<p>I've seen your numbers before, how much is your mortgage principle to get interest of 60K per year. That's higher than my AGI!</p>
<p>My mortgage interest is about 4300 a year on an original mortgage amount of $85000. I realize property in California is higher, but you must have a mortgage on over a million dollars?? Yikes.</p>
<p>My real estate tax is $1500 and my city wage tax is about 3000.</p>
<p>There are a lot of rules in the FAFSA formulas that hit some people harder than others. I am a single, self-employed, home-owning Californian so I am very much aware of the ways in which the formula is "unfair" to me. I put "unfair" in quotes because if I were still married to my ex or if I got remarried to someone else, I would no longer be single and I would have a larger asset protection allowance, but then I would have 2 incomes to report -- so FAFSA is actually doing me a rather large favor give the fact that my ex is still very much alive and earning money, even though he doesn't give me any. The CSS Profile system is not nearly as forgiving. </p>
<p>Obviously someone who is widowed would not have that rationale -- there is no second-parent income floating around to be considered in any case.</p>
<p>But the point is that there is a rather arbitrary set of rules that was created for a variety of reasons, with simplicity of administration being one important consideration, and overall fairness in the sense of "the same rules apply to everyone" also being important. Of course, since everyone is not the same, the application of those rules will inevitably treat some individuals harsher than others -- but the alternative is a system that would be much more convoluted and open to manipulation. </p>
<p>The FAFSA system DOES allow colleges to consider individual circumstances and make changes in the exercise of "professional judgment". This shifts the burden of making those judgment calls onto the individual colleges rather than having them been made by the US Dept of Education -- and once your child is enrolled in one college (as opposed to having applications pending at a dozen) -- the wisdom of this approach becomes apparent. </p>
<p>The PJ system is also governed by a set of rules, so that no college is going to make an adjustment to allow a family to subtract out their expenses for their annual vacation to Tahiti -- but there may be situations that can be explained to the financial aid department. For example, if the family is in debt because of medical expenses, that information (along with documentation of the source of the expenses) might be the sort of thing that would be considered. Sueinphilly's 4% city wage tax is the sort of thing that could also be considered -- a college could take that information and add it into the field on the FAFSA where federal taxes paid are listed, thus subtracting it out from income. </p>
<p>Note the "could" -- the fact that the college has discretion to make such changes doesn't mean that they will. But if Sue's earned income is $50,000 then that would translate to an additional $2000 in annual taxes paid -- it certainly would be worthwhile for her to write to the financial aid departments and request that it be considered. I itemize deductions, so state and local taxes do show up on my tax returns, and I know that my daughter's college does pick up on "excess taxes" and make adjustments, even without my asking. </p>
<p>I'd also note that my daughter's college gives me a bigger asset protection than the one specified for FAFSA, as part of their CSS Profile calculations. (I found that out simply by asking). That doesn't help all that much, since my home equity cancels out whatever benefit I get from the bigger allowance -- but it is an illustration of the effect of utilizing a different formula. No matter how the rules change, it will benefit some people and hurt others. </p>
<p>Finally, I'd note that people who are saddled with consumer debt or who have mortgage payments that are 75% of their AGI have a financial problem that is independent of the financial aid system. I don't think financial aid was ever intended to bail people out of situations of overwhelming debt -- unfortunately, that's a problem for the bankruptcy courts.</p>
<p>Yes, my mortgage principal is a little over a million dollars. This is very common where I live, as are interest-only and stated income loans. Thank goodness I refinanced before the credit markets imploded because jumbo loans are much more expensive now. There are no houses on the market for under a million dollars in my town at the moment, most are around $2 million. Condos go for $700-$900,000. My house is nice, but it's far from a mansion. I'll sell the house once my kids are through college, possibly before.</p>
<p>Calmom - just saw your post. I don't really have a "financial problem" even though the raw numbers and the % of income that goes to my mortgage might imply otherwise. I'm starting up a new business and therefore I've made the calculated decision to live on savings for a couple of years to focus on that. If it takes off, I'll be in good shape, if it doesn't, I'll find employment that will be sufficient to support my family. It's a risk that I'm comfortable with. I don't recommend it for everyone ;)</p>
<p>As a single, self-employed, homeowning parent of two kids in college, if I had one reform I could make to the financial aid system, here is what it would be:</p>
<p>I would create another avenue by which young people could establish independence, in order to allow hardworking youngsters whose parents can't or won't pay for their college to be treated based on their own income and assets. </p>
<p>From what I have seen and experienced, issues like the amount of a parental asset protection (when only 5.6% of assets at most are counted in any event) or other parental debts are trivial in comparison to the situation of a kid living on his own and earning minimum wage or barely above that while trying to work his own way through school.</p>
<p>My own son has supported himself since age 20. He has not lived at home nor been claimed as anyone's dependent since 2003. When he was age 23, he decided to go back to school -- and he could not qualify for any financial aid because of the combined impact of consideration of parental income and the treatment of his own income and savings when viewed as a "dependent." His EFC simply was higher than the COA at the public, in-state university he chose to attend. </p>
<p>During his first year after returning to college as a transfer (his junior year), he got a half time position with Americorps. He also reached his 24th birthday. </p>
<p>The difference in financial aid eligibility with his age-acquired "independent" status is phenomenal. He qualifies for a Pell grant, which by itself is more than the total amount of his in-state tuition. He also earned an additional $2300 of educational benefits at the conclusion of his Americorps term of service. He applied for, and got, some additional merit money. Essentially he will not have to pay another dollar in tuition -- he'll use the Americorps benefit to help pay off outstanding loans -- and he should be able to graduate debt free. At age 25. </p>
<p>While this has worked out well for my son, I simply would like to see 20 year olds have the same opportunity. Not kids whose parents are trying to manipulate the system, of course -- but the many, many kids who really, truly do not have parental support to rely on if they choose to attend college. </p>
<p>In my son's case, I see two factors that could be used as triggers for "independent" status -- one is a history of full-time employment and independent-filing tax status, coupled with sufficient income to support himself and maintaining a legal address separate and apart from parents. (He could easily have produced copies of his leases if proof of residency was required). The other is the Americorps service. </p>
<p>I'd like to see an Americorps or Americacorps-like program where students could make a service commitment and emerge from it as "independent" for financial aid, the same as with military service. In other words, there should be a national service option that doesn't involve going to war and is reasonably available to students who may not meet the requirements for military service (such as my daughter's many gay friends) -- and students who opt for that approach should be able to earn educational benefits as well as independent status for financial aid. </p>
<p>Anyway, that's how I see it.</p>
<p>vballmom, based on your last post it sounds like you have made a calculated decision concerning finances as you embark on a new business. You actually are one person who has benefited from new FAFSA rules about the treatment of "small" businesses, since you do not have to report your new business as an asset until you have more than 100 employees. I don't consider a business with 95 employees "small" but that's what the rules are now -- so it does give a lot of leeway for individuals like you that simply didn't exist a a few years ago. So you could be sitting on another million dollars worth of inventory, equipment and vehicles - and not have a dime of that considered in the financial aid process. </p>
<p>If you have money in savings to live off of while building your business, presumeably you could have chosen instead to use that savings to pay for college. In any case, you have an $80K AGI but are living a lifestyle more appropriate to at least a $150K+ AGI. (I mean, how much would you have to be earning to qualify for the mortgage you now have?) I live in California, too, in one of the most expensive areas in the state (SF Bay Area) but the homes in my neighborhood certainly aren't going for $1-$2million. So I'm pretty sure you live in a nicer neighborhood than mine, but mine is certainly no slum -- its just one of these working class neighborhoods filled with small homes set on postage-stamp size lots. </p>
<p>I'm not trying to attack you in any way -- its just that I don't see any unfairness in the way you are treated, because your current income situation related to your mortgage is a choice you have made. As you've said, you don't have a financial problem --you simply have chosen to take a path that cuts into your income for a few years, but you are hoping that your long term prospects are much better. I ran a calculation -- your AGI translates an EFC of around $17K -- since you have savings, your EFC is probably much higher than that -- but again, this a choice and I would assume that you considered the issue of paying for college as well as everything else when you made that choice. </p>
<p>The point is, no one in their right mind would make a choice like yours unless it was part of some plan with an expected payoff in the end. When I split up from my ex a dozen years ago and my income suddenly went way down, the first thing I did was trade in my leased mini-van ($425/month) to cheapest car I could find (Dodge Neon) -- it was pretty obvious to me at the time that a reduced income meant that I had to cut back on my lifestyle. So the FAFSA system is not intended as a leveraging tool to benefit people like you -- it really is intended to give assistance based on an implicit assumption that $X of income usually represents $X of lifestyle. </p>
<p>So maybe, as tough as it is for me to come up with $20K for my daughter's college next year, the reason I see the system as more "fair" is that I really am living the $50K lifestyle that matches my AGI, and I have only the expenses that go along with that lifestyle. And I am very grateful to be living in my overpriced shanty. ;)</p>
<p>Hi Calmom,
We're probably neighbors! And I don't feel attacked, no worries. I'm also not complaining, as I've been diligent about saving money for the past 25 years and will be able to afford whatever college my boys choose, one way or another. I'm really just here to educate myself and perhaps to help others who might be in a similar situation.
I actually thought that the value of my business would come into play in the FAFSA calculation, which is problematic because the value is in intellectual property, not inventory etc, and thus very difficult to put a number on right now. But if it's true that I don't need to report my business as an asset until I get to employee #100, then I'm far away from that point. Another bit of information learned, thanks!</p>
<p>See:
Small Business Exclusion
<a href="http://www.finaid.org/fafsa/smallbusiness.phtml%5B/url%5D">http://www.finaid.org/fafsa/smallbusiness.phtml</a></p>
<p>This is the first year of this exclusion, and I have very mixed feelings about it. I am a freelancer (work from home) -- no employees, no inventory, no equipment beyond basic stuff like a computer, printer/fax, desk. But in the past because I filed a schedule C I was always required to state a business value -- if I left that part of the FAFSA blank or stated something very low, I would get inquiries and questions from the colleges. My son's first college simply assigned a value equal to my entire net income for the previous year: if I earned $40K, my business was an "asset" worth $40K. No amount of explaining to them what I did changed things -- I mean, I couldn't exactly sell myself for a years' worth of earnings, could I? </p>
<p>So I really think that reform was needed in that area.... but I can't fathom how anyone could justify exempting a business with 90 employees -- that really seems like a financial aid reform that benefits people who are quite wealthy -- and as I noted it would be relatively easy to protect assets by investing them in inventory and equipment. I would have thought it more appropriate to protect family-owned businesses, perhaps with up to 12 or 15 employees -- but beyond that it's starting to look like a lot of money. (And by 100 employees they mean full time or full time equivalent -- so they could have an even larger business going if they hired a lot of part-timers). </p>
<p>And meanwhile there are single parents who have nothing at all but their paycheck who have a skimpy asset protection allowance of only $20K or so. </p>
<p>So I just don't get it. It sounds like the kind of loophole a person could drive a truck through (or 50 trucks, if that is the kind of purchase that will help shelter those assets).</p>
<p>AFAIK single parents are screwedfrom every direction. And I'm a single parent who never received any child support, my son has never met his father and his name isn't on the birth certificate. Yes, I had a child out of wedlock on purpose and didn't make him pay up.</p>
<p>And the day my son was born (ok, the next week), I was laid off from my job. It took me 8 years to get back to the salary level I left in 1989. The past 10 years have seen my salary from 1997 nearly double. BUT, because I have maintained the most possible frugal lifestyle you can imagine (no I don't reuse dental floss- have to draw the line somewhere), I have a bit of savings (60k) and a 'middle class' income (52K agi in 2006). </p>
<p>My EFC is 12k for 2007. the one state school he applied to offered little in grants/scholarships because the COA is so low. Big private university (NYU) gave him a 30K scholarship, perkins, stafford, WS and I cover the rest.</p>
<p>thank GOD I live like a pauper even though I could afford not to. Please let my 1991 honda keep running and my roof not leak and my heater and AC keep running.</p>
<p>
[quote]
who on earth came up with the idea that a single parent needs less than half the asset protection that 2 parents need?
[/quote]
</p>
<p>Your elected representatives in Washington, D.C., that's who. When the fafsa rules were passed, Ted Kennedy was Chairman of the Educ subcomittee. Since he is back in the big chair, you could start a letter writing campaign.</p>
<p>This thread has certainly meandered in various directions, but to get back to the original point: colleges, and the FAFSA formula, assume that families will devote a portion of their income to education. A middle-class family that is currently spending 100% of its income will likely find the EFC too high. A middle class family that is spending more than 100% of its income (as evidenced by credit card or other consumer debt) will find the EFC even less affordable.</p>
<p>The ideal approach is to adopt a saving lifestyle. This will create savings for college expenses, and disposable income that can be applied to paying for college when the time comes. Of course, changing life circumstances (divorce, business failure, loss of job, etc.) can change things in a hurry. And in some geographic areas, it can be difficult to adopt a saving lifestyle and live in a reasonably safe neighborhood.</p>
<p>College financial aid officers don't have a lot of sympathy for families who live in nice homes and drive nice cars but don't seem to have any disposable income to pay for college.</p>
<p>We haven't filled out a FAFSA since DH was in grad school in the 80s -- does FAFSA ask what kinds of cars one owns? I know they did when I was in undergrad, but they also used to ask for one's amount of consumer debt, mortgage payment, etc.</p>
<p>I can certainly vouch for the saving lifestyle. Made the transition to one salary when I had to leave my job due to illness a lot more manageable. It's made it harder to save for college, but it hasn't been catastrophic. I am thankful every day for good health insurance, without which we <em>would</em> be up a creek without a paddle.</p>
<p>No, the FAFSA doesn't ask for info about cars.</p>
<p>Roger, thanks for the comments.
quote--
College financial aid officers don't have a lot of sympathy for families who live in nice homes and drive nice cars but don't seem to have any disposable income to pay for college.</p>
<p>We live in an old rickety house across the train tracks and our single car for our family of five is a 1994 with 175,000 miles.</p>
<p>Very interesting to hear from the above poster countingdown that, previously, FA offices took consumer debt into consideration. Then it was changed. Bad idea. So they removed that consideration AND THEN at the same time college expenses such as tuition went way over the cost of living; certainly much higher than the rate of increases I have enjoyed over the same time. College consumers, then, get a double whammy.</p>
<p>One thing I was wondering: if you have bigtime expenses after the FA was set in the first yr. might the 2nd yr FA be amended to reflect those expenses? As I posted, I have an old car, which is probably just waiting to blow. I have a 20-30,000 expense just waiting to happen, and I am not talking about college; I am talking about ANOTHER 20-30k.</p>
<p>
[quote]
previously, FA offices took consumer debt into consideration
[/quote]
</p>
<p>fafsa did too, but the federal laws governing fafsa were changed ~1988. And, no, if you purchase a car (or other consumable) on credit, that debt will not be considered by fafsa or Profile. If you pay cash, however, your assets will decrease by that amount, so efc will increase by ~5.6% of the cash outlay. Recognize, however, that colleges raise loan amounts each year, and the Stafford increases each year.</p>
<p>idic5,
The undergrad FAFSA asked for the consumer debt stuff back in the late 70s/early 80s. I remember when I first learned how much my parents made -- it was February of my freshman year -- and it was either they filled out the FAFSA or I had to leave school spring quarter. It was that hard to pry info out of them. I had a parental EFC of 0, I was getting no help at all from them, and I realized the only way I was going to have any control over my life was to go independent so I could get access to student loans without parental co-signatures. </p>
<p>This was back when it was possible for an undergrad to go independent, assuming one survived the first two years of going through that process. Going independent required two years of filing federal taxes as a single person, which meant I could not use the year I started college since I had lived at home until September. I also could not live at home more than six weeks out of the year, and could get no more than $750 in support from parents. The benefits of going independent, therefore, did not kick in until junior year. I did it when an in-state southern flagship could still be done for $3500/yr.</p>
<p>This made me curious about other things, so I dug through my files (and boy, was this educational!) and found our GAPSFAS (graduate federal FA forms) for DH's grad school from 1986-89. We had been married three years when he went back to school, so he was considered independent.</p>
<p>The form asked for, among other info:
1) Monthly mortgage/rent payment
2) Year the home was purchased/purchase price
3) Make, model and year of your automobile
4) Total car indebtedness
5) Monthly car payment
6) Amount of student loans already taken out on student/spouse's bahalf
7) Non-educational indebtedness, showing lender and purpose (beyond car and mortgage)
8) Student's unusual expenses</p>
<p>And this was on the FEDERAL form, not the institutional!</p>
<p>The institutional form (specific to his school) asked for:
1) Clothing and laundry expenses
2) Auto insurance premiums
3) Other transportation expenses
4) Medical/Dental
5) Child Care
6) Debt repayment, including spouse's student loans</p>
<p>It would seem that the default has become to eliminate professional discretion based on actual facts and circumstances in as many cases as possible.</p>
<p>Boy, we must have lived on love back then. We sure didn't have much money! :)</p>
<p>P.S. Oh, yeah, and the interest deduction for student loans went bye-bye in 1986 (by the good folks in Congress who brought you TRA '86; great for us pension practictioners, bad for all of us consumers), just as DS started grad school. Yet another whammy.</p>
<p>In addition to his post on this thread, Roger Dooley has written what I think are some excellent articles for CC. I highly recommend reading them. They can be found here:
<a href="http://www.collegeconfidential.com/financial_aid/%5B/url%5D">http://www.collegeconfidential.com/financial_aid/</a></p>
<p>counting, great info from the attic. </p>
<p>star, Great link. I will try to digest that good FA info. </p>
<p>It seems to me that pre-1986, it was much more reasonable for students. Government policy expressed a bias for, a priority to, the support of higher learning. I just saw an article in the paper that said average student debt (2004) was over $19,000, twice as much as 10 years ago.+ This means that the students have several years before their earnings are going back into the economy productively.</p>
<p>Then why was this changed? It was post - college for me and I was probably vegetating in front of the TV watching LA Law.</p>
<p>I discovered that a site I like reasonably well, <a href="http://www.collegedata.com%5B/url%5D">www.collegedata.com</a>, is sponsored by a loan firm. I wonder who is making out besides college administrators. </p>
<p>Let's affirm Mr Jefferson's notion of good public education for as many as we as a nation can get it to. Maybe some kid can figure this out. I'll vote for him or her.</p>
<p>Students carried an average $19,200 in debt in 2004, twice the amount they carried a decade before, according to the Project on Student Debt.</p>
<p>idic5,
You do NOT have to spend 20-30000 for a car. </p>
<p>When my 1991 Honda finally dies (which I hope is no time soon) I plan on buying a 5-7 year old Toyota corolla with under 75000 miles.. I plan on spending not more than 8000. Toyota has a reputation for longevity, I mean it's nothing for them to go to 200K miles with proper maintenance. Unless you have to have that minvan or you drive 50K miles a year, a new car IMNSHO is one of the biggest causes of useless spending out there. But you have to buy the right used car. And they can be had with relatively little effort.</p>
<p>New cars are a HUGE ripoff. Why pay for that depreciation when someone else already has. </p>
<p>IMO, people who buy new cars either have to be wealthly or want to be poorer. The cost of insurance on a used car is much less than a new one too. </p>
<p>You can buy a spray that has that new car smell if that's what is important to you.</p>
<p>idic5 (me) said--
We live in an old rickety house across the train tracks and our single car for our family of five is a 1994 with 175,000 miles.</p>
<p>yes, I agree in the wisdom of buying a reliable used car. I bought a used toyota minivan in '96 and hope it goes thru college. We go camping a lot and tote lots of junk with our family of 5 as well all the friends and extended family. a two yr old used toy minivan is in the 20s where we live.</p>
<p>This leads me to expand on the point that was a response to the point of view expressed by some that one is living profligately, then one is crying poor for college costs. Of course, this point of view assumes that college costs are very reasonable. It is the poor cryer who is unreasonably over spending.</p>
<p>All one needs is a little water, a little food, and some shelter. Anything more can be considered unnecessary, and all the rest theoretically could be banked. Look at honest Abe, he became president.</p>
<p>So let the battle of parsimony choices begin. Hey, we do not have cable, and we have only gone to public schools, have only tent camped on vacations in the one single family car, take public transportation, and have rarely gone to a restaurent other than getting a pizza, ... and on and on. We can always be MORE parsimonious. We said we went tent camping on vacation. We could sleep in our yard. No, not in the yard we live next the train and would die of diesel exhaust. But we COULD dispense with vacations. We could get our meals from the local river even tho it is very polluted.</p>
<p>but we do pay for private violin lessons. maybe that ec will pay off?</p>
<p>and I wish I did not get malignant melonoma.</p>