<p>Oops. Wrong site.</p>
<p>Here is the letter...
<a href="http://www.finaid.org/educators/pj/gen-99-10.phtml%5B/url%5D">http://www.finaid.org/educators/pj/gen-99-10.phtml</a></p>
<p>Gifts- can a student who worked an earned say $11,000 after tax in the summer simply "give" as a gift that money to a parent (or to both parents if the number >$11,000) - thereby escaping the more onerous FAFSA 35% calculation for students rather than the lower 7% number parents?</p>
<p>thats an interesting question grant
but I am thinking that a student who is industrious enough to earn $11,000 in one summer, probably is not going to need a lot of help finding money for college :)</p>
<p>Technically, yes. But there are some pitfalls that can occur.</p>
<ol>
<li><p>If that money has generated any kind of income event which is reported on the student's taxes, an FAO can assume money in the student's name which produced it. Effectively eliminating any advantage and producing the ire of the FAO.</p></li>
<li><p>Custodial (UGMA/UTMA) money cannot be moved in such a fashion. The IRS can slap you with back taxes and penalties. And don't fall for "nobody ever gets penalized for moving custodial money". If you get audited anytime in the next 7 years, you will get hit. Shoot, everybody could engage in tax-evasion if we thought we would never get audited.</p></li>
</ol>
<p>I'd echo Scott's first point, in particular. You'll likely get a 1099 interest income statement based in the interest the $11K has earned. That will raise a flag that you had significant assets in the previous year. So you may be asked what happened to the assets. Being able to document that you spent the funds would probably resolve the issue. But telling a FAO that you 'gave' the funds to your parents just before filing the FAFSA isn't likely to be well received.</p>
<p>Spending the money on things a student is going to need before filing the forms is always a good idea. Below is text from my mid-December newsletter...</p>
<hr>
<p>Your student's Christmas list can help you get them what they need and want for Christmas as well as get important work done for college. So without further ado --</p>
<p>Your Student's Christmas List</p>
<p>For around the dorm room</p>
<pre><code>* Kitchen type tools: bowl, cup, glasses, can/bottle opener, etc.
* Desk Lamp
* Alarm clock (one with a really loud and annoying alarm -- they'll need it)
* Bulletin board and dry-erase calendar board
* A small toolkit (I do not suggest the Craftsman, rolling tool chest; a small bag will do)
* Bed linens
</code></pre>
<p>The Gizmos and Gadgets</p>
<p>The Computer (lets start with the really fun one): if your student does not yet have a computer of their own, or the one they do have is outdated; you should certainly consider this as the A #1 gift. Consider a multimedia computer with a TV tuner card. You can kill a lot of birds with one stone here. Not only will a multimedia machine act as their computer, but it will also be their TV, their DVD player, their TV recorder, and their stereo. It is truly the Jack of all appliances. And it makes for a great entertainment system for the very few hours they will not spend studying.</p>
<p>If you dont want to send your student out the door with one do it all machine like above, here are the minimum requirements (according to CNET) for a student computer:</p>
<pre><code>* Processor: Mobile Celeron, Pentium 4-M, Pentium
* Memory: at least 256MB (I would recommend 512MB or even 1GB)
* Hard Drive: at least 60GB
* Disk Drive: DVD+RW
* Wireless and wired networking equipped
* Operating system: Windows XP Home or Apple MAC OS X (ten)
* Software: Microsoft Office XP Standard or Student edition
</code></pre>
<p>Standard computers would include:</p>
<pre><code>* Dell Inspiron B130 (I have had a Dell in the past and love their customer service)
* HP Pavillion (One of our desktop machines is HP and it hasn't as much as hiccuped in three years)
</code></pre>
<p>Multimedia Machines would include:</p>
<pre><code>* Apple PowerBook G4
* Dell XPS M170
* Toshiba Qosmio G25-AV513 (my current laptop is a Toshiba and I have been very happy with it)
* HP Pavillion zd8000
</code></pre>
<p>The Printer: although many schools and professors are now allowing students to submit papers in electronic format, this is far from being the norm. So, your student is going to need someway to print off that earth-shattering report on Machiavelli. Printers are dirt cheap today compared to what you got yesterday. You can often pick up a good printer/scanner/copier for less than $150 or even $100</p>
<p>Surge protector: protect the investment you just made.</p>
<p>Phone: I grew up in a telephone family -- literally. My family has been in the telephone business since before there was copper wire; so what I am about to say would have been heresy at my familys Thanksgiving dinner a few years ago. Go get your student a prepaid wireless phone.</p>
<p>A digital voice recorder for class lectures: skip the old tape recorder -- your student will likely download the recording to their computer anyway.</p>
<p>Digital camera: theyll want to preserve the rest of their high school year and college.</p>
<p>Other appliances:</p>
<p>If you didnt go the multimedia computer route --</p>
<pre><code>* TV
* VCR/DVD player
* Stereo
</code></pre>
<p>Coffee Maker</p>
<p>Microwave</p>
<p>Refrigerator</p>
<p>Art: believe me, dorm walls are nothing fancy to look at</p>
<p>How to pay for this Christmas list?</p>
<p>I know that many of you have been saving money for your childs college. Many of your students have been saving as well. Some of you have quite a bit of money stuck in your students names. You do not want that money there when you fill out the financial aid forms next month. So what do you and your student do with all that money you have been saving for college? SPEND IT NOW!</p>
<p>Yes, go take your childrens money and buy their Christmas presents with it. Youve been saving it for college anyway, youre just going to spend it a few months earlier. If that money is still in your students accounts come the time to file forms, it will cost you a lot of money ($35 for every $100 in the students name).</p>
<p>HAPPY SHOPPING!</p>
<p>There wont be much interest as the money hasnt been sitting around for long.
But it is a legal manoeuver......but its still only a fraction (regrettably) of total tuition etc whch can be ~$40,000 pa.</p>
<p>I used $11,000 as an example as that is the amount per year that can be gifted to one person without gift tax.</p>
<p>It just makes sense to minimize the childs assets............they are always overstated anyway as for eaxmple an UGMA account will have an asset total which includes capital gains so that the assets could be overstated by as much as 25% depending on the state.....NY for example taxes capital gains as income so capital gains are taxed at top marginal income tax rate of the taxpayer.........the FAFSA formula (another FIASCO example) doesnt consider taxes to be paid on asset disposition.....</p>
<p>Including capital gains is not overstating the value of the assets. That's the double whammy of the system. The calculation stinks, but that's the way they designed it.</p>
<p>Of course assets can be overstated by capital gains....it"s the difference between gross and net. Now not all assets have gains but those with losses may be able to get a tax deduction for the losses. FAFSA wasn't designed to overstate - its just that the people writing the FAFSA "rules" clearly weren't rocket scientists.</p>
<p>The value of an asset equals what you paid for an asset plus the gain or loss in that asset. How then is including capital gains overvaluing an asset?</p>
<p>The point is that you cannot pay tuition with capital gains tax can you. :)</p>
<p>Taxes are deducted from available income in the FAFSA process.</p>
<p>But not the capital gains on the remaining assets which are used in the EFC calculation.... thus one is penalized in one year for assets to be utilized in future years......worse still if those assets decrease in value later you would be penalized today for capital gains which have later evaporated....The same problems exist for estate taxation btw....</p>
<p>If you want to put your money in an equity, that's the risk you take. Trying to eliminate that risk from the calculations is frankly impossible.</p>
<p>Value is a function of time, and time marches on. We cannot stop time at the point of acquisition and declare that point is the value for all future applications. Value fluctuates; that's just the way the world works.</p>
<p>It reminds me of a friend of mine complaining that the price an owner was asking for a house he was renting was too high. He kept saying the house wasn't worth that much, but the owner was getting interested parties. I had to tell him that a house is worth whatever someone is willing to pay for it. Value is not some arbitrary number, past or future. It is what the market will bear at that point in time.</p>
<p>I think you are now way off the point - and that is that the FAFSA calculation is a total crock..........Why try to defend the indefensible?</p>
<p>Grant-</p>
<p>I don't think Scott is defending the FAFSA formulation. Rather, he's explaining how the formula works, so those who wish to maximize their aid possibilites can do so.</p>
<p>IMO-- there are lots of things most families can do in the year leading to FAFSA or Profile filing to decrease their EFC and increase their aid. Knowing how the formulas work is key to developing these strategies.</p>
<p>The formulas are what they are.</p>
<p>I will have three Ds in college next term (twins entering this coming year) and each SAR came back with an EFC of about 30K. When I first filed several years back with just one college student, the EFC also came to about 30K on that SAR. I know there is one question in the FAFSA regarding number of family members in college, and, they also have that feature that lets you duplicate parental info on multiple forms, but what relief is allowed for parents with simultaneous college students??? I'm not seeing it.</p>
<p>Jackofsion-</p>
<p>Duplicate question. I answered your question in the other thread.</p>
<p>I know there is some National Housing Index calculator IM Methodology officiers use where one puts in a zip code and it comes up with the growth value of a home . I remember doing our house ,which we bought 15 years ago for $50,000 and I was shocked to see that on this calculator is was valued at $82,000 which is such a joke . We are in a working-class section of a dying city that lost many schools and businesses and now our church due to population shrinkage . The century-old homes here are lucky to recoup their $50,000 to get out to the suburbs .</p>
<p>So my question is if this Housing Index calculator has been truthfully updated to reflect the real worth of these homes in my zip code area ??</p>
<p>Mom-</p>
<p>As I understand it, you're to put YOUR estimate of the current value of your home into the Profile. Not what a calculator says, not what you'd like to get, but what you can get today of you had to sell the house. Current fair market value.</p>
<p>That less the mortgage will give them your equity in the home. They use the Federal Housing Index Multiplier (inputting your date of purchase and purchase price) to check your estimate and make sure it's not too much of a lowball. The data in the Multiplier is at least 7 years old.</p>
<p>Try it yourself and see what it comes up with, but then use YOUR estimate (remembering that there are many factors that can affect the value of a home) and be prepared to justify your estimate:</p>
<p>Remember that this is just for the Institutional Methodology -- Federal Methodology doesn't consider home equity.</p>