So our 2013/2014 tax returns will not qualify us for any aid I suspect. We are starting a new business this year (2015) so when we file 2015 returns I suspect we will qualify for some small amount of aid. Actual earnings for 2015 will be materially below prior year earnings, but 2016 earnings will be back above any aid threshold. So how do you play it?
Do you apply for aid for next year entering freshman using 2013/14 tax returns (for ED applicant) which will show no need? Do you not apply in 2016/7 application year (thereby looking like you are no need for need ‘aware’ schools? for 2015/6 application cycle) or do you have to apply as if you don’t apply as a pre-freshman you can’t apply subsequent years? Do you talk to the financial aid people explain the situation and give them estimate of 2015 income to base the award decision for 2015/6 entering year?
Thanks for any advice… D is applying to top LACs, and is consider ED at one of them.
Be aware that your future years with the new business deductions are generally added back in as income for the CSS Profile. Even though you think you might be eligible for aid you may be full pay when all the calculations are done. I would assume no aid and see if the school is affordable.
Also, there is some set of schools that require you to ask for aid as a freshman to be eligible for aid at any time during the college career (no application as a freshman, no FA ever).
You might want to look at LACs which offer good merit aid like Denison or Wooster.
I suspect that we would qualify for some aid only in calendar year 2015 because earnings are much lower due to business start. The problem is how do you get aid for this year given that the application forms all require last 2 years of tax returns. Is there a section on the application when you can make a case for current year estimated earnings, as 2015 returns will not be done until March/April?
Don’t suspect- run the NPC’s on a bunch of schools which your D might be interested in. At least get a benchmark of “if our financial picture didn’t change going forward, this is what our EFC would be”.
You can either afford what the colleges think you can afford or you can’t. If you can’t afford what you’d get right now, then deal with that problem first before you get wrapped up in an uncertain future.
Then you need to do some “what if” analyses. Your aid going forward is going to be based on both your earnings and your assets. Presumably you are not liquidating your kids college fund to start a business, correct?
I’m not sure you’re asking the right questions here. Why not get a handle on today’s income/asset picture, figure out what you can afford, and then go forward with your business plan with your kids college funding protected???
If the new business won’t net much profit, how will your family pay its usual expenses (food, clothes, mortgage, property taxes, vehicle expenses, utilities, cable tv, internet, cell phones, insurance, medical, dental, entertainment, shampoo, dental floss, etc.)?
I have run the #s through a few school’s net price calculator. There is a large delta between the pre-2015 income and the 2015 projected income. 2016 income is going to be back to closer to prior years. No school would award us any aid based on prior years or expected 2016+ years income. This is just because 2015 income is materially below, and yes we have liquidated some assets to start the business, but not any $ the kids have. Nevertheless, given the lower 2015 expected income we will be able to claim a small amount $3-9k based on net price calculator estimations i have run at 6 different schools. This is not a huge amount, but its something and as I see it only really available for one year, so trying to figure out if its possible to position best to receive this ‘discount’ when we can. Namely for the upcoming year.
So right now you are giving 2 years of returns for freshman applicants. But it goes down to 1 after that. At the end of 2015, they will just want the 2015 return. I would apply this year.
This may be complicated by the upcoming change to the FAFSA requirements. Essentially they are going to step back a year in what return is required. It sounds like they will use the 2015 return 2 years in a row, which could benefit you. But it is unclear whether the CSS profile colleges will be following this change… you might have to use 2015 for FAFSA and 2016 for CSS Profile at the end of 2016 if they don’t.
Did you liquidate investments in 2015 resulting in gains reportable on Schedule D? Will the cash be sitting in an account as an asset when you submit financial aid forms in early 2016?
Hmmm @intparent that is interesting. hopefully you are right and we can use 2015 for two years!
I guess we have no other option than submit the FAFSA and do the CSS profile and see what happens. For those who have had complicated situations like this, where exactly do you explain this situation and how does the financial office decide given the current year situation is markedly different than prior years? Is there a phone discussion or is it just done via some small ‘explain’ box in the forms?
What if kid took a gap year and applied in a year when current income was low enough? You’d still have to sorry about future years, but at least you’d have a foot in the door.
I think I wrote an email to the FA office with extenuating circumstances issued a couple of times over the years.
Would you really ask your kid to delay their launch to college & adulthood to improve FA for one year? Also, FA is recalculated every year anew. Ours has fluctuated quite a bit as the tide has risen and fallen on my small business. Many meet-need schools would give improved aid if your finances take a dive.
If this is for a current HS senior, you would be completing the 2016-2017 financial,aid forms which will use the 2015 tax year information.
Your tax information from previous years will not be the main factor in determining need based aid, alhogh some schools might request this. The main info will be the info from the 2015 tax year.
If your kiddo is already enrolled in college, the only thing you would get by completing a 2015-2016 FAFSA which is what uses the 2014 tax info…is a Direct Loan for this year.
For ED applicants, you are supposed to use yoir best estimates for,the full calendar tax year…in this case 2015. If there are not changes, you can use the 2014 info but in your case there WILL be changes.
One thing you will need to do is get your 2015 taxes done ASAP after Feb 1 which is sometimes a challenge for the self employed.
And also, some Profile schools will add back in as income some deductions allowed by business owners as income for financial aid purposes.
@thumper1 thank you for the reply. The source of my confusion is I think when I look at schools’ websites the financial aid says to include 2013 or 2014 tax returns, maybe this is because the new FAFSA is not yet up yet? Anyhow if we can include estimated 2015 with final year 2015 tax returns forming the base of our application then thats is a good outcome!
If something is a good idea because it fits with your long range plan, then it’s a good idea (i.e. if your kid wants or needs a Gap year). If it only works because of the likelihood that you MAY get SLIGHTLY more aid from a college your kid hasn’t even been admitted to yet- color me skeptical.
@AboutTheSame I would never recommend applying to a school where you can just fund a year or two. That just means you start there and don’t get the diploma from there.
@Erin’s Dad: I understood OP to be prepared not to have FA all years and actually only to be looking for a rather small amount. I was NOT recommending that they start at a school they could not afford. I was suggesting a possible tactic for dealing with programs that preclude you from getting FA at all if you don’t get it the first year. Capiche?