A Question about Financial Aid and EFC

Paying for College
1

<p>P.S. This school uses the Institutional Methodology.</p>

<p>I realize this information is a bit personal but as I can remain anonymous I don't think it'll be a problem. I have a question regarding financial aid and the calculation of my EFC, particularly the determination of AGI, for those that may be knowledgeable in this matter. </p>

<p>At this time, my parents' tax return shows an AGI of $36,500. My father owns a business and my mother is a realtor that writes off enough so that she shows no income (which is probably relatively correct). Our family has around 15k in savings/checking, we own our own home (no debt, appraised at around 300k), and we own some other properties, though the debt on them makes them virtually valueless for EFC purposes. The one thing that gets me (and I think gets us on the EFC) is a report of $65,000 "other income" on our tax return. The school wondered about this and I asked my father and our accountant. As my dad owns a business in construction yet has purchased (and thus makes payments on) the equipment (heavy, expensive) in his own name, he receives monthly payments from his company which he uses to pay the monthly notes on his equipment. </p>

<p>Even then, I feel the school may have misunderstood or not cared to calculate the funds as such. It is not really income at all as it merely passes from one hand to another, yet the only way I can calculate my EFC to be anything close to what the school has determined (32k) is by using some income value far greater than 36k, but still not quite 100k (which is what is would be, I assume, if they used the 36k +65k). I am considering asking the financial aid officer about this, though not unless I have some sort of case, or at least having our accountant contact the office. I don't want to sound like a fool though, and so if this EFC (32k) looks normal for someone with our income and assets, I won't persist. It just seems quite high considering the circumstances, unless the 65k truly is supposed to count towards my EFC, regardless. </p>

<p>Does anyone know if there are people (outside of school FA offices) that one could meet with to go over such details and get an idea of a range that it should be and also what should and should not be going into the calculations? Unfortunately, our accountant is great when it comes to taxes but knows relatively nothing about college and financial aid.</p>

2

<p>hopefully someone with more knowledge will weigh in on this -- but I do know that small business owners and self-employed people (which both your parents are) are usually not allowed the same deductions from income that you would take when filing income taxes. They generally have far greater EFCs than someone with similiar income and assets, but not self-employed. </p>

<p>As far as the "other income" -- I would imagine that the school does count that as income and probably also counts the heavy equipment as an asset. Income is money coming in -- and assets are property with value that is owned. You may need to talk with the FA office and give them some very specific details to see is your aid can be adjusted.</p>

<p>I do have a question -- did you just recently receive your FA package? this should have been a question that was asked quite a bit ago (unless you are a transfer). The school may have trouble adjusting your package at this date.</p>

3

<p>I am a transfer. I probably won't make a fuss about it now (since we've already gotten finances arranged) but wouldn't want the same thing happening next year if it's not correct.</p>

<p>I do feel a bit like a pest though since they contacted me about this at the beginning and I emailed them the explanation. I'm just concerned that it may not have been "clear enough" and I would hate for that to end up costing me in the end. It doesn't seem right, regardless, that they should count that income as actual income however, since we never really saw a penny of it.</p>

4

<p>Does your father file a Schedule C for the business or some other tax form on the business? If so, the income would be offset by costs, which would then be reflected in the 1040's AGI.</p>

5

<p>Yes he does file a Schedule C. I think that is the case as our final AGI is only 36,500, despite that other income. Still, the school asked about it and it makes me wonder whether they included it anyway.</p>

6

<p>He has equity in the equipment to the degree he has made payments.</p>

7

<br>


<br>

<p>I believe this will be considered "income"...just like cashing in savings bonds or the like. It IS income after all. Also the school may have asked because this "other income" is almost double your AGI. That is the type of thing that would raise a red flag.</p>

<p>Also, as mentioned above, the deductions taken for tax purposes are sometimes not the same as those used by the schools for finaid purposes for the self employed. Someone self employed would need to respond to this. I'm sure one question that might "red flag" some of your mom's deductions is that she nets NO income. That would pose a lot of questions, I would think. First being...why would you work a job that nets you no income? If it sounds fishy to me (just a parent) I would imagine it will to a finaid officer as well. Then again, I would imagine it also depends on the totals she is deducting as expenses.</p>

8

<p>from our experience with financial aid, is that the colleges are more interested in before tax amounts of income , rather than after misc. deductions.</p>

<p>I know that schools that use only FAFSA will find a different EFC, than Wesleyan which uses institutional methodology as you know.
No matter how you try and present it, I think that the aid office is going to expect some of the funds that "you never see" to be used for school</p>

<p>Just as if I have $60,000 in income, but put $25,000 off the top into a business or retirement, the aid office is going to expect me to recognize that it theoretically was also available for tuition.</p>

9

<p>With IM, they will also consider the assets in your house, etc, and will look hard and long at the deductions that reduce your parent's income. Since your father owns a business (per your words), he has that as an asset. I doubt if they will increase your financial aid award, but if you feel like you have a case, you should certainly speak with them about it. At the very least, they can let you know how they handle your parent's contributions.</p>