<p>Here's a scenario for you: father makes lots of money for 20 years. Familiy assets total $1M plus house plus cars. Father is unable to continue working (for whatever reason); mom has never worked. Kids go to college. Under most scenarios, 5% of the assets per year would apply to college, so two kids in private college would have an EFC of $50K/year--theoretically qualifying for $30K in aid ($80K-$50K). Should parents apply for financial aid? Is it ethical? Should parents switch kids' college funds to their names to lower the hit on savings? Is that ethical?</p>
<p>I would apply, no harm in asking, it's all how the university looks at the assets....is that $1 million+ house paid for or is there a huge mortgage?
I would provide a special circumstances letter & the school can decide how much of the asset should be protected for future income and how much is avialble to pay for university.
If kids are young, you could use some of the fund for expenses along the way.
Is this a theoretical example? The parents can move monies around in any way they feel would be defensible and legal under further examination by an outside source.</p>
<p>Our state allows for a $2000 state income deduction if money is placed in a 529 program, regardless of income status. We help our kid for school but we started programs when he was born, thus he has nearly enough $ for school. Annually we place $2000 in the 529's lowest risk option and then as soon as the money is recorded, take the money out to pay for the R&B/tuition. Kid's freshman year, we left the money on account for 1 day. We reduce our taxes by $180, at zero risk, a +405% APR. He's even going to school out of state.</p>
<p>If your state is like ours-broke and in the hole, the System is surely screwed. Knowledgeable people win at the expense of the less fortunate and ill informed. Oh Well.</p>
<p>To dmd77 -- I think it is ethical for the family in your scenario to apply for aid. $1M in assets which include the familiy home is not that much in today's economy. That family has no income other than interest from savings. Part of the value of those savings is to provide for the parents during retirement years. </p>
<p>It would not ethical under your scenario for money that is in the kids names to be transfered back,if the money was in accounts that are theirs. </p>
<p>As an aside, an interesting question would be a parent who has a joint account with a child, rather than putting all the funds in the child's name. I suppose technically each person has 50% ownership, although there are many reasons for opening a joint account. But certainly there aren't any legal constraints that I know of restraining the transfer of money out of the joint account.</p>
<p>reidm - you are right that the family can reduce the overall damage by spending down all of the kid's account for the first year tuition, but the fact remains that if you take 2 families with identical income, one of which put the college savings in the kid's name, and the second which kept it in their own (for example, buy spending $1000 to purchase US Savings bonds in the parents' names each year rather than putting the money in a bank account) -- one family pays $47K over 4 years for college whereas the other family pays $40K. If I gave you two investment options, one of which would allow you to make $7K more than the other ---- which would you choose?</p>
<p>Re: Post # 44: So it's OK for someone with one million dollars in assets (ONE MILLION!) to do the "investment option" of getting more financial aid?</p>
<p>Say it's a subsidized loan. In recent years the student would pay 3-4% while the taxpayers (most of whom do NOT have a million dollars in asstes) picked up the 9% difference to pay to the banks.OR if we are referring to grants from the alumni fund, I strongly agree with the poster above who said her parents would be livid if they saw their money going to a family like that!</p>
<p>I really, really have trouble seeing how people with a million dollars in asssets using OTHER PEOPLE'S MONEY to pay for their kids' education is ethical. Using other people's money is called "welfare" and this family may WANT it, but doesn't NEED it.</p>
<p>Are there not other options for that family? So what if the mother has never worked! Get a d__n job like everyone else! Little Buff and Muffy can get summer jobs - go part-time -- transfer to a local school and live at home --- whatever it takes. The family can sell their house and move to a smaller one - take in a renter - again, whatever it takes.</p>
<p>But all we can think of is financial aid - which is NOT A FREE LUNCH, but SOMEONE ELSE HAS TO PAY?</p>
<p>Once more - what everyone seems to ignore - I work with kids who DESPERATELY NEED money for college, not just whose parents want it to maintain their family wealth! These people have NO assets, little income, sometimes no parents, and terrible stories of hardship. I see these kids every week, and then I read this thread...</p>
<p>Very, very sad, when people with a million bucks see themselves as "needy."</p>
<p>Where is mini when you need her? We need MORE lower income people in the schools, not fewer because the rich are playing games!</p>
<p>I give a LOT to charity, but personally do not want to give thousands of dollars either as a subsidized loan or an outright gift to someone with a million dollars in assets and a wife too lazy to work!</p>
<p>Veronwe, I'm with you. This was a hypothetical situation, and yes, for the rest of you, I did intend for it to be $1M in assets plus a fully paid-for house and cars. </p>
<p>I do know people in this situation. I live in the Seattle area, where many people got pretty rich during the dot.com boom and quit working. They have lots of assets and no income. And you can game the system--as some of you pointed out. I've argued with several people who say: "if the school's willing to give us the money, why shouldn't we take it?" My answer is: because other people need it and you don't. You just <em>want</em> it.</p>
<p>Now, let me expand on the hypothetical situation. Would it become ethical for the family to apply for aid if the father had died and the situation were the same financially? I know people in that situation as well, and I know people who think the ethics change in that scenario.</p>
<p>Calmom, good example. </p>
<p>Let me ask a dumb question. In the scenario with the kid's savings resulting in a $7,000 hit, that really means $28,000 over four years, right? The total additional amt that the family would be expected to pay <em>exceeds</em> the entire savings in the kids' acct?</p>
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<p>Does the status of a parent's savings, investments and home equity make that much of a difference in the EFC? I mean, you can only hide or fudge so much</p>
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<p>I thought this also until I went to a seminar on paying for college. (Full disclosure ... I DO NOT agree with the idea that anything that is legal is ethical ... lots of this advice bothers me a lot). These stategies will not help folks with tons of assets but will help the vast majority of folks applying for aid. The two basic ideas is to get assets out your kids name ... and to minimize the parents liquid assets (up to this point assets like homes and retirement accounts like 401ks and IRAs have not been part of the calculation). Some of the ways to accomplish these goals are to have the kid buy as much as possible ... car, computer, stereo ... essentially all the material objects they might need over the next few years to minimize their assets (in other words ... spend it on stuff instead of school so hopefully the school will pay for school). For the parents spend the liquid assets also ... do the kitchen renovation you've always wanted to do, go on the big European family vacation, buy new cars, etc (again spend it on stuff instead of school so hopefully the school will pay for school).</p>
<p>Most American families to not have a lot of assets beyond their home and retirement accounts so these strategies are probably very effective in raising the amount of aid for which a student will qualify. And they are perfectly legal. Each family has to decide if they consider them ethical and/or fair.</p>
<p>BTW - I thnk it is terrible that the current system penalizes those who save. But i can't think of a simple way to solve that issue. A fair (but complex) way to determine aid would to be ask for the students and parents income over the lifetime of the kid and determine what would be a reasonable amount for people to pay given that earnings stream ... then those who save would be rewarded and those who did not save would need to compensate for the lack of expected savings ... but this would be incredibly complicated, time consuming, and a mess to oversee.</p>
<p>One thing I never got with financial aid and how they use the child's bank account as funds for college (thus the desire to move it out of the child's name)....is how for some kids, my own included, their bank account is 100% from earnings they got from jobs where their intention was/is to use this money to take to college for spending money, etc. If the college wants to take that for tuition (when figuring the aid package ,they count the child's assets as funds that can go toward tuition), then how is the kid supposed to save money for spending money for college? That's what my kids have saved it for. Just wondering if I am not understanding something.</p>
<p>Students are generally expected to contribute $2,000 through summer earnings each year for tuition. THis is without any savings. With savings or larger earnings, students contribution is 35%, parents 5.6%.
Most students have workstudy/on campus jobs for spending money. Their needs are usually few as housing and board is covered, and workstudy has added incentive of being part of aid package, so it does not figure into earnings ( although is taxable)
Additionally tax credits are available for tuition, up to $2,000 I beleive.</p>
<p>Emerald, I understand but my kids held jobs so they would have spending money at college for expenses beyond tuition, room and board. To have to put that toward tuition does not leave them the money they expect to have as cash in college. Some may opt to work in summer so they do not take on work study during the school year. We prefer our D not do work study during the school year with her courseload and being in varsity sports, etc. She has worked before going to college, plus in summer to earn what she needed instead. Actually, at Brown the president made a policy that all freshmen do not do work study but get that part of their financial aid package as a grant which is what she got, plus other financial aid. I just hate to see their summer job earnings go toward tuition when the point was to work so they had money for some other things that students use money for when in college beyond tuition (i.e, incidentals, weekend activities, transportation, things needed to set up a room away from home). If they put that toward tuition, it does not leave them funds for spending money though I get your point about work study but not everyone I guess does work study. </p>
<p>I can think of some big expenses my child has right now for her varsity sport at her college and luckily she did earn money (and saved every penny of it) as well as saved graduation gift money so she can now pay these unforeseen expenses required by her sport. </p>
<p>I realize what I am saying may not be "right" in terms of how this stuff is all figured but it is just my opinion.
Susan</p>
<p>Now Brown doesn'thave loans is that right? that has been what the counselors at my daughters high school have been saying.
I know what you mean about trying to earn money that doesn't just go for tuition. My daughter has been working a lot this year, but since it isn't a work study job it will all be counted toward money for tuition. I wonder if they allow her any of it for her current living expenses?
Thats great that your daughter is a freshman? and she is on a varsity team? she must be really good. My daughters school doesn't have a lot of sport team, she was hoping she could ride while in school, but that is pretty time consuming as well as expensive so she hasn't had much of a chance :(</p>
<p>emerald...Brown DOES have loans...I mean we have a pile of 'em...lol. That is Princeton that does not have loans. But Brown has done away with work study for freshmen and that part of the aid package is a grant. </p>
<p>The daughter who is a freshman is a college freshman....clearing that up. There is ONLY a varsity team so it is that or not do the sport at her college. Were you thinking I meant high school? Even in our high school, two of her sports were ONLY varsity....tennis and alpine ski racing and she was on those throughout high school. But the soccer team she was on was first JV and eventually varsity. </p>
<p>At Brown the ski team is a Div. I varsity team for girls but the boys team is just a club team but they train together and attend races together. It appears that the boys team is getting the same funding as the girls team (also has same coach) and I don't want to get into it too much here but there are some expenses my D is going to have to pay toward her sport there this winter even though she is on varsity.....and they are paying for the boys on the club team. </p>
<p>By the way, my girls used to do horseback riding and shows for many years when much younger but gave that up. </p>
<p>Susan</p>
<p>I knew about Princeton, but the counselors were quite adamant that Brown didn't have loans either. I didn't dare argue with them, cause that is supposed to be their area, but I worried about the info they were giving families. </p>
<p>No I knew you were talking college, I know some sports have varsity as well as JV and even freshmen teams, at least like at Colgate where my niece is on crew, she was on the frosh team, but got bumped up to JV.
Skiing is really expensive, my younger daughter snowboards although just for fun, we have pretty crappy snow this side of the cascades though .
She is also interested in crew but it is same season as soccer ( not to mention it is at the crack of dawn!)
My oldest rode at the zoo where she helped with the ponies for many years, it helped her get a summer job as riding staff at a residential camp as well. We never had a horse but they did hold gymkanas.
My younger daughter is also going to be volunteering with the same zoo program, but now the ponies are so old that they aren't allowing them to be ridden except during toddler pony rides during the summer :(
It will be good experience working with them though, I think she will get a lot out of it.</p>
<p>Doesn't the idea that you have money to pay for college but you should go out and spend it all on fancy family vacations, home improvements, and new cars instead of actually PAYING for college with it strike anyone else as odd? I just don't get it. I must be dense. If you have the money to pay for college in hand why would you go on a spending spree buying other less useful things in the hope of receiving financial aid? What am I missing here? <em>scratching head</em></p>
<p>You're not missing a thing, Carolyn! As I have been repeating throughout this thread, it's the desire for tainted money (as in, 'T'ain't yours!).</p>
<p>The lure of spending OPM (Other People's Money) is just too great for people to resist. Hence financial aid packages are often too small for the TRULY NEEDY - as in the students I described above, who had nothing - to get through school, because the money is being parcelled out to people hiding the money they have in the hopes of getting something for nothing. </p>
<p>And hence the moral calisthenics - bending-over-backward to convince oneself that this is even remotely "ethical" - the excuses range from "everyone else does it" to heaven knows what.....</p>
<p>A friend who recently bought a new, small, gas-efficient car commented that perhaps he should have bought a Lexus for financial aid purposed. By the time the discussion was over, we were all certain that the ONLY spending down of assets that makes sense, is to spend before you file what you were going to spend any way. In other words, if you go on a shopping spree.....spending $50,000, the university would only have counted 6% of that, so $3000 is all you save on the deal. In that case, you may receive $3k in aid, but you would likley have needed the other $47k for university expenses!</p>
<p>On the other hand, spend the money the month before you file fin aid forms, rather than the month after; for instance, tuition and board for your other university student.</p>
<p>If you personally feel it is unethical to LEGALLY transfer or spend out money in a student's game even if it is within the time periods and rules for doing this, then by all means it is unethical for YOU. But as far as the laws about this go, there are legitimate ways to do this, and it is considered a first step in any financial planning whether it is for a disabled child, an elderly parent, or child going to college to deplete the resources LEGALLY in their names so that as much government aid is available. There are plenty of illegal things people do, but this is not one of theml-pick up any book on financial planning for college and it will tell that the number one thing to do is to make sure you are not hit with the 35% draw on a student's account. Many of the top schools are now NOT considering student funds in that high draw range because it is so unfair right now that many who work hard and save for their kids college but are not savvy about the rules are hit nearly 7 times as much for their planning. I would consider any financial planner remiss who does not go over this area of assets with families with children. Grandmom can just as easily give the money in a way where it can go further. </p>
<p>Now, as I said in my opening statement, anyone who PERSONALLY disagrees with this perfectly legal financial planning situation is certainly welcome to leave the money in the kid's account and get assessed the 35% on it. If you believe that is the ethical thing to do, by all means, do not compromise your values.</p>
<p>There are other things in the PROFILE app that are disturbing to me such as the question asking how much a parent is willing and able to pay for the education, and if there are any outside resources (grandparents in the wings, for example) that may be approached for education. The savvy applicant will certainly answer in the way most beneficial to him, and can prearrange so that the answer is honest. And there really is no way to draw the line on how much a family should sacrifice to pay a tuition. Should a family who is willing to compromise the rest of the family to pay a tuition do so whereas a family who wants to maintain its current standard of living be allowed to do so? It really makes no sense at all.</p>