<p>I dont feel bad for anyone that have to take out loans or anything along those lines. The money will come back to you. And if you have a problem investing in the future of yourself, don’t go to school make the job market easier for me!</p>
<p>My EFC is 0. The school I’m going to hopefully attend costs 45k. My #2 school costs 34k and I have been accepted to it. My parents can barely make rent. The schools offers no help to its transfer students. So I get to take out loans for about 39k, because I should get a pell grant for about 6600.</p>
<p>If you’re going to come out of undergrad college w/ 160k of debt, I think you are sadly mistaken as to how quickly “the money will come back to you”. It’s taken my wife and I nearly 15 years to pay off our home that cost that much.</p>
<p>I just don’t get the neverending caution-to-the-wind desire of kids who have so little means stretching themselves so thin. Good luck w/ that. :rolleyes:</p>
<p>My EFC is 0. The school I’m going to hopefully attend costs 45k. My #2 school costs 34k and I have been accepted to it. My parents can barely make rent. The schools offers no help to its transfer students. So I get to take out loans for about 39k, because I should get a pell grant for about 6600.</p>
<p>Borrowing $80k for undergrad is unwise and unnecessary. Also, how will you borrow that much? Do you realize that your monthly payments will be over $900 per month for 10 LONG years? Do you plan on living at home for 10 years after graduation?</p>
<p>What is your likely career and how much do you think you’ll be earning upon graduation?</p>
<p>Did you apply to any state schools that will be much cheaper?</p>
<p>So I just completed the fafsa and our EFC was $26,000, up from $4,000 last year. Almost nothing has changed for us financially, and our EFC is over half our total household income. What gives?</p>
<p>My mom suspects she may have entered something in incorrectly. Could this be the case?</p>
<p>I almost do not know where to begin on this,except to say how angry I am at the standard financial advice that is given every day in this country. People do not realize that good tax decisions like a 401K and a 529 can just kill their college aid. Paying mortgage interest while investing in a 401 K might look good to some,but how good was it really when the 401 turned into a 201? For us it made more sense to pay off the mortgage.No fees,certain rate of return,and monthly cash flow lets you live more easily in this financial climate. I can tell you from experience that it is not always the total financial strength of a family that determines an EFC,but rather the positioning of the assets can have a dramatic effect. I started studying this stuff when d was a sophomore,and found all kinds of crazy rules that did not make sense. For example,a farmer can have a paid for farm worth 2 million,and so long as the farm is one continuous parcel of land on which his house is located ,the entire asset counts as nothing against his EFC. I could go on and on about financial positioning,but I found the best little packet of info on a link from CC and it was on finaid .org Look up “maximize your aid eligibility” I did much of what was there,plus some other stuff like making sure all my annual bills like insurance came due in February. Pay 'em all then and down go the assets for FASFA reporting.The hard part was,I had to research it all myself and apply what I could to my own situation. [I did not know about CC then] Having a small business/ self employment did help to some degree,but the trick was to not make a bad business decision just to maximize college aid.
The other side of affordable college is the student herself. D did have 3 full rides in some combination of athletic and academic and needs based aid, but she wanted to at least try for a reach private school [no athletic scholarship]. I had just about burned myself out researching all I could and keeping an eye on replying to any coach that showed interest. I pointed out to d that without all the travel time that an athlete has and working in the summer instead of working out for athletics,a private college ‘might’ be achievable. We ran the numbers,including interest on the debt, and went from there. She even did a varsity sport,but not to the level of a D I school.
Summer employment was put 100% into a Roth IRA. That totally shelters it as an asset of the student,yet the principal can be recaptured to pay college loans if needed after graduation. She worked as a Resident Assistant for 2 years [free room and meals and no income penalty for FASFA next year] and worked as a developmental assistant for an administrator her senior year. Her senior employment helped her discover and qualify for a grad school assistantship.She just called us today and found another job as a “watcher” that enables her to multi task homework with a $9 an hour second job.It is actually cheaper now to have her at school than at home. Because of her hard work, debt will be less than 5% of her education.</p>
<p>There’s no evidence to back this up because in fact this is not how the EFC is calculated. After certain allowances based on number of people in the family, state tax rate and the age of the older parent, current income weighs most heavily in the EFC calculation. Parent assets, again after an age-based allowance, are only assessed at 5.6%. So you can do the math, but if you add available income (adjusted for allowances) and available assets (at the rate of 5.6%) together, you get the adjusted available income number which is multiplied by around 40% to obtain the EFC. That means savings are weighted 40% of 5.6. </p>
<p>This is for parent contribution to EFC only. Student savings are assessed at 20% with no asset protection allowance, and student income is assessed at 100% after a $4500 (if I recall correctly) income protection allowance.</p>
<p>There’s nothing in the EFC calculation that references future loans.</p>
<p>Now, how to actually pay the EFC? That’s where families have to look at the available sources of funds, which include current income, savings, loans, scholarships, gifts from grandparents, student earnings, etc, etc. How a family choses to pay the EFC is highly variable. Those who have no savings and a low income might choose 100% loans. Those who have saved for college might choose 100% savings. Those in between will choose a mix that works for them. I don’t think there’s a one-size-fits-all.</p>
Actually the total maximum impact that unprotected parent assets will have on the EFC is around 5.6%, not 40% of 5.6%. If you look at the EFC formula 12% of unprotected assets are included in adjusted available income. The maximum impact adjusted available income can have on the EFC is 47%. That is where the 5.6% comes from - 47% of 12% is 5.64%.</p>
<p>
50% of student income over the protected income allowance goes to the EFC, not 100%.</p>
If there is little change in income or assets (both student and parent), or in family size and number in college, then it seems very likely she made a mistake on FAFSA. You need to print your SAR off and go through it line by line. (you could also print of last years and do a line by line comparison).</p>
For FAFSA a 401k has no impact on the EFC. It is not a reportable asset. A 529 account is a reportable asset and can impact the EFC by up to 5.6% of it’s value if assets are over the protected asset allowance.</p>
<p>Thanks for the corrections, swimcatsmom! You’re right, I took the math too far on the parent asset percentage - it really is 5.6% not 40% of 5.6%. And the maximum impact of adjusted available income is 47%: I just gave an average 40% because the actual formula is:</p>
<p>Contribution from AAI ($7,732 + 47% of AAI over X) where X is the age-based parent income allowance. </p>
<p>For some people the overall percent will be much lower than 47%.</p>
<p>A 401k DOES have an effect on the EFC if that 401 K is added to the senior year of high school or the freshman-junior years of college. Many parents try to reduce their taxable income using the 401 K and think that it will help reduce the EFC as well. We did this and the 401K lost money and made our EFC go up by 1100 dollars.We did this one year and did not repeat the mistake.
I spoke directly to the head of financial aid about this and he said that a Roth during this time would have been the better choice. However,a Roth was not available at place of employment. I later read an article about this very issue,and it recommended that for parents who are not funding the limit in 401K should consider borrowing extra to fund it in the pre-college years and then lay off funding during the four FASFA years so as to not impact the retirement nest egg.</p>
<p>I should have said that 401ks and IRAs as assets do not affect the FAFSA EFC at all. So if you have $500,000 in a 401k it will have no impact on the EFC. </p>
<p>However 401k contribution in the tax year being reported on FAFSA are not allowed to reduce income for that year for FAFSA purposes, so are added back to the AGI in the EFC formula. The reason the contribution has a negative effect on the EFC is not the contribution itself, but because a 401k contribution reduces your taxes and taxes are an allowance against income in the EFC formula. If your taxes are lower then your available income in the EFC formula will have a smaller allowance for taxes against it, increasing your EFC. So yes the tax you save by making a 401k contribution will increase the EFC. That is why a Roth contribution does not affect the EFC (no tax impact). On the other hand I would have expected the saving in taxes to be more (at least double) the increase in the EFC as the maximum impact income can have on the EFC is 47%. So still a net gain in most cases. </p>
<p>In the vast majority of cases the 401k or IRA contribution would still mean a net $ gain as the tax savings would exceed the EFC increase. But there are situations where it might not, usually when people have low EFCs. For instance the SMART grant (a grant mainly for 3rd and 4th year math/science majors) is dependent on Pell eligibility. A small increase in the EFC that made a SMART eligible student lose pell eligibility would cause the student to lose the SMART, which is $4,000 a year.</p>
<p>Just starting the process of climbing up the learning curve of financial aid. I doubt we will qualify for aid for son #1’s first year, but wondering about the next year when we will have another son at college and less assets due to having just paid for son #1’s first year of school.</p>
<p>Do the two different Universities look at the cost of attendance of the other school, i.e. if son #1 school is $50,000/yr and the son #2 school is $20,000/yr, will the son #2 school take into consideration what we have committed to for son #1? Will the EFC vary for each school or is it simply cut in half?</p>
<p>Any comments or personal experiences would be appreciated.</p>
<p>will the son #2 school take into consideration what we have committed to for son #1? Will the EFC vary for each school or is it simply cut in half?</p>
<p>Your EFC for each child will be about half of what it is for the first child (unless child #2 has a lot of assets/income). </p>
<p>As for what son #2’s school will do…it depends on the school. If the cost is $20k for son #2, that sounds like a public school. A public & many privates won’t likely care what you’re paying for son #1. Most schools can’t meet need, and they aren’t going to give more simply because a family chose to spend more on child #1. However, top privates will take those things into consideration.</p>
<p>The part of the FAFSA EFC generated by parent income and asset information is divided equally between the number of students in college. Ant part generated by student income/assets stays with that student’s EFC. So if on student has higher income and/or assets then the other then their EFC may be slightly larger. Schools using FAFSA only will base their aid on their student’s FAFSA EFC. What you are paying for their sibling, whether it is $10k at a CC or $50k at an elite private school, will not factor in. Just the EFC.</p>
<p>From anecdotal evidence on CC it sounds like schools using CSS for their own institutional aid do not follow the same formula as FAFSA when it comes to their being 2 in school at the same time. The numbers I have seen mentioned here seem to indicate that the CSS “EFC” (" " because there is no CSS EFC as such) may be reduced by around 40%. It would depend on the school whether they take into account the actual cost you are paying for the other student I believe CSSS asks for this?). Schools using CSS have their own formulas for how to use the financial data provided so their is no one correct answer.</p>
<p>*Schools using FAFSA only will base their aid on their student’s FAFSA EFC. What you are paying for their sibling, whether it is $10k at a CC or $50k at an elite private school, will not factor in. Just the EFC.
*</p>
<p>I was trying to say this, but swimcat said it better. Since school for child #2 is only costly $20k per year, that sounds like an in-state public and will therefore likely be a FAFSA-only school. As swimcat says, they won’t care what you’re paying for child #1. That may sound harsh, but it also makes sense. An instate public school for child #2 isn’t going to give you extra aid because you’re spending a lot on #1 child’s pricier school.</p>
<p>What schools are these schools? Is child #1’s school a private or an OOS public? Most OOS publics aren’t good with aid, either, for OOS students.</p>
Since school for child