^Ok I just ran the EFC calculator at collegeboard website which I found pretty accurate for us.
Family of 5 with $70k income (only one parent works, older parent is 47) and 2 in college with about $1200 tax paid and $1500 education credit, yields a parent EFC of around $3500. D1 income of $5800 and assets of $2k adds about $400 so $4000 total.
For the EFC to be over $6000 I had to add at least $80,000 in parent assets
Does the 529 still have that high of a balance?
The most relevant numbers to be used for a quick comparison:
Number in household
Number in college
Parents - AGI; taxes paid; contributions to 401k/403B plans; untaxed income; assets (all are treated equally - cash, savings, investments, value of 529 plan; savings bonds, etc); any retirement plan rollover made that year
Student - AGI; taxes paid; contributions to 401k/403B plans; untaxed income or gift money or money paid on student’s behalf (by anyone other than the parents); assets (all are treated equally - cash, savings, investments, savings bonds, etc); any retirement plan rollover made that year; value of 529 plan if in student’s name; distributions from 529 plan owned by anyone OTHER than the parents (counted as gift money).
For clarification, a 529 plan in the student’s name needs to be reported as a parent asset.
My guess here is that there was a mistake made on the previous year’s FAFSA that brought DD1’s EFC to around half of what it should have been.
^Yes with the change of $4000 in income the EFC should not change from $5000 to $12,000 ($6,000 each D)
Folks…I don’t have a printed out FAFSA handy here (DD has it). IIRC! There is a separate line where you indicate the amount of tax deferred retirement contributions…and and the ? Part clearly shows which line on the W-2 goes in that column.
Wondering out loud If maybe this wasn’t done correctly.
That would be FAFSA line 45.a. (for the student) and line 94.a. (for the parent/s).
@BelknapPoint thank you!
I’m beginning to also wonder if the mistake was on the previous year for the older daughter…and this one is correct.
Hi all. I screwed up last year’s FAFSA and didn’t add in our 401k contributions 
That was her sophomore year. When I pulled her Freshman year our EFC was 10136, so probably this year it being 12 w/the 2 is correct.
But I do want to ask a question about adding in the retirement contributions. I read a book, “Paying for College without Going Broke” before I filled the FAFSA out for the first time for DD1, 2014-2015…this is what it said about adding in the retirement $$:
"The instructions are wrong. It’s just that simple. Other aid professionals agree with us. So please ignore the instructions. If you contributed any pre-tax wage income (subject to Social Security and/or Medicare taxes) into tax-deferred retirement accounts, include it as part of the question on income earned from work on the FAFSA.
^ now I didn’t do that this year because I read it in 2014 and wasn’t sure if that still pertained. Can anyone comment on that paragraph and if that is a strategy to follow or not?
I think what happened last year was I did add our retirement to our income figures then when back and changed it and subtracted them out because I wasn’t sure if it still pertained, but then I neglected to add the 401K money on the box that asked for it.
Oh boy. So you need to let the school know that the 2015-2016 FAFSA was wrong. If your daughter received any need-based aid (federal subsidized loans or institutional aid; I don’t think you got a Pell grant, did you?) based on that artificially low EFC, she’s probably looking at paying back some money that she wasn’t entitled to.
I don’t understand why anyone would argue that contributions to qualified retirement accounts should be included with earned income instead of reported separately. As a separate reporting category, it gets counted as earned income anyways, but it also can be identified as not being available to pay for education expenses (or regular household expenses, for that matter). In other words, it’s a good thing for the student and parent/s to separately identify contributions to qualified retirement accounts.
DD1 has not gotten any need based aid, she got all the same aid she’s been getting since Freshman year. Only the sub and unsub loans.
DD2 this year did get some need based aid from her school, but DD1 didn’t get anything extra. That was the whole point of my thread, kid 2 got aid but kid 1 didn’t.
I would say…do NOT ignore the FAFSA instructions. And if you have a question about them, call the FAFSA helpline. They are good at answering this type of question.
Glad you found the discrepancy.
So…this year is correct…we’ll sort of. You included the 401k contributions but not really on the right line on the FAFSA, right? Still, your overall income is the same.
It sounds like DD2’s school is more generous with need based aid that DD1’s.
Thumper 1^ No this year I followed the FAFSA directions and inputted our income on the income line and our retirement contributions on the line it called for.
That’s good. Then this year is correct.
Subsidized loans are need-based. You should report the 2015-2016 FAFSA mistake to your daughter’s school. It may very well not make any difference to the aid she should have received, but you have found a mistake on a form that you and your daughter both signed, and by doing so you and she were certifying that all the provided information was true and complete. You weren’t being intentionally devious, but now that you have found a fairly significant error, you should own up to it.
It depends on the need you have (COA-EFC). We had an EFC of over $10K last year and had a sub loan in our package. So things might not change, but you should tell the school about the error.
This happens alot because the 401K contributions are not listed on the tax return. Some schools require W2s to be sent in as well, because they are listed on there in box 12.
I read the same book. The question being talked about is not the total income for the parents, but the question when you break out each parent’s income. The author claims the purpose of that question is to compute the fica/medicare amounts paid. Before I read this, I wondered why they had the question to break it out by parent. This does explain it (if it is accurate). Since you do pay fica/medicare on 401K contributions, he’s saying it makes sense to include those amounts in this question for each parent. These amounts do not adversely affect your EFC. In fact, I believe the higher these values, the lower your EFC because the fica/medicare get subtracted out. I played around with some net price calculators and agree that there is no negative impact to increasing these values.
Right…these items do NOT affect EFC…but this person did NOT include the 401k contributions at all on the line that DOES ask for them. And that DOES affect EFC.
https://fafsa.ed.gov/fotw1617/help/parentIncome.htm
^these FAFSA instructions specify which lines on your tax return to add up to arrive at the “income from working” number.
Since 401k contributions are listed nowhere on the tax return, you cannot include them in that field.
If you don’t want to have that problem of 401k contributions not being taxed but having to be included as untaxed income on FAFSA, then don’t contribute to the 401k. Then your “income from working” will be higher.
^ I’m not sure what you mean by “If you don’t want to have that problem of 401k contributions not being taxed but having to be included as untaxed income on FAFSA, then don’t contribute to the 401k.”
In either case, 401K money will be considered on the FAFSA. In one case, as part of your AGI. In the other case, as part of untaxed income. As far as I know, both cases have the same affect on your EFC. Either you want to contribute to the 401K or not, but that decision should have nothing to do with the FAFSA form. However, if you want to get into how taxes impact your EFC and how 401Ks impact taxes, then that’s another issue and certainly not part of this conversation.
First, thank you, @BelknapPoint: “For clarification, a 529 plan in the student’s name needs to be reported as a parent asset.” I deal with graduate-school students, and they DO have to report their own 529 - I am always telling students they have to report it, and I didn’t even stop to think about this being a dependent student.
As far as where to put things on the FAFSA … put them on the line the FAFSA instructions tell you to put them on. That is why the FAFSA instructions tell you to put them on that line … because that is where you are supposed to put them. Some author says put them elsewhere? He says that “other aid professionals agree?” Sorry, but the regulations trump what the author and the other aid professionals want to believe. Just follow the instructions.