Advice Complicated Blended Family EFC/ FAFSA??

Paying for College
1

Hello,

A neighbor and church member have both come to me with ?s and I’m a bit stumped on how to respond. I’m a retired professor helping with essays- but not sure about these two financial aid situations.

Any advice appreciated:

Situation A:
Married couple files separate tax returns as Mom has rental properities - -second marriage for mom.
Mom has child # 1 freshman at Howard, and child # 2 freshman in high school.
She filed her FAFSA generating an EFC of $ 19k
Seemed high to me as she earns only $ 83k filing as head of household separate return
I reviewed her printout and found $ 100k on rental investment properties-- she says they’re underwater.
the biological father disappeared years ago- not in picture.
Step Dad earns $ 93k - his household size is three-- he’s never been married - his son a senior in high school and his mom is also on his tax return.

When I run their data through FAFSA4caster I am seeing with $ 83k 3 person household rental prop at $ 100k an EFC as projected.
??? since her tax return shows loss on the rental properties- safe to list a more reasonable lower estimate of investment income?
If I run the estimate to 0 I get an EFC from 19.1 down to 14.1 - so yes, 5%
??
Bigger question- for next year, both parents of thisremarried couple will be in college.
Should they file jointly on taxes and EFC

Since stepparetnts’ income must be included-- how do they handle this on the FAFSA when they are filing separate returns/

Confused?

They want to revise the 2016-17 FAFSA for the kid at Howard-- the 100k underwater investment seems to be the problem.
Is there any way to verify the value of real estate investments?

Situation B;
Church member divorced and remarried. They both have high school seniors. The situation is so complicated – everyone lives in separate homes and files their own taxes.
If stepparents aren’t living in the same household address - although married-- does the income need to be included on the FAFSA–
This would impact both kids-- indirectly.
Couple 1 divorced.
Mom remarried, dad did not. Dad is a high income physician.
Couple 2 divorced
Dad remarries mom from couple 1. Mom remarried in couple 2 as well .
Both couples have to file FAFSA-- ?
Clueliss which parents - biological or step will be impacted if at all?

Thanks

2

The FAFSA is filed by the student. The student must use the information parent he lives with the most. For Situation B, I’m not sure who the student lives with, but when he figures that out, he uses that parent and that parent’s spouse’s tax information, no matter if it is filed with the IRS on one form or six. Yes, the income of a stepparent who lives in a separate home needs to be reported on FAFSA if still married (not separated or divorced) on the FAFSA as they are in the same household.

For Situation A:
Again, if they are married, it doesn’t matter if they live in the same house. If they are married, the FAFSA requires the income from parent and stepparent. Another problem will be that they own two houses - the house he lives in and the house she lives in (plus the rental houses). Only one is excluded from the FAFSA assets. The family size would go up, but the income and assets are going to go way up. It’s not optional how you file FAFSA, and you don’t get to pick like you do filing status on taxes (although I’m not sure that HOH is correct either if she’s married).

Will it really matter if the EFC drops from $19k to $14k? Did the student get any need based aid? Even if it does drop the EFC, it might be better just to appeal directly to Howard as it could use professional judgement to make any adjustments needed.

3

If Mom earns $83,000 and she is married to step dad who earns $93,000, then their income for fafsa purposes is $176,000…not just $83,000 for the mom. Her tax filing status doesn’t matter one but for financial aid purposes. What justification does she have for filing HOH? She has to meet certain requirements to do this.

She also owns rental properties? The rents from those rental properties are considered income, I believe.

Again…TAX FILING STATUS has nothing to do with financial aid filing status. If she is married, the step parent income and assets MUST be included on the FAFSA.

For situation B…yes…step parent income needs to be listed even if living in separate households UNLESS they are on the way to divorce.

Here is how fafsa gets filed…the custodial parent needs to be determined. This is the parent who the child resides with 51% of the time…or more for,the 365 dats prior to submitting the fafsa. The custodial parent and spouse income and assets MUST be included on the fafsa. It doesn’t matter at all who declares the kids on their taxes.

Now…if these kids apply to schools requiring the Profile, you may find that the non-custodial parent Profile will also be required.

4

Thanks

I’ll clarify and see if that changes things.

For Situation A - There are no other parents in the situation.

These are the custodial parents and so both children would report their biological parent and the stepparents’ income. There is only one house in that situation. Mom has rental income (a lost on her return).
It’s a six person household
Mom files as Head of Household.
Howard gave zilch- gave them a Parent Plus loan- no aid whatsover.
The appeal to Howard is coming-- there is no way they can sustain borrowing at this level- no grant money awarded.
So at minimum- getting the $ 100k valued as a quick sale rather than at market value would help.

Situation B
50/50 shared custody all around.
Child A lives half time with each of his biological parents both of whom are remarried.
We will use lower -earning mom as custodial but once we add in step-dad’s income even though he lives elsewhere this is terribly bizarrre- . What’s the household size- do we add in the children of the step dad since stepdad’s income is included?
For Child B - she spends more time with her mom- who is not remarried. No step dad-- but since child A will get to write 2 in college on his FAFSA since stepdad’s income is included (he’s second husband to child a’s mom) does Child B also get to write 2 in college on her FAFSA since her biological dad’s income is being thrown on Child A’s FAFSA?

Thanks

5

Please clarify. In situation A does the mom earn $83,000 and the step dad $93,000? If so…THIS is the reason the school gave them NO need based aid. Howard doesn’t guarantee to meet full need. Even without the rental income…the total income of mom and step dad would net a fafsa EFC of over $50,000 a year.

For situation B…if a child A really lives equally with both parents, the parent who provides more support is the one who must be listed on the fafsa. Usually this is the HIGHER income parent, not the lower.

You can only include in the household size kids who actually reside in that household.

For child B in that second situation…do the step dads kids reside with the mom? If NOT they cannot be included in her household size.

Each child files their own fafsa and it uses the data for THAT child.

In some families…one kid lives more with one parent…and the sibling lives more with the OTHER parent. Their custodial parents would NOT be the same parent.

6

If the rental property is really underwater (debt on the property is greater than the property’s market value) as you say in your first post, than it does not get reported at all as an asset on FAFSA.

You don’t just get to choose which parent will be reported as the custodial parent. If the student really does spend exactly the same amount of time with each parent in the 12 months immediately prior to filing the FAFSA, the parent that has contributed more financially for the student’s support in that 12 months is considered to be the custodial parent, and that parent’s information must be reported on FAFSA.

7

@WifeofaVarmin

How do you get $83,000 total in one on situation A if the mom earns $83,000 a year, and the step dad earns $93,000? You can’t just decide to exclude the stepdad income from the equation unless they are getting divorced.

8

Situation A is clarified-- I found an error- she submitted FAFSA writing “divorced” – and she is remarried-that’s why they ignored the stepfather’s income- . The investment added only $5k to the EFC
But I’m stumped- -even in the FAFSA Forecaster with no cash and investmetnts as a single parent- how can the model yield $ 19k as an EFC on a family with AGI of $ 85? That’s not even affordable!

Situation B
Stumped again - Child A gets saddled with income of his step parent and there’s a double count - because that step parent is also the custodial parent of Child B.
Since they never live together - the EFC wouldn’t split in half - but one man’s income ends up on two different FAFSA reports. This is why I am wondering if in at least the one situation of the remarried parent with the step dad we can count 2 in college as that household? what a mess

9

If she’s married, how is she filing as Head of Household? Do she and her husband not live together?

10

If custodial mom’s AGI is $85k and her husband/student’s stepfather has an AGI of $93k (as you explain in your first post), that means that the family AGI is $178k – not $85k. Also, if the “investment” is underwater, it shouldn’t add anything to the EFC.

11

Read post 9 again…and again. The fam,y income is much higher than $83,000. More than double that amount.

No point in wondering about the fafsa with the wrong marital status. THAT needs t be corrected…because she is MARRIED. And the school will expect to see her husband’/ income. She will also need to provide documentation showing why and if she can file as HOH. It’s possible that this is correct…but it takes special circumstances which she MUST meet.

Why are you stumped by situation B? The student uses HER custodial parent and spouse. The only members of her household can be folks who actually live in that household sufficient time. You can only put members of your household who are on college…not members of someone else’s household.

Why is that confusing?

12

No, Howard is NOT affordable. Single parents who make $85k per year look for cheaper schools for their kids, look for merit aid. At that income (assuming it is the AGI), the parent wouldn’t even qualify for the full tax credit of $2500 as the AOTC starts phasing out for singles at $80k.

You, and your friends, are in the ‘first stage of college financing grief’ - denial! Yes, the EFC for an income of $85k can really be $14k (your $19k includes the assets). Yes, the student really won’t qualify for pell grants. Yes, most schools really do expect you to pay the tuition or borrow the money to pay it OR don’t go to that school. Howard is a private school. Private schools cost a lot of money.

If she is filing the FAFSA as divorced and she really is married, that is a fraud. (Yes, she’s divorced from the bio father but she’s remarried.) The family status for FAFSA is NOT the same as for the IRS. FAFSA is centered around the student, the parent the student lives with, and the household of that parent (stepparents, siblings).

You can do all this, but if the EFC is more than $6000, you aren’t going to get much federal aid (no Pell, maybe some SEOG, probably a subsidized loan but they may have that anyway. All this adjusting and divorcing and financial gymnastics might not result in any additional need based financial aid.

13

Unless the kid had the stats to get merit money, Howard is not know for generous need based financial aid.

At 83k a year just using the mom’s income, child A would have only been eligible for loans unless child A could get merit money. Howard essentially gave child A an admit-denial; admitted kid based on academic but with no need based/merit aid.

For situation A

It sounds like child A lives with mom - custodial parent who makes $83k and step dad who makes 95K in addition to mom having rental property.

Child 1(college freshman) will get no need based aid from Howard.

It seems like Child 1 was not in the position to get merit scholarships from Howard.

If Howard is unaffordable, then Child 1 will need an affordable option if that means coming home and commuting locally.

Stepdad’s income and assets must be on child’s a FAFSA because stepdad is part of the household and probably contributes to the household (essentially freeing up monies).

If child 1 (mom’s child college freshman) and child 2 (high school freshman) are both living in the same household, then both incomes will be used

Since 2nd child is a high school freshmen, there will probably not be a time where both kids are in college together.

Advice for child 2 ; study hard, get the best grades you can, study for the SAT/ACT (get tutoring if you need to) in order to position yourself to get guaranteed merit $$ (the schools that give merit today, may have a different requirement when child 2 applies to college 3 years from now).

If Child 1 will still in undergrad when Child 2 starts college would be 2 children in college.

Unfortunately, they still will not be eligible for any “free” money (Pell, Seog, FWS).

For situation B

It sounds as if one child (A) is the child of the mom and the other child (B), is the child of the step dad.
Are both of these kids currently HS freshmen

Who does child B live with?

Child B (stepdad’s child) should be using the income/assets of the parent s/he lives with the most.

If child B lives with both parents equally, then the custodial parent will be the one who provides the most support. In this case it would be dad and step mom, which again would result in no federal aid other that loans.

If child A (mom’s child) and child B (stepdad’s child) are both living in the same household, then both incomes will be used (their respective mom and dad along with their stepmom/stepdad). Child A is not going to be eligible for any Free monies.

If Child A and Child B start college together and are living in the same household, would be 2 children in college.

Unfortunately, they still will not be eligible for any “free” money (Pell, Seog, FWS).

Unless students can get merit money, fafsa only schools give very little in terms of need based aid. If student(s) are looking at deep pocket schools those schools will usually ask for the CSS profile and non custodial profile. They will then ask for the income and assets of both biological parents and their respective spouses.

For situation B, both kids should be studying hard in school, practicing and studying for the SAT/ACT, and the PSAT (which drives national merit $$) in order to position themselves to get merit money. Or in a household with $176k, start, cutting back on expenses, try living on one salary and banking the other salary to help offset some of the cost of having 2 in college at the same time.

14

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Mom files as Head of Household.


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What??? If she is currently married and living with her CURRENT husband, then she can’t file as HOH.

15

Thanks Everyone
I’m not their acct but had the same reaction-- HOH is an error, and the FAFSA was also an error as divorced.

Situation B – I feel badly for Child A - b/c the step father income impacts child A as he is married to mom and it’s also counted for his own biological daughter for whom he has 50/50 custody.

16

I haven’t seen this mentioned and defer to other posters but I believe to the extent that Family A is looking at more schools be aware that bio dad’s income may STILL be relevant/necessary to add even if he isn’t actively involved or financially involved. That mom has custody and kid doesn’t see dad much/at all may require family to try to get a non-custodial waiver.

17

Well, advise the Situation B folks that the mom can’t file as HOH and her FAFSA will get kicked back at some point.

FAFSA didn’t put that she’s divorced, she did. May have been an error, or may have been intentional because she wants to hide that she shouldn’t be filing HOH.

18

Also…if any of these custodial parents received child or spousal support in 2015, that also MUST be included on the financial aid application forms.