... they still base their help on what the family is expected to provide... even if they do or not...

If it were that easy, all parents would just say 'bye bye' to their kids and they would get help from the gvmt....

Texas Proud: It wasn't about that. It was about taxes. She was able to deduct items related to college costs we were unable to deduct due to our income. In order to do so we had her "claim herself" and we gave up the deduction for her.

Of course she also had the income to be able to be able to take those deductions.

Granted this has nothing to do with FASFA but it does have something to do with overall costs and deducting things on taxes....all of which helps a bit, depending on situations.

 

[athena53]

When my 4 siblings and I were facing college, my parents laughed at the "Parents' Confidential Statement" (FAFSA predecessor) and said it wasn't worth filling out because they'd saved too much and we wouldn't get a dime. They were probably right- we were all bright but no one had a 4.0 average. When DS was in HS, just for fun I got on the site of Princeton U. (not that DS was Princeton material) and used their calculator. I was making about $120K/year back then and I think Princeton ran about $60K/year, all-in. I threw in a token contribution from my Ex even though he'd been unemployed for the last 8 years. The calculator said I could afford to put TWO kids through Princeton with no financial aid. Uh-huh.

DS got through Drake U. in Des Moines; we paid full sticker price and half was paid through the generosity of my Ex's sister and her husband. I didn't ask; they just did it.

Co-op programs were mentioned; these are FANTASTIC. I went to U. of Cincinnati, which pioneered the idea; that's how Dad got his Engineering degree in 1953. He had a co-op job that was close to home, so lived with his parents and saved enough to fund the next academic quarter. When I went there 20 years later, the Engineering students were still doing that and most came out with offers from the company where they co-opped. It wasn't available to me as a Math major but I think they've expanded it now. Great way to make good money AND get relevant experience.

 

[Texas Proud]

Quote:
Originally Posted by sheehs1 View Post
We (I) never eligible for financial Federal aid.

Not sure I can remember all the specifics but at some point, I think I allowed my daughter to claim herself on her taxes. I gave up the tax deduction for her. This allowed her to deduct some items. I was unable to deduct it on my taxes. Of course, one must have earned income to do this. She worked during summers, on breaks and minimally during college semesters.

The FAFSA is an interesting exercise and one I wish I had more knowledge of BEFORE she went to college. After all, most are 18 so parents could elect to not be legally responsible for their college tuition. Ha!




Texas Proud: It wasn't about that. It was about taxes. She was able to deduct items related to college costs we were unable to deduct due to our income. In order to do so we had her "claim herself" and we gave up the deduction for her.

Of course she also had the income to be able to be able to take those deductions.

Granted this has nothing to do with FASFA but it does have something to do with overall costs and deducting things on taxes....all of which helps a bit, depending on situations.

Seems a bit strange that someone would be able to make enough money that they would have a tax liability while still in college... well, full time college that is... many people work full time and go at night...



I will look into this in a few years when my DS might be doing a paid internship... it would be for almost a full year, so should make some money....

 

[RE2Boys]

Quote:
Originally Posted by sheehs1 View Post


Not sure I can remember all the specifics but at some point, I think I allowed my daughter to claim herself on her taxes. I gave up the tax deduction for her. This allowed her to deduct some items. I was unable to deduct it on my taxes. Of course, one must have earned income to do this. She worked during summers, on breaks and minimally during college semesters.

Under currrent law, if an individual is eligible to be claimed by another person, such as a parent, they can not legally claim themselves on their income tax return. For a student, if they provide more than half of their own support, either from wages or their own "wealth", then a parent would no longer be eligible to claim that student as a dependent.

Also, if 19 or older, make over $4000, and fail to meet the test as a full time student, then they can't be claimed as a dependent on a parent's return and thus can claim their own dependency. A full time student is one who pursues a full time course of study in school or trade school for some part of five month during the calendar year.

You can not legally "let" them claim themselves unless they qualify.

From IRS Pub 17, chapter 3:
"You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself even if the other taxpayer doesn't actually claim you as a dependent."

 

[sheehs1]

RE2boys: So with this, I went back and looked thru a few of her tax returns. You are correct and she did not claim herself. But...she did have enough income that she could take $2,500 in education credits on her return that we, as her parents, could not or did not take, I presume due to phase out or that it did her more good than us.

Sorry for being misleading. I guess I was remembering that we had a long discussion about whether or not she could claim herself and my memory thought she did. So much for memory! Claiming or not claiming herself wasn't the trigger that allowed her to deduct those education credits. Having enough income to do it along with the standard deduction was and again, it served her better than us.

 

[aida2003]

Sorry, folks, for hijacking this thread a bit. Even though college matters are in distant future for us, I'm always curious what other people discuss about on such threads.

After reading this thread, I came up with a few questions I'd like to get answers to in order to understand the nature of nuances we'll be dealing with when our kids are in HS.

- OP said that his/her income is modest, but non-retirement assets were too substantial to qualify for any help via FAFSA.
Question #1: Could you put a range of value of assets which would disqualify a family for any help?
If tuition+board is $50K/year, then $1M value in non-retirement accounts/rentals/529 plans would nix help...Does it sound about right?

- Some people say their earned income or AGI disqualifies for any help. Everything else is in retirement accounts.
Question: What's the range of income/AGI that disqualifies for help?

In general, what's the purpose of FAFSA? In my VERY limited understanding, it tells how much a student and his/her parents can borrow at subsidized loan rates which are not really low, IMO.

So, what do people do when FAFSA gives a negative response?
If they didn't save for college, perhaps they can get a mortgage against their hopefully paid off house or a home equity line with a lower rate than parental loans through FAFSA.

Finally, what is a co-op program and is it only applicable to engineering/IT students?

My dream is that at least one of our kiddos goes to our country in Europe to obtain a degree that's acceptable in the US (if chooses to come back).

 

[RE2Boys]

RE2boys: So with this, I went back and looked thru a few of her tax returns. You are correct and she did not claim herself. But...she did have enough income that she could take $2,500 in education credits on her return that we, as her parents, could not or did not take, I presume due to phase out or that it did her more good than us.

Sorry for being misleading. I guess I was remembering that we had a long discussion about whether or not she could claim herself and my memory thought she did. So much for memory! Claiming or not claiming herself wasn't the trigger that allowed her to deduct those education credits. Having enough income to do it along with the standard deduction was and again, it served her better than us.

Glad it worked out for you. Just did not wish for folks here to get the wrong idea about when a student can claim themselves. Most times the student does not have sufficient tax liability to take advantage of the educational credits when the parents are not eligible due to high incomes.

Since my older son just started college, I've been trying to read up on all the educational tax benefits to see which would apply in our situation. Having been retired for 16 years, income doesn't make us ineligible for any educational tax benefits, but high worth made the FAFSA a waste of time. Next year son #2 starts college, and the sum of their expenses is still under the expected family contribution that FAFSA dictates.

 

[LOL!]

I put comments in red.

- OP said that his/her income is modest, but non-retirement assets were too substantial to qualify for any help via FAFSA.
Question #1: Could you put a range of value of assets which would disqualify a family for any help?
If tuition+board is $50K/year, then $1M value in non-retirement accounts/rentals/529 plans would nix help...Does it sound about right?
One can look up FAFSA algorithms. So 5.64% of family assets are used, but that is not the only thing use.
- Some people say their earned income or AGI disqualifies for any help. Everything else is in retirement accounts.
Question: What's the range of income/AGI that disqualifies for help?
It is not just AGI because any contributions to 401(k)/403(b)/IRAs are added back in. So if a two-earner family is conributing $18K + $18K to 401(k) plans, then that's $36K right there. But there are FAFSA calculators on the internet and articles that answer this question more completely. Also note that EFC below Cost of Attendence could mean aid only in the form of loans.

In general, what's the purpose of FAFSA? In my VERY limited understanding, it tells how much a student and his/her parents can borrow at subsidized loan rates which are not really low, IMO.
I think the purpose of FAFSA is to encourage low-income families to go to college.
So, what do people do when FAFSA gives a negative response?
If they didn't save for college, perhaps they can get a mortgage against their hopefully paid off house or a home equity line with a lower rate than parental loans through FAFSA.
If they get a negative response, then the family really does have enough money to pay for college. Really. Tuition for college is about $5,000 a semester and commuter students can live at home. My son worked at minimum wage and made $3,000 in the summer, so working part-time during the school year could bring in $5,000. The American Opportunity Tax Credit is another $2,500. So all of that is more than enough to pay tuition and books. If parents still feed the student and provide a bed at home to sleep in. Most college students do not go to expensive private colleges.
Finally, what is a co-op program and is it only applicable to engineering/IT students?
I have not participated in a co-op program, but I think it is a systemized way that students work during college. Students are not prevente from getting jobs and working during college. I worked every year I was in college in order to help pay for college. My oldest worked in college, too. My youngest will work in college.

 

[growing_older]

You might consider hiring a private consultant. I have heard they are well worth the money since they know how to play all the college financial games.

It seems ironic to have enough wealth to hire a private consultant in order to hide enough wealth so you can qualify for tuition aid packages.

 

[LOL!]

It seems ironic to have enough wealth to hire a private consultant in order to hide enough wealth so you can qualify for tuition aid packages.

I have seen families of moderate means hire consultants and pay them money that could have been better used on college tuition. But some parents who did not go to college really worry about these kinds of things and fear doing the wrong thing. Unfortunately, they sometimes get scammed.

I think very very few wealthy families hire consultants and they get scammed always.

 

[RE2Boys]

The purpose of the FAFSA (Free Application for Federal Student Aid) is a standardized systematic program that attempts to measure the expected family contribution (EFC), what a family could afford to contribute toward a college education.
Many (most?) schools use it determine what kind of aid package to offer a student who has a shortfall between cost of attendance and the EFC. . I believe everyone who completes the FAFSA is offered a federal sponsored loan, though it may be unsubsidized (meaning you start making payments immediately if you have no demonstrated need.

The aid package can consist of outright grants by the school, federally sponsored work on campus, and loans from a variety of sources, including the above federal loans. The aid package is usually put together and offered by the school, some schools may offer grants, others may offer only loans.

Since the EFC formula takes into account over 5% of your non-retirement assets, I've seen it recommended that you spend down these assets by buying new cars, necessary home repairs/remodels, pay of mortgages and car loans, etc, prior to filling in the FAFSA. If you spend down $100K, you would reduce your EFC by $5-6K. And a certain amount of your assets are not counted, the amount depends the parent's age.

As 20% of a child's financial assets count toward the EFC each year, it is not a good idea to have much in a child's name (have him buy a car). The EFC also looks at the child's income so you could discourage your child tfrom work. I hate these provisions as it seems to send the wrong incentives for the child to save and earn.

The FAFSA doesn't care how deep in debt you are (that is a personal financial management problem) or what type of car you drive or what house you live in as those are personal decisions.

If the EFC exceeds the cost of attendance, you'll only be offered an unsubsidized federal student loan.

The EFC is based on family, so if you have two in college, the EFC stays the same so the likelihood of some aid is greater.

Co-op programs allow a student to work for a company, get paid, and gain experience in their chosen field. Many schools will grant college credit for the experience gained.

 

[NanoSour]

Here's a thought. Pay for college expenses out of pre-tax accounts, i.e. 401K, IRAs, etc, even if not at the 59 age limitation. The 10% early withdrawal penalty is waived for all valid education expenses to include tuition, fees, and room & board. This may save you taxes if waiting to withdraw the retirement funds will put you in a higher tax bracket.

Might be beneficial if in the 15% tax bracket with kids at home, as opposed to 25% bracket after pensions and social security start.

 

[Texas Proud]

I put comments in red.

Your comments are in a quote in red... but I just wanted to post something...

From what I can see... if you do not have any tax liability then the college credit is only $1,000.... at least that is all I see on my estimated return...