<p>I was just curious. What's the general cutoff point where one doesn't receive any financial aid? I'm going to guess 200k+ income for two working-parents household. Any other inputs? :)
(referring to the 30k+ colleges)</p>
<p>My understanding is that at that level, it's as much about assets as income. That is, most people with 200K in incomes also own a home, have retirement funds, equity, savings, etc. At that level, families are expected to leverage those assets to pay for school -- take out equity loans or things like that. </p>
<p>So, it's not just the income alone.</p>
<p>Retirement funds are NOT used in financial aid computations. The amount contributed to the fund for the year IS used, but the amount IN the fund is not. E.G. for students who will be freshmen in fall 2007, the 2007-2008 FAFSA and Profile (if required) are completed. Contributions TO retirement accounts for the 2006 tax year are considered in the calculations, but the total amount the family HAS in the accounts is not.</p>
<p>Re: income cutoff...there is NO way to tell you this because so many other factors are considered....# of students in college, # of family members, money in bank accounts, money saved for college. A family with $200,000 income with 12 children, 4 of whom are in college, would likely receive some aid. A family with 1 child in college with an income of $60,000 per year BUT with a savings account with $200,000 in it would likely not.</p>
<p>I found this calculator on finaid.com to be helpful. It is just an approximation, but great when you are giving a classroom presentation and don't really know each family's income/asset etc.</p>
<p>Quick EFC Approximation Chart</p>
<p>Well, I've never had retirement funds, equity, or savings, so I wouldn't know. But that would be why our EFC = 0 . I know that at points the forms ask for things like that, and people are constantly talking about how that sort of thing affected their EFC.</p>
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<blockquote> <p>the forms ask for things like that>></p> </blockquote>
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<p>Neither form has a line item for the current balance in retirement accounts. The amount put IN to the retirement account for that year, does have to be listed. There is a HUGE difference.</p>
<p>"There is a huge difference". </p>
<p>Only to those people. As I said, if you have none of those things, all of those are just lines you put 0 on, and nothing else. (And mathematically speaking, the difference between Retirement account = 0 and IRA contribution = 0 is, well, zero.)</p>
<p>Thumper1 is right-- lots of variables.</p>
<p>But the primary component in calculating the EFC for most families is parental income. So excluding the very unusual cases (12 kids, 4 in college; or a kid with a 100K+ savings account), families with one kid in college and making under 60K or so should be eligible for significant aid. Families making 70K to 100K will likely be eligible for some aid, particularly if the student is attending a high-priced school. And families making over 125K or so will be eligible for little, or no need-based aid (unless there is an unusual circumstance, or multiple kids in college at the same time).</p>
<p>But there are so many variables that it's always best to prepare, and run various scenarios through an EFC calculator well ahead of finaid filing date so you're not caught by surprise.</p>
<p>"the difference between Retirement account = 0 and IRA contribution = 0 is, well, zero."</p>
<p>No, you don't understand the difference.</p>
<p>IRA contributions reduce your AGI, and your taxable income, and the tax you pay. But in the financial aid formulas, the IRA contribution gets added back onto the AGI, increasing available income for finaid formula. On top of that, since the income tax you pay is lessened due to your IRA contribution, and since income tax paid is deducted from income in the finaid formulas, your EFC will actually increase if you make a regular IRA contribution in that tax/finaid year.</p>
<p>The balance in your retirement accounts is not considered, as Thumper said. A zero contribution does not mean a zero balance, and a zero balance does not mean a zero contribution (since withdrawals can happen any time).</p>
<p>BTW, thumper, is there a reason you need to nitpick about this with me? I said, in lower case letter, "retirement funds". I mean not any particular kind of funds -- not an IRA, not a Roth, not 401K, but all the money, stocks, etc, that people put away and then seem to be constantly complaining about in other threads that Fin Aid offices expect them to liquidate in order to pay for college. I also was clearly saying, "At that income level, your parents assets usually affect your aid." Even if things like this or that particular retirement account do not get included in calculating aid, it appears that there is an expectation that parents will draw upon or leverage those assets in some way to pay for school. As in "Yes, okay, my parents do have some money and stocks and stuff, but they were saving that for retirement, and it's not fair that schools expect them to use it for me! They're not going to support me in college, so why does their [insert asset here] have to count?" </p>
<p>When I filled out the FAFSA to attend college over 20 years ago, my family didn't have any of those things. When I filled out the FAFSA for my son this January, I didn't have any of those things. As a result, while I know questions are asked on the forms, I don't spent much time reading them, because the answer is going to be '0', for us.</p>
<p>Blake, I do, in fact, understand the difference. I've spent years helping others with tax issues related to it. </p>
<p>What I said is that if you have neither, there's no functional difference to you. The continuing snarkiness about "You don't know the difference" is starting to sound a little tacky and classist.</p>
<p>OK. Good luck.</p>
<p>Last post on this subject....If a family has their retirement money in retirement accounts colleges do NOT expect the family to liquidate those retirement funds...and in fact the funds do not factor into finaid at all. If, however, the family has their retirement "savings" in investments such as stocks, bonds, or other non-retirement savings, then that is considered liquid assets, not retirement money (no matter what the family's intent is....the reality is that retirement funds in most cases cannot be tapped for any reason before a certain age...while "liquid assets" can be tapped for anything at any time). So...for other families who may be interested...if you plan to save for retirement and NOT have these monies tapped for college expenses, put the retirement money into retirement accounts, not any kind of investment or liquid asset account. OH...and do this about four years before you apply for finaid. Perhaps this will help someone in who is reading this for future information.</p>
<p>Thumper: Agreed. When I see kids posting about that, I always think, "Wow, poor planning on the parents part, putting "retirement money" into stocks, etc." OTOH, I think that much of the time when it comes up, the parents just have assets, period, and are relabelling them "retirement assets" to justify not using them.</p>
<p>thumper1</p>
<p>Good advice. For much of our married lives, we didn't have a separate "retirement" account as my husband wanted the money easily liquidable for our business and yes, we were thinking that we would need that money for college expenses. </p>
<p>Then I read Paying for College Without Going Broke. It is just as you said. I felt like an idiot for not doing the research earlier.</p>
<p>Thumper--</p>
<p>Why do you say to put the funds from stocks/bonds into a retirement account about 4 years before applying for financial aid?</p>
<p>Thanks.</p>
<p>I think she said that because:</p>
<ol>
<li>You're limited in the amount you can put into a retirement account each year, so it may take several years to shelter sufficient funds get your assets below your asset protection allowance to maximize aid.</li>
<li>Best not to fund retirement accounts in the year before applying for aid, as it increases EFC due to reduced federal income tax that year.</li>
<li>Some colleges look back a couple years, and may not be as generous with aid if they see that you've been maximizing your retirement accounts just before applying for aid.</li>
</ol>
<p>Thanks! !</p>
<p>Somewhere it asked us to list current value of our 401 account - not the amount we contributed for that year. Just can't remember what form that was. Too many different FA systems (FAFSA, PROFILE) with several schools, such as Princeton & UVA, preferring their own systems.</p>
<p>For a very few schools, there is a Profile supplement that apparently asks for the value of 401K accounts. I never had to fill one of those out, but I have heard of others who did. Still...it is my understanding that the amount of money IN a retirement account is never used as an asset for calculating need based finaid.</p>