What fafsa loopholes did you find with ER?

[BellBarbara]

Don't plan on any financial aid, it's really only given to the very brightest, but very poor students. There are no secrets - we don't work, our daughter gets 2K out of 55K. haha

The only chance you have a large FA package is if you have a truly exceptional kid that they will pay to come. This happened to a friend of my son's who got perfect SAT score (I didn't even know he was smart, he seemed average). Because a school in our area wanted to start raising the profile of the school, they offered him 100% paid, in an engineering program, even though his parents made decent money.

Our first kid went to My Holyoke, 52K per year, we got zero. None for my son, and 2K per year for this past one who is in Boston College.

I think people don't understand how little money there is available now.

 

[BellBarbara]

Also there are two levels of FA, Federal with their rules, and then the school's rules which are much more strict.

For example, I went to a FA seminar for my son - I had just remarried. I made good money, but my son't father made zero so I felt like there could be a possibility. The person told me that schools count your husband's income as well, even though there was no way my new husband was going to be paying tuition for my son, when he had to pay for his two girls. My husband was a high wage earner.

I literally, packed up and left when I found that out.

 

[daylatedollarshort]

Don't plan on any financial aid, it's really only given to the very brightest, but very poor students.

"A New Jersey resident who will remain unnamed has a house worth well over $1 million, drives nice cars and has a daughter at MIT getting financial aid. How is it possible to live well and still qualify for a tuition handout?"

"Fafsa, the only aid formula used by most public colleges and many of the less-selective private ones, does not count the value of a small business. “Small” means one with fewer than 100 employees. Mom’s and Pop’s little software firm could be worth $20 million and it won’t show up."

Paying for College: Own a Business - Forbes

There are many loopholes. A business is just one example.

 

[pb4uski]

....For example, I went to a FA seminar for my son - I had just remarried. I made good money, but my son't father made zero so I felt like there could be a possibility. The person told me that schools count your husband's income as well, even though there was no way my new husband was going to be paying tuition for my son, when he had to pay for his two girls. My husband was a high wage earner.

I literally, packed up and left when I found that out.

How sad, stupid and unrealistic that they rely on your new husband's income in assessing financial aid. Bozos.

 

[rodi]

I'm curious what the projected cost of a UC or CSU system is per year with boarding/housing/books/tuition all inclusive?

I update our savings goals each year based on the admissions office. I look at UCSD and SDSU (my alma mater)

For UCSD - from their website, for in-state undergrads for NEXT year (2014-15 school year.)
Living at home: $24,855
Living in dorms: $31,245
Living off campus: $29,715
https://students.ucsd.edu/finances/financial-aid/budgeting/undergrad-2014-15.html

For SDSU - they don't list all the same incidental expenses
Living in dorms: $21,611
San Diego State University | Admissions

Our budget was based on the 2013-14 year - and we'll need to up it. We had budgeted $30k/kid/year.

 

[Katsmeow]

There is a table with income thresholds for FAFSA in this article.

2014 Guide To FAFSA, CSS Profile, College Aid And Expected Family Contribution - Forbes

Our expected AGI in retirement puts us in the BLUE area of the chart in the linked article - but not by a lot. We're 5 years out from college, so everything can change. To be safe, we're saving and assuming we're paying.

Here's the thing. I plugged in $60,000 AGI just for grins. We have 2 kids in college. I then went through the FAFSA caster calculator. By the time we finish this year we will have very few taxable assets left so the asset thing is not a big deal.

When it gets to the end our EFC is $2,837. OK, that is fine. DS, for example, is attending a state university and between living expenses and tuition, even at this school, a year's cost is close to $20k.

But although the EFC is $2,837 the type of aid that he would qualify to actual receive is underwhelming. For example, a Pell grant in the amount of $2,880. We could raise that some not withdrawing as much from the IRA this year and withdrawing more next year, but it wouldn't make a huge difference. And, it would mean really making a lot of effort to keep AGI low this year for really not a lot of return.

Also listed in the national average for work study of $1465. We actually don't want DS to work these last two years of school when he has a lot of difficult classes. Regardless, work-study is based upon getting a minimum wage job. We could do that without filling out FAFSA.

The final type of "aid" is student loans. We don't particularly want to saddle him or us with loans.

Of course it is possible he could get some grants directly from the school, but I'm not holding my breath.

The bottom line is that it just doesn't likely that any financial aid is going to matter in his case. It might be different if he was attending an expensive private school, but we have no interest in those.

 

[daylatedollarshort]

FAFSA is federal aid. What I am saying is that schools ask for and count way more detail - I have to enter half a condo I own with my son, they ask about businesses, etc. They ask how much your house is worth, what the remaining mortgage is, etc.

Articles like the Forbes article are very misleading. Sure maybe a kid of a parent who owns a small business gets a pell grant for 5K - but if you are in a private school, that's nothing and the school will be asking about that business. We have to submit our tax returns to BC every year.

Not trying to be negative, just realistic.

"Most colleges and universities nationwide use the FAFSA as their sole application for need-based financial aid, so students applying for aid at those colleges only need to complete the FAFSA."

2014 Guide To FAFSA, CSS Profile, College Aid And Expected Family Contribution - Forbes

 

[daylatedollarshort]

None of the schools our kids went to accepted only FAFSA. I am in Boston area, land of very expensive private colleges. So perhaps that is the difference.

Sorry if I am wrong, I still think trying to manage your life so that your kids get financial aid isn't the best idea.

FYI - this thread is titled "What FAFSA loopholes did you find with ER".

 

[BellBarbara]

OK I got it and deleted my posts. Carry on!

 

[sengsational]

I realize I'm late to the party here, but I do have real-world experience with this problem, and I noticed that a strategy was not mentioned in the thread.

Retirement assets escape both the federal and CSS profile formulas. The same can not be said for personal residence and businesses. Some schools will run both formulas and take the efc that benefits them the most. True fact.

But back to "retirement assets". You, of course, are limited in the amounts you can put into 401k, IRAs, but not annuitues. Annuity is a dirty word here, but you can get a variable annuity from VG or Fido that is basically a mutual fund wrapped in an insurance product. Those don't have the huge commissions and you never need to annuitize them unless you want to. The bad tax treatment (need to pull all of the gains first, and of course no cap gains tax treatment) is the big downside.

So if you had a kid thast was headed for a well endowed, internationally ranked school, that might make up the price difference in grants (not loans), then tucking assets in an annuity might make sense. You are basically trading off crappy tax treatment with a possibly huge discount on a college bill.

That strategy makes no sense if the state school is good enough, or if your kid doesn't have the grades to get into the Iveys (or thereabouts). But if the other bits fit, getting a 20 grand discount for 4 years in a row might close the gap on the crappy tax treatment. But its like a grocery coupon...only use it if you were going to buy the product anyway.

 

[AnIntentionalRoad]

The bottom line is that it just doesn't likely that any financial aid is going to matter in his case. It might be different if he was attending an expensive private school, but we have no interest in those.

One of the biggest mistakes families make when preparing to send a child to college is to assume the "expensive private schools" would cost more than an "inexpensive" state school.

The little known fact is that very few families pay the sticker price at selective private colleges. Most have strong endowments that fund substantial need and merit awards.

Inexpensive state schools typically have virtually no endowment to speak of. So there is little in the way of merit based aid.

If one's child is a good student, able to get acceptance letters to great private schools, the net cost of attending can be LESS expensive than a state school.

 

[Katsmeow]

One of the biggest mistakes families make when preparing to send a child to college is to assume the "expensive private schools" would cost more than an "inexpensive" state school.

The little known fact is that very few families pay the sticker price at selective private colleges. Most have strong endowments that fund substantial need and merit awards.

Inexpensive state schools typically have virtually no endowment to speak of. So there is little in the way of merit based aid.

If one's child is a good student, able to get acceptance letters to great private schools, the net cost of attending can be LESS expensive than a state school.

I assure you I am not ignorant. I recognize that there can be cases where expensive private colleges can be the same or less than attending a state university. Without getting into a long and boring story, suffice it to say, that those cases did not apply to our situation.

 

[fh2000]

One of the biggest mistakes families make when preparing to send a child to college is to assume the "expensive private schools" would cost more than an "inexpensive" state school.

The little known fact is that very few families pay the sticker price at selective private colleges. Most have strong endowments that fund substantial need and merit awards.

Inexpensive state schools typically have virtually no endowment to speak of. So there is little in the way of merit based aid.

If one's child is a good student, able to get acceptance letters to great private schools, the net cost of attending can be LESS expensive than a state school.

Many ER board members may be similar to me, with enough assets and income so our EFC is $99,999. DD got in some nationally ranked 20 private schools but received no aids other than $5,500 stafford loan. She decided to go to a relatively high ranking UC instead. The cost of UC is 1/2 of those privates.

So, maybe if DD applied for much lower ranking private schools and got accepted, she might get some aids.

When DS applied, he went to UCs only. No privates knowing he won't get anything.

So, the above known fact is not true in our case.

 

[Bestwifeever]

Many ER board members may be similar to me, with enough assets and income so our EFC is $99,999. DD got in some nationally ranked 20 private schools but received no aids other than $5,500 stafford loan. She decided to go to a relatively high ranking UC instead. The cost of UC is 1/2 of those privates.

So, maybe if DD applied for much lower ranking private schools and got accepted, she might get some aids.

When DS applied, he went to UCs only. No privates knowing he won't get anything.

So, the above known fact is not true in our case.

Not true in our case either.

 

[sengsational]

My "problem" now is getting the money I saved by getting need-based grants at an internationally ranked school out of the 529 account. I can pull out amounts up to what I got in grants without penalty (but still need to pay tax on the gains). Of course I could leave it and use it for grandchildren, but according to DW, "that will never happen", hehe!

 

[AnIntentionalRoad]

Many ER board members may be similar to me, with enough assets and income so our EFC is $99,999. DD got in some nationally ranked 20 private schools but received no aids other than $5,500 stafford loan. She decided to go to a relatively high ranking UC instead. The cost of UC is 1/2 of those privates.

So, maybe if DD applied for much lower ranking private schools and got accepted, she might get some aids.

When DS applied, he went to UCs only. No privates knowing he won't get anything.

So, the above known fact is not true in our case.

This post really isn't for you, since you have already been through the process, but for those with pre-college-aged kids.

Two things I recommend:
- Do good research on not just the ranking of schools but their financial awards. One way to do this would be to figure out per capita endowment for schools you are interested in.

- Make sure you write an appeal letter as soon as you get your award. Let them know how much DD/DS wants to attend their school but wouldn't be able to given the current award. Then describe any material circumstances or special qualities of DD/DS again.

School selection based on typical size of awards and appealing awards are the key, especially if your kid was good enough to get accepted but didn't get the award package you needed.

Some great schools will award merit with a 27 ACT but others want a 32. Look at the average scores of incoming students to get a feel for their selectivity. If you DD/DS has less than a 27, it gets more challenging and an inexpensive state school may be the best choice.

My main point here is that people shouldn't write off expensive private schools because it is the net cost that matters, not the sticker price. I know a kid that was planning to go to state school but was convinced to apply at Northwestern and got accepted--with a lower net cost than the state school he would have went to. And it was merit aid and work-study.

Of course every situation is different but it is foolish not to investigate.

Good luck.

 

[fh2000]

I went back to look at my 2 kids' UTMA account balance. This is what I saw. We started to put $200 each month into our kids' UTMA accounts ever since they were born. As we increased our earnings, we started to increase to $400, later $600 each month for each kid.

Around the end of 2007, I got laid off, and we stopped contributing to their accounts. By 2012 when DD began college, and this fall DS will attend college, both of their accounts are just above the 4 year UC cost. The total of our actual contributions were just about 1/2 of that. So, by staying in the market sustaining 2 major crashes (2000, 2008), we still get 1/2 of their college cost free for us.

I guess this is like 401K contribution. Start early and put everything in index funds, you won't go wrong.

 

[BellBarbara]

I have some information to share. Background: two daughters in expensive private colleges in NE. First daughter - we were working - zero FA. We paid about 53K per year - we did make her take out loan for one semester which was about 20K.

Fast forward to second daughter in BC - cost about 57K per year. Year one - she got 2K (we were working). Year 2 - she got 5K (we worked about 6 months of that year). Just now we found out she got 30K grants plus 6K in loans for year 3. Unbelievable!

Now, I don't think it's 100% based on our not working - she is an excellent student and is the president of a prestigious club/service org on campus.

So based on this I would say ER, spend down the 529 money, make sure your student works hard. We are sort of shocked. If the same thing happens for her next year we may be able to leave her without loans, and pay off the balance on daughter one with the money we put away.

Happy dance.

 

[daylatedollarshort]

So based on this I would say ER, spend down the 529 money, make sure your student works hard. We are sort of shocked. If the same thing happens for her next year we may be able to leave her without loans, and pay off the balance on daughter one with the money we put away.

Happy dance.

Good to hear that worked out for you. Thanks for the update.

 

[LOL!]

I guess this is like 401K contribution. Start early and put everything in index funds, you won't go wrong.

I wanted to comment on this previous post of putting things into the UTMA. One might have done better with regard to financial aid just putting them into your own (i.e. the parents) taxable account. Sure, the kids get a little tax break for UTMA (especially before kiddie tax law), but their assets count more against aid than the parents' assets. It is something like 25% versus <6% of saved amounts. Basically, the aid formulas assume all of child's assets can be used to pay for college.

Anyways we just saved for our retirement in tax-advantaged and in taxable accounts. Our kids (two in college this upcoming semester, I'm retired) got no aid whatsoever. But by now, the portfolio grows every year enough to fund college expenses, so just save lots for retirement. If you are wealthy, do the 529 plan thing for the tax break, but only after doing the retirement thing.