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Old 01-05-2014, 02:03 PM   #21
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Make that $30,700

New College Aid Formula Is Out, Penalizes Savers Additional 25% - Forbes
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Old 01-05-2014, 03:17 PM   #22
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I semi-retired in 2010 when my oldest started college. I engineered the tax return that went with the FAFSA to have less than half our usual AGI. When the FAFSA results came back, our EFC was the maximum possible and well above our AGI.

Your deferred comp is fair game. Also any pre-tax retirement plan contributions are fair game.

In the end the financial aid folks were correct: We didn't need any financial aid to pay for college.

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Concerning the timing, you'll be doing the FAFSA in the January that your kid is a senior in HS. You'll use the tax forms that you filed 9 months earlier, so yes, you need to plan ahead and get things situated before your kid is a senior in high school.
Well, this is not quite true. They want you to use your new tax return that you just worked on and not the one from 9 months earlier.
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Old 01-05-2014, 04:47 PM   #23
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I can't find the exact article I read years ago on college and retirement accounts, but this one has the same basic information -

Save For Retirement Now, Get More College Aid Later - Forbes

If you have a small business both spouses own, the maximum possible household retirement contributions can be quite high ($100Kish), depending on your net business income -

https://www.fidelity.com/retirement-...-401k/overview
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Old 01-05-2014, 04:54 PM   #24
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The cheapest way out would be to forget financial aid, put them through community college for 2 years (living at home!!) and then transfer to a state school.
Which is what we have done resulting in a very low cost for our DS who is now a junior at a state school.
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Old 01-06-2014, 09:34 AM   #25
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as opposed to "manipulating" your personal balance sheet to maximize the chance of aid.
From another point of view, the 'wealthy' are subsidizing the others in college tuition right now.

Lets say a car dealership needs to sell cars for an average price of $20k to reach its profit targets. It charges your family $40k because you have saved and can afford it, and then sells an identical car to two other families with identical incomes for $10k because they take a $10k vacation every year instead of saving for a car?

Lets say you went to medical school and lived a lower class lifestyle and saved nothing till you were 32. You now make a lot of money, but have lots of catching up to do. The dealership charges your family $40k because you have a high income and can afford it, and then sells an identical car for $10k to two other families with higher lifetime earnings, a bigger house, and a larger 401k balance because your income is higher now and home equity and retirement accounts don't count as assets when computing car costs.

Lesley recently decided they were losing semi-affluent students to state schools because their parents couldn't afford the unsubsidized tutition.

Lesley’s new pricing model more closely aligns the university’s tuition price with real costs.

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Old 01-06-2014, 09:56 AM   #26
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People should be paid to get educated. The system is backward as usual.
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Old 01-06-2014, 05:35 PM   #27
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My DW and I need some help thinking through a retirement scenario.

Currently we are planning to retire before our two kids begin college as we do not want to spend our last working years collecting a paycheck that we will need to turn around and give to the yet-to-be-selected colleges for tuition. We have ~ a 10 yr through 16 year horizon on this, and want to position our kids to have access as many scholarships, grants or loans as they can receive. Has anyone seen strategies helping people think through this?

Here is our scenario....

First, our goal would be to retire in the tax year our first child finishes their Sophomore year of High School as I believe college tuition assistance reviews two years of taxable income when determining grants, loans and scholarships as well as how much tuition a child's parents can afford.

Second, seeing that we will retire before 55, in addition to our traditional retirement plans, I am deferring some of my compensation (pre-tax) to afford us some flexibility between when we retire and when I turn 59.5. This pre-tax comp deferral is not beholden to the pre-59.5 yr withdrawal penalties and, when we begin to withdraw funds, we are trying to minimize deferred comp income during our kids college years.

Third, we are trying to structure our mortgage payment to continue until our 2nd child finishes their senior year in college. While we are accelerating mortgage payments to align our final payment to when our 2nd child finishes their senior year of college (~16 yrs away), with current interest rate of 3.625, we do not feel paying it down faster is prudent as we believe having a mortgage payment will help offset income and position our children for grants, loans or scholarships.

Fourth, we do contribute ~$6k annually to a 529 for each child. We have considered stopping these contributions completely and reallocating any contributions to our retirement, but have not moved in that direction yet.

With all that said, I believe colleges determine grants, loans, etc by looking at income, expenses (e.g. Mortgage) and current bank assets, but do not look at retirement plans.

Any experts in this area who can point us in the right direction?

Thanks....
First off - you are talking 10 years out. Who knows what the college finance landscape will look like at that time.

I retired two years prior to my kid going to college (freshman now.) We made the decision to not save separately for college. I don't know where you anticipate your finances to be at 10 years from now ... but I can tell you I delved deeply into the scholarship/aid game and found ours did not qualify for any kind of need-based scholarships or grants and we are far from wealthy.

As to "other" scholarship opportunities, many (most?) of them seem to cater to special groups - none of which we happened to be a part of.

She did qualify for loans, but we don't want her to borrow for college.

Fortunately ours did manage to cop two academic scholarships which covers all tuition, books, fees, and even puts a little money in her bank account at the end of the year. (one from the school and one from the State) Nowadays though, even the purely academic scholarships are highly competitive ---- sure your kid had all A's & a 32 ACT schore ... but so did most of the other applicants.

For whatever it's worth ---- don't know if that helps.
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Old 01-06-2014, 06:27 PM   #28
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People should be paid to get educated. The system is backward as usual.
My son IS getting paid to go to school. Quite generously. By me. I'm happy to pay it for him. After all, I want to be able to live in the basement of his mansion after he gets that high paying job!
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Old 01-06-2014, 07:14 PM   #29
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IIRC, you can avoid having your assets used in the EFC calculation if you filed a 1040EZ or 1040A. That is my plan to become eligible for gov't grants.
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Old 01-06-2014, 07:28 PM   #30
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This thread is interesting:

529 plans...advantages while minimizing disadvantages

A lot can change in 10 years.
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Old 01-06-2014, 07:56 PM   #31
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This depends on the school a lot. We have the last in BC (55K per year). First year we were working, she got 2K. We stopped working and they still only gave her 5K. So we have abandoned hope. Other schools may grant more. For example, her BF goes to George Washington, he got about half paid for in grants. (parents are teachers) He wanted to come to BC and so applied to transfer to BC and they offered him only 10K so he could not afford to change. Parents salary did not change.

Kind of depressing to me. But my husband is really into the best school thing. We already paid about 210K for Mt Holyoke for the first one.Glad he was such a good saver!
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Old 01-06-2014, 07:58 PM   #32
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One really good thing is that we retired in April so we had a few months of salaries. We finally made little enough to get some credit for the tuition, which got us 5K credit. Woo hoo!
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Old 01-06-2014, 09:16 PM   #33
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My kids eyes lit up when I told her they should pay people to go to school. The system is club based & exclusionary.
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Old 01-06-2014, 09:21 PM   #34
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All, I must say I received more than I bargained for with this thread. My deepest thanks to those of you who shared personal experiences, industry articles, other forum posts and financial advice. THe great thing is this thread has soon much information via direct comments to shared links: thank you.

I will tell you I went from general ignorance to filling out a mock FAFSA, questioning my deferred comp strategy to thinking about how I flip that into an annuity, potentially shutting down my 529 to creating multiple 529s to give better leverage. Heck, even the article on 30 yr College RoI with and without aid was fascinating and I almost bought a "Proud Harvey Mudd College Parent" sweatshirt for my nearly 7 yr old to give me for my next birthday.

What I realize is 10 years is a ways away to plan for college financing / aid, but what I can do here in the short term is spend a Saturday, lay out different options based on the rules today and the information provided, select/ implement an option and revisit/ revise ever 2-3 years....

Will update this thread with my option selection after that Saturday afternoon session.
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Old 01-06-2014, 11:06 PM   #35
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Google is starting to hire more people that didn't go to college at all, which I suspect will become more of a trend, at least for programming type jobs -

"After years of looking at the data, Google has found that things like college GPAs and transcripts are almost worthless in hiring. Following these revelations, the company is hiring more and more people who never even went to college."
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Old 01-06-2014, 11:20 PM   #36
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I will tell you I went from general ignorance to filling out a mock FAFSA, questioning my deferred comp strategy to thinking about how I flip that into an annuity, potentially shutting down my 529 to creating multiple 529s to give better leverage. Heck, even the article on 30 yr College RoI with and without aid was fascinating and I almost bought a "Proud Harvey Mudd College Parent" sweatshirt for my nearly 7 yr old to give me for my next birthday.
Here is one of my favorite companion links for you to consider, on how to pay zero federal income taxes, which ties in with putting money into retirement accounts or a business in advance of the college years, as the business (under 100 employees) and retirement accounts are FAFSA exempt assets -

ROI: How to Avoid Paying Income Taxes - WSJ.com
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Old 01-07-2014, 12:06 AM   #37
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.... Of course if your kid is a whiz kid (high SAT) they don't want to go to an elite school, and the less than elite school want to prop-up their numbers, then they might just get those big discounts. ....
This was exactly the case with ours and that's what I found out. Some smaller or lesser known schools offer more & better academic scholarships to high achievers because those kids bump up the school's average SAT score and rate of subsequent admission to Masters, PhD, Medical, etc programs ... schools are rated on this so it makes for good advertising to increase those stats thus attracting more paying customers to the school over time.

(your entire post, btw was excellent ---- just wanted to highlight that part)
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Old 01-07-2014, 12:22 AM   #38
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My kids eyes lit up when I told her they should pay people to go to school. The system is club based & exclusionary.
I'm pretty sure I'm paying my kids to go to school....
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Old 01-07-2014, 12:47 AM   #39
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My perspective is that you really do not want to plan to fund your kids' education based upon the "largesse" of others. The availability of federal and/or institutional based aid may change between now and the time your kids get to college; even with aid, it frequently is insufficient to fully fund a 4 year undergraduate degree. Seems to me if funding your kids' education is a priority (and for some people it is not) that it makes sense to continue working as long as necessary to generate the assets required to pay for college tuition, as opposed to "manipulating" your personal balance sheet to maximize the chance of aid.
I agree with this, and will add that you should also take a close, objective look at your kids to determine if college will be beneficial to them (as opposed to giving a parent bragging rights) and based on their interest look at how much it makes sense to pay.

Our youngest is a freshman and we ramped up our savings to pay for it out of my salary vs. touching our savings. Since it is "only" $22K a year (less now but we are including expected future increases) and we have no other large bills this is doable. We've already gone through paying over $40K a year for older kids and have learned from that experience.
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Old 01-07-2014, 05:05 PM   #40
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Concerning the timing, you'll be doing the FAFSA in the January that your kid is a senior in HS. You'll use the tax forms that you filed 9 months earlier, so yes, you need to plan ahead and get things situated before your kid is a senior in high school.
Well, this is not quite true. They want you to use your new tax return that you just worked on and not the one from 9 months earlier.
Oops. You're right for the FAFSA. I ran my 2009 taxes early and put that on the FAFSA in January 2010. And I sent my 2009 tax forms - all 1040 forms, W-2, 1099, etc...very intrusive, to CollegeBoard in early February 2010 (part of what they call IDOC).
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