FIRE & College funding

[KenZ71]

Admitting I am very fortunate to be in the position to say this - Fidelity's Planning Estimate tool says I have a 85% success rate to retire in 2 years. That rate dont change much if I set retirement date 2 months or 10 years from now. Wow

So I was futzing with college tuition guesstimates for my current 16 & 12 year old sons found this link and similar for a few other schools

https://college.harvard.edu/financial-aid/net-price-calculator

So it would seem if I quit sooner the scholarship funds are greater. Granted that may be viewed as gaming the system but is it really any different than tax planning i.e investing in IRA vs taxable accounts? Am I correct that IRA assets are exempt from college funding estimates?

Lots of variables in these calculations so everthing is written in sand or is it?

 

[LOL!]

IRA assets are not listed on the FAFSA, but not all universities use the FAFSA. There is also the CSS Profile that many private universities use.

One thing is that with the FAFSA one's tax returns 2 years before are used. If you are contributing $55K to a 401(k), then they see that AND any IRA contributions. Those contributions are expected to go to zero ($0.00) when sending a child to college. So they will get added to any income in the calculations.

So if you have no income and everything in a Roth IRA or tax-deferred IRA, you might get a break. But do you even need it? Or are you just trying to work the system like everyone else?

 

[Dtail]

Just a comment on the Fidelity retirement calculator tool (assuming that is your reference).
I am surprised that you would get the same results of success whether you retire now or 10 years from now.

 

[RetiredAt55.5]

But do you even need it? Or are you just trying to work the system like everyone else?

Oh boy, the OP better not follow up with any ACA questions.

 

[ckelly78z]

So it would seem if I quit sooner the scholarship funds are greater. Granted that may be viewed as gaming the system but is it really any different than tax planning i.e investing in IRA vs taxable accounts?

Don't feel guilty for taking advantage of a loophole, this isn't gaming the system when you have worked honestly for the last 45 years to achieve this.

I would gladly use any scholarship opportunities that you (and your sons) can qualify for.

 

[pb4uski]

What does your planning include for college costs? I would be hesitant to pull the plug with a plan that presumed significant financial aid.... I would include all college costs (or at least what you plan to provide for each kid) in my plan and if they did get any scholarships then that would be gravy.

 

[KenZ71]

"Playing the game", "Work the system", "Using the tools available" - at the end of the day the bill has to be paid and not just college expenses.

Would like to know what system I gamed that gave me cancer 5 1/2 years ago. Sweating bullets for my 5 year follow up in a couple months but that is another post for another forum.

This post was meant to understand possible speed bumps that may get carved in the sand as we go through life.

I've told my kids I will cover 2 years of college and have that funded through 529s & my Roth separate from my retirement plan. I am using the current cost of tuition at my alma matter as a benchmark. I say 2 years because I want them to have some skin in the game to help keep them focused. DW & I plan to give the kids a check equivalent to those 2 years they paid for when they reach early 30s but they don't know it.

If we don't hit financial speedbumps might just give them much more - but they have to be supporting themselves. These are kids who can learn a trade or build a career not pets that sleep on the couch all day.

To bring this back to my original post - if we are able to plan now to make scholarships and grants more available why not? That is my goal - take steps now to make the future easier. That applies to college funding, tax planning, heck buying groceries at the grocery store instead of the dollar store - it is just good financial sense.

 

[HillCountry]

Do you know their admission rate?

 

[imoldernu]

About scholarships. My college has a large fund that subsidizes the tuition.
the site location is Niche.com...

I think you can get an idea of the extraordinary amount of information that Niche provides for every college in America. Here's a link to mine, but you can search any college and get the same kind of information. I think it's quite worthwhile to look at the kinds of, and amount of scholarship available, based on income.
https://www.niche.com/colleges/bowdoin-college/

In this case, the average net cost is $24K/yr., but this varies by income. Higher and lower. The actual full cost is closer to $62K/yr without the scholarship subsidy. Also... be sure to check out and understand the "Common App". Not all schools accept this. When it comes down to narrowing choice, note the acceptance rate to avoid spinning your wheels, in schools with a 4% acceptance.

 

[SecondCor521]

OP:

I am saddened to hear about your cancer.

Pretty much every college in the US is required by federal law to provide a net price calculator. You linked to Harvard's, but it should be super easy to google for any school. Since they're provided by the schools themselves, they vary somewhat from school to school. But most you can fill out in about five minutes, and from my understanding they are the most reliable estimate you can get for a given school before actually applying for financial aid. I understand also that they are in general fairly close to what is actually offered.

I don't view what you're doing as gaming the system, and I personally encourage everyone to take every advantage they can find which is legal and which they consider ethical. But there are some members on this board who have dim views of certain actions and will comment about that.

Financial aid is a large and complex subject, but in general if your tax return shows a low AGI and your assets are in either your home or retirement funds, then for schools that rely on the FAFSA, you'll get more aid.

Several hundred schools, mostly high quality liberal arts schools (like Bowdoin ;-) ) use the CSS profile in addition to the FAFSA. It considers the equity in your home. It may also consider your retirement assets; I'm not sure. For my situation, the CSS provided less aid, but it depends on your situation.

In addition to niche.com, you might want to look at the data at Big Future, which is the College Board's university website. Here's the link to Bowdoin's page for example:

https://bigfuture.collegeboard.org/...ege?searchtype=college&q=Bowdoin+College+(ME)

One thing in general to look at is the balance between scholarships and grants, and loans. If school A and school B provide $25K in financial aid to your kid, the one that offers $20K in grants and $5K in loans is better than the one that offers $20K in loans and $5K in grants.

I agree with imolderthanu's comments about acceptance rate too. I encouraged my kids to apply to schools where their GPA and test scores put them in the 75th percentile for the schools they were applying to. If you're an above average kid for a given school, they're more likely to give better scholarships and aid. For example, my kids probably wouldn't have gotten into Harvard, but if they had, they would have been average for Harvard. But they are above average for the schools they're going to, and thus have so far received (or are likely to receive) about $180K worth of scholarships between the three of them from the schools they're going to.

 

[daylatedollarshort]

Our kids have gone to community college, in state public schools, had assorted jobs including paid internships and tutor jobs, took some low cost online classes, etc. Most of our assets are in FAFSA exempt asset classes. We retired early and the kids received grants so after tax credits college really hasn't cost us much out of pocket.

The one that has graduated has a STEM degree and makes near the top of the Payscale salary reports by college in a high demand field so it has worked out really well - no student loan debt and we paid for a car so no car loans either. In California the income limits for grants are pretty high, close to the same for the ACA max income limits for a family of 4, so keeping our MAGI under those two limits was a really huge savings for us.

 

[Col. Klink]

If your state offers a prepaid tuition program, you may want to look into this particularly for the 12 year old. At least when we did this with our kids, it did not negatively impact their eligibility for scholarships. Those were applied to the room and board as the tuitions were prepaid.

Some states have dropped this program since the great recession and with bond rates not keeping up with increasing college cost rates. However, worth a check IMHO. It was one of the best financial decisions we made back in the day.

 

[LOL!]

Or are you just trying to work the system like everyone else?

Like everyone else we certainly worked the system to put 2 kids through college. There are plenty of tax benefits for education described in IRS Publication 970. Free money is free money no matter who is giving it away.