0 EFC but with good amount of assets...what now?

Paying for College
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<p>My husband lived with his parents until he was 27 when we got married. Before we got married, he saved up a lot of money, invested his money on money markets funds, stocks, retirement, etc... He's a self-employed guitar teacher who rents a small room at a local music store. He's been doing that for the past 14 years now. He's earning around $43,000-$45,000 GROSS a year...but after all his deductions (his room rents, his supplies, car mileage, gas, and other miscellaneous expenses), his income is below the $20,000. Since he's self-employed, he doesn't have a fixed income ever year. There are years when he does really good, and there are years that he doesn't. We have two kids, and I stay home and do part-time dressmaking (bridal) to supplement my husband's income...and we're saving a lot with child-care at the same time. We live in a small appartment and live within our means as far as expenses goes. The past couple years, business has not been doing good for my husband at all, which compelled us both to finish college so we could find better careers in the future. He started at a community college after he graduated high school, and I also finished at least 3 years of college myself from overseas.</p>

<p>We've recently submitted our FAFSA application, and with the income that we reported from our tax return, we were not asked to fill out the assets section. We have about $30,000+ worth of cash in our savings/checking (that's money that my husband has saved up a long time ago) and a few more money on retirement, stocks and mutual funds. Anyway, we got an automatic 0 EFC after submitting our application, but we're under verification. Someone told us that we should allocate our savings and invest it on something else instead of letting it sit in our bank like that. That's the money that will keep us safe when my husband does go out of business while our kids are still little.</p>

<p>We have not submitted our verification worksheet to the school yet (we're going to the College of Southern Maryland) because a friend of ours told us that we should wait for the next school year instead, and that we should take out some of the money from our savings money and invest it in other things. The verification worksheet is asking us of our assets. My questions are:</p>

<p>1.) How much is the percentage that schools normally take from assets/investments towards the EFC?</p>

<p>2.) Will they count assets that cannot be accessed right away such as CD's, time deposits, etc...?</p>

<p>3.) Will it be a wise idea to call the school and tell them we're cancelling our fafsa application for this school year (spring semester)? Or should we leave it be? The verification worksheet said, if we don't submit the papers in a timely manner, this will result in the cancellation of our fafsa application. So, should we just leave it be?</p>

<p>4.) The final question is...if we do spread out our money into other investments instead of letting it sit in the bank, will this indeed help out in terms of our EFC?</p>

<p>I appreciate all of your opinions. Thank you so much in advance! :-)</p>

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<p>Someone else will have to pipe in…but there IS an asset protection for your savings. It varies depending on the number of people in your family, I believe. I do think that your $30,000 in savings would be a protected asset under FAFSA guidelines. Swimcats probably knows the exact amount.</p>

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<p>Gosh, I am so clueless about “asset protection”. What does that do? I wish I could get a clearer calculation. We’re not expecting a full ride, of course. I’ve also read somewhere that with the two of us going together and we have two children, our savings will automatically be split in half, then the percentage for the EFC will be taken from there. I’m still very confused.</p>

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<p>The asset protection allowance (APA) is an amount that the feds allow you to have in savings and investments outside of retirement before you are assessed towards your expected family contribution (EFC). Below is a link to the 2009 table…</p>

<p>[Asset</a> Protection Allowance - The Financial Aid Saving Grace](<a href=“http://ezinearticles.com/?Asset-Protection-Allowance---The-Financial-Aid-Saving-Grace&id=2442252]Asset”>http://ezinearticles.com/?Asset-Protection-Allowance---The-Financial-Aid-Saving-Grace&id=2442252)</p>

<p>If you are applying to a FAFSA only school (one that does not use the CSS Profile), then there is no need to do anything with savings above the APA limits. For any savings amount above the APA limit, you as the parent will contribute 5.65% towards the student’s EFC.</p>

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<p>The OP and her husband are the students not the parents.</p>

<p>The asset protection for independent students are based on the age of the student. Here is an excerpt from the EFC formula that shows the asset protection</p>

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<p>Assets over the protected allowance will affect the EFC by 20% of the asset value.</p>

<p>The calculated EFC from FAFSA should already take into account the assets. If you completed FAFSA correctly and it came out with a 0 EFC then that s/b your FAFSA EFC for federal aid. The verification may be to make sure you completed it correctly. If you are eligible for the automatic 0 EFC (AGI <$30k and other criteria) or the simplified needs test (AGI <$50k and other criteria) then assets will not be considered in the formula. But as your husband is self employed that probably means he is not able to file a 1040a or 1040ez which means you may not be eligible for the simplified needs or auto 0. Other criteria that would make you eligible is if you receive any sort of designated means-tested Federal benefits such as the SSI Program, the Food Stamp Program, the Free and Reduced Price School Lunch Program, the TANF Program, and WIC; OR the student (or the student’s spouse, if any) is a dislocated worker. Perhaps this is what the school wants to check. Self employed people’s FAFSA’s can be more complicated. </p>

<p>

This will make no difference at all. All reportable assets are treated the same by FAFSA. Non reportable assets are retirement accounts and primary home. </p>

<p>

Yes they are counted.</p>

<p>Honestly I think you should just go ahead and do the verification as requested by the school. That way you will know if the aid is or is not going to be enough. If you find that aid will not be enough then you can figure out if you need to do something differently and retry next year.</p>

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<p>Missed that. My bad.</p>

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<p>Thank you for all your input. I’ve seen this EFC formula for 2009-2010 since we’re planning to start on Spring Semester (January 2010). We’ll try to talk to a financial advisor tomorrow and get information. I’m sure we’ll get a lot of questions answered. Because of your inputs, we might be able to proceed with our application after all. Thank you.</p>

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<p>I also missed that these were married independent students. That sheds a different light on things. </p>

<p>Still…can’t some of that $30,000 in savings be used for some of your college expenses? If it’s a rainy day fund…well…maybe this IS the rainy day.</p>

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<p>I filled out the form on page 29 this link:</p>

<p><a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/111408EFCFormulaGuide0910.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/111408EFCFormulaGuide0910.pdf&lt;/a&gt;&lt;/p&gt;

<p>and followed all the instructions. Even after putting our assets (suppose we do not qualify for automatic 0 EFC), after doing all the calculations, our EFC is still 0. This gave us hope! :slight_smile: I will encourage hubby tonight to complete the verification process. We might be elligible even for a little something (even if not the entire amount for the 2009-2010 Pell grant). I am afraid to be excited as this might let me down. hehe! But we’ll never know if we won’t go for it. Thank you!</p>

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<p>I am having a difficult time understanding how you qualify for auto 0 efc. You cannot file a 1040A or 1040EZ … did you say you were eligible to do so? That is my pet peeve - I hate that it allows you to skip asset info, because A LOT of people answer that wrong - and then I have to go out & collect the asset info when I am verifying. And it can change the picture for students. What is your reason for being eligible for auto 0 besides income? That will be looked at during verification, and if you don’t meet the criteria you’ll be asked for asset info. It doesn’t really matter where you put it … money is money. </p>

<p>I agree with thumper. You have $30,000 saved. It is not in a retirement account, so one would assume it’s savings for a rainy day. To be blunt, if you have that much in savings, why should I (a taxpayer) have to foot the bill for your aid? I don’t mean to be harsh, but I don’t have $30,000 in savings & my kid doesn’t get a Pell grant. And no, I am not living the large life, either. If you actually do qualify for auto 0 efc, more power to you. But truly, that level of savings does indicate an ability to help yourself to some extent with the costs of school.</p>

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<p>Yes, I have reread all the descriptions and did the calculator again…so no, WE DO NOT qualify for 0 EFC. I understand now that we have to have at $30,000 or less for the Total Income AND meet either one of the three criteria: Elligible to file 1040A, a dislocated worker, and someone who has received benefits from any of the federal benefits programs such as reduced lunch, food stamps, etc… I filled out the calculator again and it didn’t qualify us for auto 0 EFC, that’s why I was able to provide our asset information. The good news is, even after putting our asset information, our EFC is still 0. It’s still a combination of grants and loans. So, because of this, we will go ahead and proceed with the verification and see what happens.</p>

<p>I have already called the school and told them about the correction. They told me I can do the correction on our FAFSA online, but we’d rather meet with the advisor in person and indicate the corrections ourselves. </p>

<p>Kelsmom, I agree with your opinion. However, if we do qualify for it, we’d be willing to take it. If we don’t…no harm done. We’re not expecting that we’re not going to take anything out-of-pocket or NOT touch our savings for school and get a free ride. My husband saved that up way before we got married and we’ve tried to make that as a decent amount of downpayment for our very first home a year ago. We were denied by lenders left and right because of the fact that my husband is self-employed and he doesn’t have a fixed yearly income. We’ve been very responsible with our expenses, only own one credit card and have excellent credit scores, with 0 debt…we were still denied. Did it feel unfair? Of course, but it is what it is. We’ve already accepted it and we’re moving on. :-)</p>

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<p>I’m confused. Doesn’t part-time bridal dress making count as a job too?</p>

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<p>Shyanne, I did not start with my dressmaking until this year. So, our 2008 tax return, my extra income is not there yet. That will be reported for January. So, no, I’m not a dislocated worker, and yes, it is a job. The good part of it is, I’m entitled to deduct the small area in our apartment off of our taxes. Our tax lady told us last time that if I could even go in-depth, I could calculate a percentage of electricity, but I’m not going to do that…it’s way too involved. :-)</p>

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<p>I am glad to hear that you still have a 0 EFC, even after finding out you do not qualify for auto 0. That’s good news for you. I hope your schooling goes well! :)</p>

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<p>Thank you, kelsmom. We have an appointment with the financial advisor this coming Monday. Since it’s the mid-school year already, we’re not expecting a good amount of grant/money left. The school said, the priority deadline each year for student aid is from Jan. 1-Mar.1. They’ll continue to accept applications and give awards as long as there is funds left…whatever that means, we’ll still try…who knows. But we’ll absolutely file our taxes early 2010 so we can apply early to be included in the priority dates. :)</p>

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<p>Thanks for answering my question.</p>