<p>The EFC thread has brought up a lot of questions for me that probably belong in another thread so here goes. My oldest is in eigth grade but it seems to me advance planning can't hurt. </p>
<p>I'd love to know what you wished you had known earlier regarding financial aid. Anything we should do now before it's too late? </p>
<p>My husband and I are pretty non-complicated as far as our taxes go, not self-employed, no farm income, etc. Our money is in our home and retirement funds and some cash. We're in that upper middle class zone that probably won't receive much need based aid but every little bit helps. How do financial aid calculators assess the value of one's home? Is it expected that parents take out home equity loans? </p>
<p>Our parents are modestly wealthy, but I view that as their money, not necessarily to be spent on our children's education. Do financial aid calculators share that point of view or are their assets a consideration? </p>
<p>I currently work part-time. I could make more money by increasing my hours. Do financial aid officers look at that and take that into consideration? </p>
<p>I've read that some people have experienced a big difference between the estimated financial aid calculators and what the FAFSA determined was their actual EFC. Is there a way to get a more concrete idea of what to expect so that decisions regarding ED and such won't lead to disappointment down the road?</p>
<p>There is a quick calculator on the Financial Aid Forum. You can get some idea what the schools expect. As for the home, it really depends on the colleges. Look up Profile and find out what colleges use it. Most (other than some ivies) take into account home equity. Any assets in the kids names are assessed at a whopping 35%. Grandparents are not hit up though they do ask on PRofile. Selling stocks during a threshhold year or getting a payout is not a good thing, because you are assessed the realized income on it AND it is assessed as an asset.</p>
<p>I don't think YOUR parents (you, as the parent) are taken into consideration. Your child's education is your financial responsibility, no matter how wealthy your extended family is. I think the value of your house is based on what you say it is. Maybe a check is done on average prices in your area. I don't know. Maybe there's way to check, I don't know. Better to try to be as close to reality as possible. Home values are going crazy in my area.....my cousin bought her home last year for $130k and her neighbor (same home - rows- connected homes) just sold her home last week for $329k. It's like that all over Philly now, which has been vastly undervalued in years past. The problem is, if you sell, there's nowhere to go unless you pay through the nose! </p>
<p>If you have no young kids at home it will be interesting to see if your "potential" income is factored, since it seems that you are earning less than your potential, today. </p>
<p>It seems that the picure can swing $5k in each direction....more or less....from what the calculators show you.</p>
<p>On the grandparent front I'll share what I've recently learned. If you will inherit their money someday, and they are willing, you should talk to a financial/trusts planner about how they can contribute tax free. For example, starting to gift you and your husband the maximum each year should produce a nice fund by the time your kids begin college ($44Kyr), and the money that would have been taxed later will be transfered tax free. they can also gift each kid but you have to understand 35%/yr. will go directly to the college. No problem if you qualify for no financial aid. They can also pay tuition (but not room and board) directly, again transfering money tax free. Not a bad estate planning exercise.</p>
<p>I was a stay at home mom for quite awhile and didn't go back to work full time until my oldest was in 6th grade. When I did that, rather than spending much of the money I was making, we a good chunk of it away into savings. Every year we would increase our savings by $1000. When it came time for the oldest to start college, we were saving over $1000 a month. We quite saving and started putting that towards the tuition and have money in the bank that we have started to take out now that we have 2. We certainly have not saved as much as we should have, but by starting to save money now, however little it might be, when you do have to start paying tuition, you don't have to scramble around trying to figure out where it is going to come from. You also won't be having to give up so much in order to pay the tuition bills. I have to confess that some unexpected expenses occassionally derailed our savings goals for short periods of time, so we certainly weren't perfect with our plan. And we didn't end up saving as much as we hoped, but we did find that our finances have not been turned upside down by kids going off to college even though our income has not risen substantially in recent years.</p>
<p>one other strategy is for the grandparents to contribute to a 529 (since some states provide a tax deduction), but the owner is considered grandparents and the funds are NOT included in efc.</p>
<p>I think putting college money into a Roth IRA is a good idea as it is protected under IRA rules and the interest is also tax free and not included in your income. I would then borrow the tuition amounts from the PLUS loans rather than withdrawing the amounts out of the IRA to pay the tuition, as that amount would then be considered as income the following year. When you are finished with kids in college, you then have the IRA money to pay the loans, and you'll have had a nice start on them as you'll have been paying as they were in college as well.</p>
<p>MomofFour - We do not qualify for financial aid at all, EFC>tuition. But, depending on selectivity of schools your kids will be focusing on, I recommend learning - through this Board, college websites, etc. - of those excellent schools which offer higher-than-usual amounts of merit aid (Tulane is a typical example). Or schools so well-endowed that their tuition is comparatively low for their caliber of school (Rice). If any of these are relevant to your S/D, visit them and see if they fit. </p>
<p>Corollary: if any of these "high merit" are of interest, strategize which might be most likely to give your S/D an award (based on geography, special interest of your S/D etc.)</p>
<p>Thanks for the advice. I did the calculator and as expected, our EFC is high. We do have the advantage of my being able to increase my hours, but with four kids to educate, we'd definitely be interested in merit aid. I've been told it's a good thing they're close in age. When I have three of them in at the same time, I take it the EFC covers all three? Do colleges split that evenly?</p>
<p>EFC is EFC, regardless of the number over which you spread the money. Remember, though that many schools gap - don't meet all need, and others just offer loans. You need to understand the school.</p>
<p>One thing many people fail to do is liquidate assets you will need for college expenses early enough. For example, let's say you have a chunk of stock with good appreciation you plan to sell. The year you sell it, a portion of any gains will count as income for fin aid purposes, even though your net asset base has decreased, due to the tax hit. Unfortunately, you need to do any asset sales two years before in order to have it stay off your income tax return.</p>
<p>How is the EFC divided between schools? Say I have three kids at expensive schools at the same time, and our EFC is $30,000. Do we pay $30,000 towards one school and are left with huge need at the others, or do we pay $10,000 towards each school? If one child is at a school which meets full need vs. one that doesn't, it could make a big difference.</p>
<p>Is there any need to fill out FAFSA? Two different calculators put our EFC at about 62,000 or so. </p>
<p>Frankly we don't need aid. If we didn't fund retirement plans we could easily pay by the month at whatever school. We are 56 and 55; so we prefer not. Son plans on going to grad school. We skipped the whole elite app process. He is probably going to UT Austin. We applied to one or two other colleges known for great merit awards and one NMF full ride school. . Wouldn't mind merit aid. Is it necessary to fill FAFSA out for such aid as National Merit, or school merit aid?</p>
<p>Call the schools, texdad, and ask if there are any merit scholarships or programs that need the FAFSA. The other consideration is if the school will not take financial aid apps if your son does not start out filing financial aid. Some schools have a sit out period though I doubt UT would. The reason you should talk to the financial aid director is that sometimes as state schools, there are special awards, internships, etc that need for the student to have been cleared by FAFSA. By simply having an eFC calculated, it makes your son eligible for government money of all kinds. It confirms that hes is registered for the draft if he is 18, that his citizenship status is good, that he is not on any federal lists for other issues including previous loans that may have been ditched. It serves as a clearing house of sorts. Even private schools like NYU have workstudy or other government subsidized internships that can be of great interest to a student but they have to have filed FAFSA to be eligible. My friend has an EFC at about your level (a big ouch since Tisch costs $50K+ a year) She found a wonderful workstudy type internship (paid) for the summer, but only kids who had filed FAFSA were eligilbe for it.</p>
<p>I would not recommend setting up a UGM fund. Even though there are tax advantages when your child reaches the age of 16(?), a very high percentage of that fund is figured into the EFC calculation. I suspect the same thing goes for 529 designated funds too.</p>
<p>I believe if the <em>grandparents</em> own the 529, it is not figured in. All my kids received $55,000 529's from their grandparents (you can collapse 5 years of the "maximum-gift-$11,000-a-year rule" in to one year).</p>
<p>that is correct, a 529 setup by grandparents is technically owned by grandparents and not part of the kids or parents 'assets' for purposes of efc calcs</p>
<p>I believe there was a ruling that 529 funds are considered parental assets, so only 5% counts in the formula - same as non tax sheltered assets.</p>
<p>if you have any info on that ruling, pls post it. I've been searching for awhile and can't find anything. I realize that the Bush Admin had proposed changing the law, but I had not heard that it had passed. </p>
<p>What (used to?) make the 529 a great generation-skipping tool was the fact that the owner, in this case grandparents, retained 100% ownership and control of the account, with full rights to change the beneficiary at any time, and, even to completely reclaim the funds for grandparents full use (say, if Grandson Johnny gets uppity); of course, the grandparents withdrawl is subject to a IRA-like 10% penalty. Thus, when the law was first passed, the DoE could not argue beneficial ownership on behalf of the student/parent because they might never see the funds.</p>