Hello all,
My wife and I are older parents of 3 high schoolers, a senior, a junior and a freshman. We have funds in retirement and a wife’s pension, along with part-time jobs that we could keep (we both have multiple jobs) to provide us a living and lower our EFC from 32k/year to 10k/year. The difference, 22k/year times a total of 10 years of college to pay for (the three kids will overlap at various points) would mean a theoretical savings of 220k over a 10 year period. While our lifestyle would take a big hit, it’s hard to not consider paying 100k vs 320k for the same “service”. Anyone else consider this approach as part of college financial planning?
Thanks for your thoughtful responses.
The overlap makes me wish I had twins to reduce the total cost.
Just because you have a lower EFC does not mean that is what you will pay. The school may gap you and you would have to pay anyhow, the difference in EFC may be made up with loans (loans for parent to co-sign), and/or the lower EFC may impact your child’s ability to be accepted at a needs-aware school. Also, too late for your Senior for next year as the EFC is based on 2016 income. Those are the practical considerations. And also too late for the Junior whose EFC will be based on 2017 income and this year is almost over.
If you have the ability, through staying employed and helping financially, to help ease the problems that would come about because of the practical considerations above, that might be a better choice in the longer term.
The timing issue that treschicos describes is real. Our family lost all of our income due to a stroke for one of the parents, but still had to pay a substantial amount for the first year of college for our youngest.
Also, let’s say, hypothetically, that your EFC is 15% of your income. You are then giving up 85% of your income. If the savings on college costs exceeds that 85% then it does make sense, yes. And you appear to have savings to sustain you, as well as your wife’s pension, so you are fortunate.
I am reminded of the parents (and they’re usually fathers, truth be told) who reduce their income or go off the grid in order to reduce their child support payments. I don’t see how this is that much different.
In any case, don’t let the FA tail wag the income dog. Be happy to be earning; there are people who don’t have the option.
Well…remember…
- The financial aid forms use prior prior tax year information...so you have already worked for years used in 2018-2019 and 2019-2020 FAFSA and Profile forms.
- The vast majority of colleges do NOT meet full need for all accepted students, and the schools that do are highly competitive for admissions. It sounds like you are counting on all three getting accepted at schools that meet full need. Those schools are not a slam dunk for admissions for anyone.
- Colleges that do not meet full need....your EFC per FAFSA will be the MINIMUM you will be expected to pay.
I’m going to paraphrase the advice given by another long time and well respected poster…
Do NOT do anything for financial aid gain that you would NOT be planning to do anyway.
In other words…if you weren’t planning to quit your jobs, then don’t do it for financial aid gain. You may find that all you end up with is…less income. No guarantee this will net you more need based aid.
No - I actually did the opposite and just went back to work part-time after being a SAHM for 18 years to help with college costs. It wasn’t a financial necessity, but it will help offset the costs of private college and quite frankly give me something to do once the nest is empty.
My husband is 63 and has worked in a very physical job most of his life. Our kid is a high school junior. Hubby has been making decent money and overtime this year so this year is what our first EFC will be based on, but it’s possible that hubby will be forced to retire due to health some time between now and when college starts. If it happens, it happens. Hopefully kiddo will get into a needs met college whose financial aid office will work with us in that case. I’m the higher earner anyhow, but it will still knock our total earnings down when he does retire.
But with the tax situation so up in the air, who knows what our finances will be in two years? I’m only trying to save money where we can because I feel like having more money and less debt should give more options.
As a parent of two full-pay students, I don’t look kindly to anyone trying to game the system.
I only came up with 7 years - how are you getting 10?
This discussion points to the need to apply to what other threads have called “financial safety schools.” Places where the family can afford to send their kids under difficult or changing financial circumstances. So make sure each of your kids has such a school on their list. Also, I would suggest looking for schools with good financial aid or merit scholarships to assist. Deadlines for such scholarships are often short! If there is extra time left over, then look for 3rd party (or outside scholarships). This is what “donut hole” families have to do. Too much income to qualify for good financial aid (ie; no-loan FA) but not enough income to comfortably pay full price especially with 3 kids. Believe me, I know that feeling! There are many other threads here on CC that address these issues.
I do not believe you would come out ahead. I think the money you make will more than offset the savings you wish to obtain by receiving fin aid.
Fin aid is so tricky. It is not as simple as you think. The EFC is more of a guide used by colleges. I doubt many only insist you pay the EFC and they will discount the rest. The reality is that college is expensive and someone needs to pay. There is just not enough fin aid money out there to help everyone.
Caveat: I know someone who did this, and then they were told that their EFC did not lower because the school expected the parent to work.
In our family’s experience, the EFC calculated by colleges that met full need was less than the FAFSA EFC, so I don’t think this as rare as many posters claim.
A 22k decrease in EFC corresponds to at a minimum, a 60k decrease in income, AFTER taxes. So from a financial perspective, it not even worth it. Of course, it could be that not working will be less stressful and give you more free time.
One way to game the system that makes sense, is to go ahead with any major expenses before your kids apply to college (for example, home improvements or cars, etc.). This way you have less assets than can be counted towards EFC.
For other reasons, I stopped working two years ago when my eldest (now a college freshman) was a HS junior. I live frugally. I drive a 10-year-old Nissan and take very modest vacations (mostly family visitations). What I found was that cutting back is hard if you are already a frugal person. Do not expect much savings as a result of “scrimping” especially if you are already live modestly. The financial strain came to a head when eldest child left for college. I could probably get by scrimping, but I chose to not scrimp on college. So, I’m back on the job…
Have you considered costs like maintaining reliable vehicles for the family (and the associated costs), unexpected and occasional home maintenance costs, unexpected medical costs, etc.? Would those part time jobs provide medical insurance and other benefits? Would it be easy to be re-employed at a similar level of your prior income if quitting didn’t work out financially?
We had $32K in unexpected or occasional costs last year. That’s not a typical thing, but with a 25 year old house and two cars over 100K miles, the unexpected does happen. And we have only two kids.
“One way to game the system that makes sense, is to go ahead with any major expenses before your kids apply to college (for example, home improvements or cars, etc.). This way you have less assets than can be counted towards EFC.”
I’d be careful about this^. Heed thumper1’s advice about not doing anything for financial aid gain that you would NOT be planning to do anyway. Only a small percentage of your assets are considered in the financial aid formula (about 6% I think) - most of the EFC calculation is based on income. So reducing your assets for financial aid purposes doesn’t make sense unless those expenditures are necessary.
I too would caution dumping assets to try to lower EFC. The percent of assets that they allocate to the EFC is pretty small. AS posted above, the biggest driver is income which the OP wants to drop.
There are a lot of issues that come up with retirement or cutting back on work. One is health insurance. I retired from a high tech job just before my 64th birthday and while my youngest was in high school. We found that the cost of health insurance would have been very bad except for the fact that my wife still works – so I am now on her health insurance. Insuring adult children can be very difficult if both parents are retired. Remember that kids will graduate from university at some point and many don’t don’t immediately get a permanent job with full benefits.
Most universities don’t meet full need. From what I have heard need based aid often includes significant debt.
As such, I think that a better approach is to continue working, set a budget, and make sure the kids stick with it. In spite of what you read on CC, most students in the US go to in-state public universities or start at community college.
I’ve considered not taking on additional / optional work (beyond my FT job) b/c the net gain (after taxes and FA reduction) would not be worth the effort and time I’d spent doing it.
OP, don’t know how old you are but have you looked into taking SS at 62 while your children are still in high school? They’d get benefits too. My brother has one year left (he turned 61 yesterday) and his kids will only be 13, so if everything works out the kids should collect for 5 years. Makes for a nice college fund.
It’s pretty hard to thread the needle for income a years before filling out the FAFSA (for the school year another year down the road), knowing how much you’ll have in assets, and how much college will cost for your three kids and whether the chosen schools will meet full need. If you have a crystal ball, go for it, but most of us just try to earn as much as we can and hand it all over to a college.