I've just started to delve into the cost of college as I'm on the doorstep of ER and have 3 to put through the higher education system.
From looking at the online EFC calculators, your assets outside of primary home equity are added to the EFC as a rate of 12% of total assets. If you could "hide" your assets this could be a significant savings in college costs. Now don't mistake me, I'm not trying to cheat the system, but rather take advantage of the rules as they are.
Seems like the ultimate goal for a family in ER would be to qualify for the Simplified Needs Test. To this you need to get out of filing a 1040 tax form. Of course this is difficult for one who relies on investments for part of their income. If one has Capital Gains/Losses to report, you must file a 1040 and can't use the 1040A or 1040EZ.
A way to get around this would be to shelter your assets by paying off your mortgage and using a HELOC to be able to access the equity if needed. Also, for the time the children are in college, move all other assets to TIPS or the like where you would have no Capital Gains to report. The savings you will make through addition financial aid eligibility will make up for the loss of potential gain by being invested in stocks during this time.
For my particular situation, if I keep assets as they are (lazy portfolio) my EFC is $25K. Employing the strategy as outlined above lowers it to $3K. That's quite a bit to make up should you keep the assets invested.
Any experience from the group with legitimate ways to decrease you EFC?
From looking at the online EFC calculators, your assets outside of primary home equity are added to the EFC as a rate of 12% of total assets. If you could "hide" your assets this could be a significant savings in college costs. Now don't mistake me, I'm not trying to cheat the system, but rather take advantage of the rules as they are.
Seems like the ultimate goal for a family in ER would be to qualify for the Simplified Needs Test. To this you need to get out of filing a 1040 tax form. Of course this is difficult for one who relies on investments for part of their income. If one has Capital Gains/Losses to report, you must file a 1040 and can't use the 1040A or 1040EZ.
A way to get around this would be to shelter your assets by paying off your mortgage and using a HELOC to be able to access the equity if needed. Also, for the time the children are in college, move all other assets to TIPS or the like where you would have no Capital Gains to report. The savings you will make through addition financial aid eligibility will make up for the loss of potential gain by being invested in stocks during this time.
For my particular situation, if I keep assets as they are (lazy portfolio) my EFC is $25K. Employing the strategy as outlined above lowers it to $3K. That's quite a bit to make up should you keep the assets invested.
Any experience from the group with legitimate ways to decrease you EFC?
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