Absolute shock and desperation over financial aid letter

Paying for College
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<p>few things:</p>

<p>KayF - you wrote "It may irk you that teachers and professors get this deal but it is NOT the same as a barter. If you tried to report someone to the IRS for this, you would be laughed at.”</p>

<p>Don’t know where you get that idea but I could care less. This is all academic to me.</p>

<p>The caveat in section 117 is that it deals with qualifies scholarships as fringe benefits and includes this little tidbit:</p>

<p>"The qualified tuition reduction must not represent payment for services” </p>

<p>Yes if your kids get 30% off because you are a teacher or employee that is not taxable but the word employee does in itself have definitions by the IRS and many other fed and state agencies. It is explained a bit better in:</p>

<p><a href=“http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf[/url]”>http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf&lt;/a&gt;&lt;/p&gt;

<p>xiggi, you have over 9800 posts so I’m sure at one point or another you’ve strayed off topic, for example, telling me about volunteers at some school in Dallas and wasting 2 seconds of my time I’ll never get back :-))</p>

<p>cpt - yup sometimes folks are better off not volunteering information.</p>

<p>It was fun but I now have a headache (not your folks fault, just an allergy to prolonged exposure to IRS publications).</p>

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<p>Sagiter, </p>

<p>The sentence you quote does not appear in the law, Section 117(d). It’s pretty clear to me that many people regard tuition reduction plans as payment for services and in fact stay in jobs that they quit the day their kid graduates.</p>

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<p>Apologies, you are right, I got my publications mixed up, the sentence refers to this publication:</p>

<p><a href=“http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf[/url]”>http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf&lt;/a&gt;&lt;/p&gt;

<p>Which is just as powerful as the ridiculously written article.</p>

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<p>Sagiter, neither cite refers to the statute, i.e, the LAW. YOU are looking at pamphlets. Not the law. Here is what the LAW says - </p>

<p>(d) Qualified tuition reduction.
(1) In general.
Gross income shall not include any qualified tuition reduction.
(2) Qualified tuition reduction.
For purposes of this subsection , the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) for the education (below the graduate level) at such organization (or another organization described in section 170(b)(1)(A)(ii) ) of—
(A) such employee, or
(B) any person treated as an employee (or whose use is treated as an employee use) under the rules of section 132(h) .
(3) Reduction must not discriminate in favor of highly compensated, etc.
Paragraph (1) shall apply with respect to any qualified tuition reduction provided with respect to any highly compensated employee only if such reduction is available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees (within the meaning of section 414(q) ). For purposes of this paragraph, the term “highly compensated employee” has the meaning given such term by section 414(q) .
(5) [sic (4)] Special rules for teaching and research assistants.
In the case of the education of an individual who is a graduate student at an educational organization described in section 170(b)(1)(A)(ii) and who is engaged in teaching or research activities for such organization, paragraph (2) shall be applied as if it did not contain the phrase “(below the graduate level)”.</p>

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<p>You know, every time I scan through the thread titles in the Financial Aid board and see this thread, I get more and more annoyed. A poor financial aid package from a first choice school is not desperation–it’s disappointment. Desperation is losing your home and all your possessions in the tsunami and living in a shelter. Desperation is knowing your spouse is being exposed to radiation while working at damaged nuclear plant. Desperation is when your son is shot while demonstrating at a rally in Syria. If you have $300,000 in investments and your kid is an NMF on her senior trip to Italy, you aren’t desperate. Fairfield’s daughter has a wealth of options open to her, as so many on this thread have pointed out.</p>

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<p>Languages to forget, because so many native speakers also speak English: Urdu, Hindi, Farsi.</p>

<p>Languages they say they need, but for which they are NEVER HIRING, it seems (if you find jobs please send me a PM ASAP because we are looking): Uzbek, Tajik, Dari, Russian.</p>

<p>Mandarin, Turkish, and Arabic are pretty much the only ones I’d count on and no, you don’t make jack with those or a FS job. And yes, everyone I know in the FS (probably about 10 people on my facebook page alone) was military, Peace Corps, or a missionary (in many cases, more than one of the above).</p>

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<p>I apologize for all of this :slight_smile: it’s actually getting amusing at this point.</p>

<p>IRS LAWS only mean what the IRS defines them to mean. This publication:</p>

<p><a href=“http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf[/url]”>http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf&lt;/a&gt;&lt;/p&gt;

<p>is titled:
"Taxable Fringe Benefit Guide</p>

<p>FEDERAL, STATE, AND LOCAL GOVERNMENTS
THE INTERNAL REVENUE SERVICE"</p>

<p>in the introduction to this guide is this statement, boxed in bold caps:</p>

<p>“NOTICE
This guide is intended to provide basic information on the subjects covered. It reflects the interpretation by the IRS of tax laws, regulations, and court decisions. The explanations in the guide are intended for general guidance only, and are not intended to provide a specific legal determination with respect to a particular set of circumstances. Additional research may be required before a determination may be made on a particular issue. Citations to legal authority are included in the text. You may contact the IRS for additional information. You may also want to consult a tax advisor to address your situation.”</p>

<hr>

<p>There is a huge difference between a quoted law and it’s interpretation by the IRS. The reason is that the law is written by bureaucrats who for the most part don’t have a clue. Then the IRS defines the law. Then there are court cases and audits and arguments with learned testimony by people who have a clue and the law is defined. The IRS issues these publications which interpret the law.</p>

<p>So in the publication listed above it says:</p>

<p>"Qualified Tuition Reduction - Section 117</p>

<p>Free or reduced tuition for employees of educational institutions may be excludable to
employees. The term “qualified tuition reduction” means a tax-free reduction in tuition
provided by an eligible educational institution. At the undergraduate level, the education
need not be at the same institution where the employee works. Whether a tuition reduction is a qualified tuition reduction, and therefore excludable from income, depends on whether it is for education below or at the graduate level. The qualified tuition reduction must not represent payment for services."</p>

<hr>

<p>I didn’t make this up :-)) This is how the IRS defines the law you quoted.</p>

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<p>Sagiter. The law is written by lawyers. Generally the Joint Comm. For Taxation (JCT) lawyers (which refers to the Joint Comm of House and Senate dealing with tax matters). The bureaucrats at the IRS interpret it. The IRS does not define the law, the courts do.</p>

<p>Sometimes attorneys for the JCT refer to IRS auditors as clueless. Meanwhile, I can not find one case where the IRS presses this issue where the tuition was for a child (as opposed to an individual performing services and himself/herself receiving benefit).</p>

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<p>Great. This is college message board, not a tax one. Doesn’t matter a whit what the IRS considers the situation. The problem is how the colleges view it and when it comes to their own methodology, they can consider it any way they please.</p>

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<p>I think you may be making an assumption about the timing of that information that is not all that clear in the OP’s postings. </p>

<p>We don’t know when or how the OP reported the information about the barter arrangement.</p>

<p>It is possible that she provided that information prior to receipt of the $51K COA award last week – but if so, that implies that she had previous conversations with the financial aid office beyond the one in which someone supposedly quoted the $9000K “max” COA figure to her. But that still doesn’t work out mathematically – and it also would mean that the OP neglected to tell us that the financial aid questions & discussions had been going on previous to receiving last week’s awards. Unless the barter arrangement is simply something she wrote about in the CSS Profile in the space at the end for extra comments and information. </p>

<p>I’d note that if the tuition is $21,000/year – then at most the barter arrangement reflects $21K in annual income to be considered in writing the financial aid award. At the OP’s income level, that could increase her contribution by around $5300 (at least based on FAFSA). So that still doesn’t bring the amount up to the $51K quoted in the opening post.</p>

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<p>I agree. Presumably, the daughter was not adopted at a late age. So, what did the parents do to prepare to pay for her education during the past 18 years? Maybe part of the $300,000 inheritance was intended to pay for college, and the mom would rather keep it for herself.</p>

<p>And now they’re spending money in Europe, yet are worried about how to pay for college. Counting your chickens before they’re hatched is what has happened. So, it looks like the only option is to backtrack and try to get those full-rides reinstated or else do like most people do and not attend an elite university.</p>

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<p>My guess at this point is that there were a lot of red flags on this financial aid application, and perhaps there have been one or more inquiries from the financial aid department over the past several months that the OP forgot to mention to us. Perhaps there was a letter asking for info re the tuition of the private school, and a letter asking the value of the investment – to which the OP responded in ways that she thought would be helpful for her at the time but actually worked against her.</p>

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<p>LOL! No assumptions on my part calmom; I just wanted to point out something you had missed, buried in the hundreds of posts. I’m glad you agree with me that we don’t know when or how she reported it… but we do know that they brought it up as their first point after she spoke to them so it sounds like it was part of the calculation. (I agree that we don’t know whether it was part of a conversation, part of some other communication with this individual school or on the Profile. That is exactly my concern: <em>if</em> it was on the Profile, it would be information available to all schools and they may-- not will, but may-- interpret it in a way that’s not to her advantage.) </p>

<p>As to the rest… I agree with you that they may have imputed assets. I also cannot rule out that they considered her daughter’s social security. And, frankly, I cannot discard the possibility that there was a bit more back-and-forth than we’re aware of.</p>

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<p>I am definitely starting to think there has been more back & forth.</p>

<p>Here’s my current guess:</p>

<p>1) The CSS Profile has a space on it for parents to write information about tuition paid to private schools for younger children. Unlike FAFSA, Profile schools will sometimes subtract out expenses for private schools from income. My kids didn’t attend private schools, so I have only a vague recollection of where that info might be entered on the form. But I’m thinking that maybe the OP listed the tuition at the d’s private school as an “expense” on the Profile.</p>

<p>2) I also suspect that on both FAFSA & Profile she listed -0- assets.</p>

<p>3) Now I am guessing that somewhere along the line the financial aid office asks her for documentation of (a) the private school tuition, and (b) the assets that are producing all that interest income. </p>

<p>4) Another guess: she replies back explaining that the tuition was paid via “sweat equity”, and that she in fact has no assets, because the interest income is from loans, not savings. </p>

<p>5) Financial aid office sees tuition as a benefit, rather than a deduction, so adds that to her income, converting 2010 income to $53K, rather than $32K. This results in an AAI of $37K and parental contribution from income of roughly $11,500. </p>

<p>6.) Add in $4500 for the home equity – now you are at $16,000 parental contribution.</p>

<p>7) Either the college doesn’t buy the 10% interest story, or the OP fails to give them the full explanation – perhaps because OP failed to understand that the money owed to her was an asset – and the college ends up attributing a $600K asset value to the $300K. (Assuming 5% rather than 10% interest). That adds another $33K to the family contribution and gets us up to $49K.</p>

<p>8) We know from the OP that the financial aid award also required a $1700 contribution from the d. – so that gets us up to the $51K ballpark figure we are looking at.</p>

<p>9) Meanwhile, the OP has been plugging along thinking she’s a pretty savvy woman, having answered the financial aid inquiries in a way to show how poor and hard-working she has been – so naturally the financial aid award results in “shock and desperation”. After all, she told them that she had no assets and worked off the tuition costs for the private school… how could they possibly have increased her EFC based on that info?</p>

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<p>I agree and that is the scenario of sorts I suspected from the first page or so of posts. It’s the only path to get to the $51,000 number. She might be able to negotiate her way to zeroing out the barter situation and she may be able to validate the $300,000 but its tough to see (from this far away vantage point) getting down to $9000 (including staffords).</p>

<p>I’ve been curious (to myself) how it would play out if you “invested” your money in someone’s business and how that would be viewed and treated…would Profile schools give an inputed value to a percentage of that business based on what went in on Day 1 and what that is worth on year X, would they see it as a “business asset”…so many scenarios that are totally separate from the OP and her “problem” since we have no idea whatsoever what her arrangement was with the “businessmen.” That’s why this thread is so interesting…</p>

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<p>For a school such as GU who exclusively uses the CSS Profile, is the whole point of filling out the FAFSA to get the Federal Pell Grant?</p>

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<p>I don’t know of any school that exclusively uses the Profile. Schools that use the Profile ask you to fill out the FAFSA to determine eligibility for Pell, SEOG, Work-Study and federal loans.</p>

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It is my opinion that people who are capable of working and contributing to their own families should do so. We seem to disagree on that. You view the fact that earners will be expected to contribute as a problem to be avoided - by not earning. I believe that society would benefit from more contributors, and fewer free riders. But again, we disagree.</p>

<p>Anyway, in this case the woman is in fact exchanging her labor for benefit, and I’m glad that the college seems to expect that it will continue.</p>

<p>I made no statement about presumptions of financial aid calculators - that’s your own personal issue. Or should I say, that’s YOUR own personal ISSUE. :)</p>

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<p>How do you know the city that Fairfield lives is about 2 hours away from Des Moines?</p>

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<p>But she did make $81k over four years, which she traded for education.</p>

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<p>In the context of this conversation, I count four logical fallacies in this statement.</p>