College aid/funding questions???

[movaly1]

I am a single parent of two children - currently a high school freshman and an 8th grader. It is time for me to start learning about what I need to do to best position them for college funding. I live in NY state and my income just barely gets me into the 24% federal tax bracket. I am thinking they will probably only be eligible for need-based financial aid in the form of student loans. I am looking for any recommendations for resources to read, strategies to put into place, etc. They do have 529 accounts (under my ownership) but nowhere the amount they would need for four years of college. I am not sure if I should continue to fund them or if that will work against them. Anybody willing to share their wisdom/experience? Thanks!

 

[ivinsfan]

I am a single parent of two children - currently a high school freshman and an 8th grader. It is time for me to start learning about what I need to do to best position them for college funding. I live in NY state and my income just barely gets me into the 24% federal tax bracket. I am thinking they will probably only be eligible for need-based financial aid in the form of student loans. I am looking for any recommendations for resources to read, strategies to put into place, etc. They do have 529 accounts (under my ownership) but nowhere the amount they would need for four years of college. I am not sure if I should continue to fund them or if that will work against them. Anybody willing to share their wisdom/experience? Thanks!

Start reading about FASFA, one area where you will benefit from possible need based aid is the fact that you will have two children in college for multiple years. this helps a lot. I'd suggest you start by looking online at a FASFA form and seeing what counts as eligible income assets. Also you might be a single parent but the other parent's assets could/will come into the picture at some point.

 

[Bir48die]

If you need help an organization that I volunteer for called Tax Aide are doing FAFSA training. They can assist you if needed. You might look them up.

 

[sengsational]

Your kids need to be flat broke. You need to seem flat broke by having all your assets in retirement accounts. There are two calculations: the institutional methodology and the federal methodology. Research those to see how much they expect you to contribute. That amount is total per year (roughly), so if you had 2 kids in school concurrently, they'd expect you to pay the same amount, thus only half as much per kid as if you had only one at a time. The financial aid officer doesn't have to make up the difference between the list price and what you pay, but the best schools try not to have their graduates leaving with too much debt. You want grants, of course, and those are basically discounts. Universities are too cool for price/discount, so they say tuition/grant. The FAO will send an award letter, and the deal will be what they think will enable attendance, an no more. Then as the years progress, they may start cutting, once they have the student. The FAO is to be negotiated with as a financial agent (they aren't your buddy). The biggest problem needs based people with assets have is the roughly 5% of parents assets per year EFC. I must use foul language here: Variable Annuity. That's one way to reclassify assets as retirement funds so as not to be included in the EFC calculations. Both Fidelity and Vanguard have low cost index funds wrapped in the VA insurance wrapper. These have an additional fee that isn't horrific, and you can pull money out any time with no surrender fees. And you never have to annuitize unless you want to, so none of the really bad features of some VA's, but the tax treatment sucks...you must pull out all the gains first, paying regular income tax (no favorable capital gains rate). Only then will you have access to the principal. And it might not pass the FAO sniff test...the retirement assets are reported, but supposedly don't affect the calculations (the institutional methodology calculations are no longer publicly available).

 

[joeea]

Anybody willing to share their wisdom/experience? Thanks!

Make an appointment with the high school's guidance office. They will have plenty of resources for you.

 

[HenryD]

I am not sure if I should continue to fund them or if that will work against them

We had my (now ex) FIL own our main 529 to get the state tax benefits during accumulation as our state offered none. After the first year FAFSA we'll transfer ownership to my ex so it won't hit as a parental asset until the second FAFSA year. Will cover the first year costs with another small 529 owned by my ex. Distribution from a grandparent-owned 529 counts as income to the beneficiary so best to transfer it back to the parent at some point and hold off on using it as late as possible.

We've made sure to have DD spend slightly more that half time at my ex's, and on her taxes, so the FAFSA calcs will use ex's financials. Already doing the same for step-DS with DW's ex. FAFSA looks back 2 years I believe so now is the time to start thinking about all this.

 

[Philliefan33]

Head over to the forums at “college confidential”. It’s filled with parents like you and those who have been through the process. It was very helpful to us when we were doing the college thing for our girls.

Be prepared. You won’t get as much financial aid as you think/ hope you will, and your students are not as special as you think they are. When I was frequenting that forum, you could watch parents go through stages of shock, grief, and acceptance.

 

[upupandaway]

https://www.savingforcollege.com/article/yes-your-529-plan-will-affect-financial-aid

This article highlights the affects of a 529 balance on student aid pretty well.

Also if they are going into a STEM field and don't mind working for the DoD for a few years you may want to explore the "DoD SMART scholarship program." I heard an interview with a guy who went through the program and it worked out really well for him. Zero debt + Guaranteed job

https://smartscholarshipprod.service-now.com/smart

While in school, students will receive full tuition, monthly stipends, health insurance and book allowances, as well as summer internships that range from 8 to 12 weeks. Upon degree completion, scholars begin working in a civilian position with their sponsoring facility.

 

[LOL!]

Read IRS Publication 970 from start to finish. There are thousands of dollars of free government money awaiting you.

 

[kgtest]

Soo, right or wrong, I give my dad money and he puts it into the 529 under "grandpa's 529 for his grandkids" Even though its funded by my money.

Planning ahead. Kids won't get the first tuition check for another 15 years, but you can never plan too soon!

There is a very tempting tax credit for me to begin a 529 in my name with my state income tax TODAY, but I do not want to hurt the chances of aid TOMORROW, so instead we put that money to use in other investments (grandpa's 529, brokerage, MM).

What will FAFSA look like in 14 years, who knows but my kids will have 529 with both grandparents, that under TODAY's rules won't hinder financial aid.

If Grandpa is around, and cash accounts are included like MM, likely I will shift assets as gifts over to Grandpa and Grandma again to decrease the amount of assets we have on hand. This is a backup. Who knows if legal, but i have lots of time to go.

 

[movaly1]

We had my (now ex) FIL own our main 529 to get the state tax benefits during accumulation as our state offered none. After the first year FAFSA we'll transfer ownership to my ex so it won't hit as a parental asset until the second FAFSA year. Will cover the first year costs with another small 529 owned by my ex. Distribution from a grandparent-owned 529 counts as income to the beneficiary so best to transfer it back to the parent at some point and hold off on using it as late as possible.

We've made sure to have DD spend slightly more that half time at my ex's, and on her taxes, so the FAFSA calcs will use ex's financials. Already doing the same for step-DS with DW's ex. FAFSA looks back 2 years I believe so now is the time to start thinking about all this.

Is there some kind of proof you need to show that they are spending more than half time at the other parent's house? I am the parent they are currently living with during the school week and they attend the local school in NY, but their father lives in NJ (a little over an hour away). He makes less than half of what I earn. When they apply they are going to say that the high school they attend is in NY, so I don't think that will fly. The high schools where he lives are less than desirable. They do spend summers with him though.

 

[daylatedollarshort]

If you want to get financial aid the time to start planning is now. We retired early and our kids received grants for 100% tuition as our assets were in FAFSA exempt asset classes (small businesses, business retirement plan, house, IRAs, etc.). We didn't put any money into 529s. Between community college credits, transfer degrees (guaranteed acceptance and graduation in 4 years), in state public schools, online classes, paid internships, tutor jobs, tax credits, grants and low interest loans we didn't pay much out of pocket for college. Both have good jobs now they really enjoy and their salaries compare pretty favorably with the top salaries on the Payscale reports for early career pay so it worked out well.

When our kids were in middle school I checked books out of the library on how to get financial aid and found a lot of helpful articles on the Bloomberg online site.

 

[SnowballCamper]

Have the kids research scholarships as (or more) intensely as you research the FAFSA and other funding rules. There is a LOT of scholarship money out there.

 

[bigreader]

I'm about midway through this college business, also with 2 kids a few years apart. I funded 529s when they were little (in my name, with my money -- just saying . . .) I didn't see a way to manage my salary or my assets to make a meaningful difference in FAFSA but ymmv.
My best advice is to figure out exactly how much money you and your ex have to contribute to college expenses for both kids. Once you have your budget, tell the kids as they start the process of applying for admission. Let that be a factor they consider with their guidance counselors. Depending on the kids, their interests and abilities, merit scholarships, lower cost colleges, community college first and then transfer or taking out loans are all options. But start with a realistic view of what you can afford. There is no shame in not being able to fund a private college education out of pocket and no glory in being $250,000 in debt for your undergrad. There are tons of great choices and options out there.

br

 

[sengsational]

Have the kids research scholarships as (or more) intensely as you research the FAFSA and other funding rules. There is a LOT of scholarship money out there.

We were told this, but we didn't find it to be the case; There wasn't too much around for my kids. You might get $500 from the "Left handers born on Friday the 13th" organization, but that would reduce your award by $500. The big money was in the non-needs based academic scholarships (full ride). My kids got the interview, but didn't have the right answers to win the full ride. The kids that won, and we knew a few of them, had helicopter parents and they were building their volunteer / save humanity resume since they were 4. My kids got to be kids, doing stupid kid stuff, but they didn't get the full ride.

 

[Just_Steve]

NY is giving away "free" college. Wish they had this a few years ago.

https://www.hesc.ny.gov/pay-for-col...arships-awards/the-excelsior-scholarship.html

Eligibility

An applicant must:

be a resident of NYS and have resided in NYS for 12 continuous months prior to the beginning of the term;
be a U.S. citizen or eligible non-citizen;
have either graduated from high school in the United States, earned a high school equivalency diploma, or passed a federally approved "Ability to Benefit" test, as defined by the Commissioner of the State Education Department;
have a combined federal adjusted gross income of $125,000 or less;
be pursuing an undergraduate degree at a SUNY or CUNY college, including community colleges and the statutory colleges at Cornell University and Alfred University;
be enrolled in at least 12 credits per term and complete at least 30 credits each year (successively), applicable toward his or her degree program through continuous study with no break in enrollment except for certain reasons that can be documented;
if attended college prior to the 2019-20 academic year, have earned at least 30 credits each year (successively), applicable toward his or her degree program prior to applying for an Excelsior Scholarship;
be in a non-default status on a student loan made under any NYS or federal education loan program or on the repayment of any NYS award;
be in compliance with the terms of the service condition(s) imposed by any NYS award that you have previously received; and
execute a Contract agreeing to reside in NYS for the length of time the award was received, and, if employed during such time, be employed in NYS.

 

[ncbill]

NY National Guard pays for tuition up to SUNY rates:

New York National Guard Education Services - Recruitment Incentive & Retention Program

 

[SecondCor521]

Some good advice on this thread so far. Some of it is plain wrong, though.

Advice:

1. Consider the costs of colleges. Pick schools where your kids are academically in the top quartile; this will increase the chances of them getting scholarships from the school. It will also lower the stress of them getting accepted, and may reduce the amount of college visits and applications you decide to do. There are lots of good, less well known schools, that are priced more affordably. In general, in state public (is that SUNY for you?) is going to be cheapest.

2. If I got a decent tax discount for contributing to my kids' 529s and the investments were reasonably good, I would go ahead and contribute to them. 529s where the parent is the custodian are treated as parental assets, so only ~5% of the balance per year will be due as EFC tax.

3. As someone pointed out, FAFSA uses prior-prior year tax returns for evaluating need. So for my son who started college this fall (2019), we filled out the FAFSA in October 2018 using my 2017 tax return data. So you would be smart to plan ahead.

4. I second what LOL! said about reading Pub 970. Two key points: You can't double dip on any government credits/deductions, and the AOTC needs to be paid out of pocket. Through careful reading of the rules and strategizing, I've probably saved 10-20% of my kids' college via Pub 970.

5. Our experience has been that most of the aid is scholarships from the school and Pell Grants. It's been sufficient that I really haven't had my kids apply for outside scholarships (Rotary Club or whatever). As previously commented, if you're getting aid and you get an outside scholarship, they just subtract that from what they were going to pay or discount for you, so you're really pretty much in the same situation.

6. For some kids, the military academies or ROTC can provide full rides. There are significant considerations with this, but it's an option worth mentioning if your kids are so inclined.

Answers/corrections:

1. For FAFSA schools, you can put taxable assets into retirement or pay down the mortgage. For CSS schools, it's harder to hide assets. In the 24% bracket, you'll be expected to pay a lot, although government grants, student loans, and PLUS loans are probably likely.

2. For FAFSA, only the parent with whom the child spent >50% of the time (overnights) with has to fill out FAFSA. Plus whomever that parent is married to. Non-custodial parents are not required - and in fact not allowed - to fill out FAFSA.

3. @kgtest, asset shifting to grandparents to get more aid (post #10) is probably financial aid fraud. You probably wouldn't get caught, but if you did get caught the penalties would be severe.

4. @movaly1, post #11, read up on FAFSA verification. Everyone fills out the FAFSA every year. Every year, some small percentage gets audited via verification. If you get selected (randomly I think) for verification, then you have to provide proof of everything on your application. I assume this would include whether or not the correct parent filled out the FAFSA. My understanding is it is sort of like an IRS audit or a colonoscopy - very thorough.

 

[SnowballCamper]

FinAid | Scholarships | Outside Scholarship Policies

"The school's outside scholarship policy dictates how the outside scholarship is used to reduce the financial aid package. Most schools have favorable policies that first apply the outside scholarship to unmet need, and then reduce self-help (loans and work-study) before touching institutional grants. This lets you replace your loans, which must be repaid, with the outside scholarship. After all, it is in the school's best interest to encourage you to win outside scholarships."

So, umm, yeah, go ahead and leave that money on the table if you want... I'll have my kid pick it up. Or at least try to get it.

 

[SecondCor521]

FinAid | Scholarships | Outside Scholarship Policies

"The school's outside scholarship policy dictates how the outside scholarship is used to reduce the financial aid package. Most schools have favorable policies that first apply the outside scholarship to unmet need, and then reduce self-help (loans and work-study) before touching institutional grants. This lets you replace your loans, which must be repaid, with the outside scholarship. After all, it is in the school's best interest to encourage you to win outside scholarships."

So, umm, yeah, go ahead and leave that money on the table if you want... I'll have my kid pick it up. Or at least try to get it.

I wish your kid sincere good luck and best wishes.

I was relating my experience. My experience with my first two kids is that most outside scholarships were extra work to apply for, not as generous as the school supplied scholarships and grants, and the vast majority had restrictions which made my kids ineligible.

Also, at least two of the three schools my first two kids have attended did not follow the "most schools" policies in your quote. They reduced aid rather than deduct it from EFC. If the school credits outside scholarships to a student's account rather than deduct it from the aid they provide to the student, it may be good marketing and public relations and may help graduation rates marginally, but I'm not sure if it's in the school's best interest. That $500 Rotary scholarship could have been $500 more retained in their endowment.

And, as noted, my kids got enough that I can swing the rest financially easily enough. If our situation were different and we really needed those scholarships, then we would have applied.

Finally, it was in the advice portion of my post. YMMV.

 

[HenryD]

Is there some kind of proof you need to show that they are spending more than half time at the other parent's house?

If you have shared custody it will be whichever parent claimed the child on their tax return.

 

[SecondCor521]

If you have shared custody it will be whichever parent claimed the child on their tax return.

Not necessarily true.

I claim custody of my high school senior DD17, because that is what our divorce decree says. That also applies to a calendar year.

The (main) FAFSA rule is whichever house the child spends more than 50% of their overnights with, and covers the 12 months immediately prior to filing the FAFSA itself. Aggressive parents like me would file the FAFSA on October 1, but it can be filed as late as in the spring or even early summer. So it would very likely not cover a calendar year.

 

[HenryD]

Not necessarily true.

I claim custody of my high school senior DD17, because that is what our divorce decree says. That also applies to a calendar year.

The (main) FAFSA rule is whichever house the child spends more than 50% of their overnights with, and covers the 12 months immediately prior to filing the FAFSA itself. Aggressive parents like me would file the FAFSA on October 1, but it can be filed as late as in the spring or even early summer. So it would very likely not cover a calendar year.

Thank you for the correction. I had not considered that. I suppose I'm lucky that my ex and I agreed to start modifying our arrangement a few years ago to avoid that kind of complexity.

 

[SnowballCamper]

I wish your kid sincere good luck and best wishes.

I was relating my experience. My experience with my first two kids is that most outside scholarships were extra work to apply for, not as generous as the school supplied scholarships and grants, and the vast majority had restrictions which made my kids ineligible.

Also, at least two of the three schools my first two kids have attended did not follow the "most schools" policies in your quote. They reduced aid rather than deduct it from EFC. If the school credits outside scholarships to a student's account rather than deduct it from the aid they provide to the student, it may be good marketing and public relations and may help graduation rates marginally, but I'm not sure if it's in the school's best interest. That $500 Rotary scholarship could have been $500 more retained in their endowment.

And, as noted, my kids got enough that I can swing the rest financially easily enough. If our situation were different and we really needed those scholarships, then we would have applied.

Finally, it was in the advice portion of my post. YMMV.

Thanks SecondCor,

I had a completely different experience funding my education (which was within the last 20 years). It was almost entirely with scholarships and employer education benefits. But I did work a few years before school. Since it was scholarships, I was able to go to private schools (BS and, later, MS but at different schools), and they were very enthusiastic about outside money. I know the rules are only getting more complicated as the bureaucracy of college funding grows.

My other reason to say that the student should apply for scholarships is that the process is a good learning experience for the student, to have to write about how great you are and what you did/will accomplish will help when it's time to apply for a job.

But yes, YMMV.

 

[SecondCor521]

Thanks SecondCor,

I had a completely different experience funding my education (which was within the last 20 years). It was almost entirely with scholarships and employer education benefits. But I did work a few years before school. Since it was scholarships, I was able to go to private schools (BS and, later, MS but at different schools), and they were very enthusiastic about outside money. I know the rules are only getting more complicated as the bureaucracy of college funding grows.

My other reason to say that the student should apply for scholarships is that the process is a good learning experience for the student, to have to write about how great you are and what you did/will accomplish will help when it's time to apply for a job.

But yes, YMMV.

Good points. Somewhere I compiled a list in a document for my kids that listed the major ways to pay for college. Scholarships, grants, saving, summer jobs, 529s, donations from Grandpa, tax deductions and credits, etc. I think I went over it with them around 10th grade or so and talked through each of the methods. Interestingly, each of the kids sort of ended up with a different subset of those methods.

The larger point is there are different ways to get there, and depending on circumstances and individual preferences and so forth, different things work for different folks.

(When I got my master's degree, it got paid for four times over because I used four different methods to pay for it and each method paid the full costs. It was weird but nice to make money on going to school, in addition to the money I was earning on my job and the increased salary I got when I graduated.)