<p>OP, I understand you feeling bad for your kid in this situation! Do you have financial aid offers from any other similar caliber schools (in hand or expected)? If so, and if they’re more affordable, you may be able to go back tot his school and ask them why their computations turned out so differently than schools X or Y. It may in fact turn out that they’ve made a mistake, or they may want your S enough to change their offer. Or they may not, in which case you do need to take them out of the running, and indeed assure your S that he has what it takes to thrive in many different places!</p>
<p>We are glad that our kid doesn’t really have his heart set on any particular place. We have told him all along that money will be a factor in where he can actually attend, and we’ll have to work it out after he gets all his offers on the table. We have already ruled out one EA school on the basis of the financial package not being workable. I was glad that that something we could do without emotion since S is not really in love with any one place. (He does have 2 other affordable EA/rolling schools where he has been admitted and offered enough merit money to make them doable.)</p>
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<p>mom2…this OP had all of the above…none are included on the FAFSA. There very well could be a HUGE difference in what the school calculates as need based on their IM formula and what the FAFSA calculates (since none of the above three items really is included on the FAFSA).</p>
<p>Yes, all those things are considered in the Profile. I get so upset when I see poster after poster talking about income levels…it’s income and assets. The fact that the OPs husband has two employees is very different than a sole proprietorship. </p>
<p>The presumption would be that the business is and would be an on-going concern (future income), I’m assuming they are adding back expenses that employees typically pay out of pocket (cars, retirement accounts, vehicles, etc.) and assuming that the OPs family will pay out of savings, current income and future income. The college could be assuming that the OPs H draws a low salary and plows the rest back into the business…which is a choice. </p>
<p>The OP can contact the college to understand how their worth was calculated. It’s entirely possible if the college erred, for instance if the H does not run the cars through the business, doesn’t fund the retirement through the business, doesn’t run the insurance through the business…and it’s proveable it’s entirely possible they might make an adjustment. I just have too many friends with small businesses that pay themselves a small salary, enough to pay for their house, groceries, utilities and run most of their expenses including their entertainment through their companies which does result in a “lower income.” </p>
<p>The OP isn’t going to know unless the OP calls and asks. And the OP isn’t going to be reviewed unless they can show that they are different from the vast majority of small business owners which they may very well be… But yes the institutional formula could be wildly different from EFC, if I remember FAFSA doesn’t even consider small businesses so a small business owner could look quite modest on paper.</p>
<p>thumper - those assets were included in the IM method… … So, I did not look at my EFC at 3,000 and expect BC to cover the rest. I took the IM which included those assets and then even figured that they would not cover that… added 8,000 more and thought I would be safe around the 20,000 number… I was wrong. I will call on Monday to see if I can find out what went wrong…
MathMomVT - Son has been accepted to 6 out of 11 schools right now… waiting on the other 5 . …although besides one the rest I expect him to get in. But, we have no other packages to compare with… So, the next month plus will be a little stressful…
Thanks all for letting me vent:)</p>
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<p>Yes…but you do NOT know how BC uses them in THEIR IM calculations. There is NO uniform IM calculation. I agree you should call them and inquire…there could be some mistake on their part. Or this is simply the formula they use. Ask…and at least you will know.</p>
<p>*your second property, your home equity and your business </p>
<p>mom2…this OP had all of the above…none are included on the FAFSA*</p>
<p>Thumper, why wouldn’t the second property be included on FAFSA? It’s an asset that is not a primary residence.</p>
<p>I do think that home equity has hurt them, but it doesn’t sound like they have a whole heck of a lot of equity. I wonder if the OP estimated home equity based on profit after “fire sale” and realtor fees and such? And, if equity is “capped” at an amount related to income (which is low in this case), then BC really shouldn’t have it “both way”…calculate the cap based on low salary, but then “adjust salary upward” based on being self-employed and adding things back in. I’m not saying that is what BC did; it just seems like they may have done so. </p>
<p>And, what “value” would they be placing on the business if the business is largely service-oriented with little equipment, etc. Would the value be what the H could “sell” the business for if he sold it this month? or what? </p>
<p>It will be interesting to see if BC has made an error some where.</p>
<p>There are a number of ways to value a business if, for instance, you wanted to sell it or someone wanted to buy it… it would depend on which one a college “chooses.” A quickie, quickie, off the top of the head would be 30-40% of gross sales TBD what the business is. The OP said there are no assets that’s it’s service so % of gross sales is an easy quick guesstimate.</p>
<p>I valued the business at 25,000 which is all the computers and printers… Without my husband doing the engineering its not worth anything. The Equity on our house I valued at 190,000 and the the piece of property we have at 150,000. Those are the assets I put down that we have… We are a family of 6…this is my oldest going to college. As I said the last two years our AGI was around 44,000 and 38,000. That pretty much sums up everything…I will call on Monday and see… but I doubt I will have any luck… but its worth a try…</p>
<p>Absolutely call…and let us know what they say. It will be interesting to see how they valued your primary residence equity…and also your business and second property.</p>
<p>Mom2…you are right…the second property would have been included on the FAFSA but the business and primary residence would NOT have been.</p>
<p>For a service-based business, it seems reasonable to just value the business based on any assets it owns, such as computers and equipment. On the profile, I did that for my H’s business and explained briefly in the comments field. You can’t really “sell” the business for a percent of gross “sales” because there would be zero sales the next year without the owner doing the work. The only saleable thing would be the hard assets.</p>
<p>$25,000 I think is grossly underestimated unfortunately…that’s probably where the issue is. The computers and printers are a depreciable expense of the business, the “business” value is related to the annual gross sales…you’ll have to come back and let us know what the college says. This has been a topic of interest for a number of years.</p>
<p>Just to update… it was not the property or the home equity it was my husbands business they took more into account. When owning your own business they do not look at your AGI. But, after a good conversation and explanation of somet things and our 2010 taxes now to look at… they will send a new report… so we will see… Boy, have I learned alot…if anyone wants just send my a private message if you also have a small business and are concerned…
thanks…</p>
<p>Gogiants…I hope this all works out for your child. Yes business expenses for the self employed are often added back into the AGI…many schools do this…but not all do it in the same way.</p>
<p>Ugh! My husband’s income is self-employment income also, and now I’m dreading how this will be interpreted by my S’s schools :-/ Are <em>all</em> business expenses automatically added back in, or are there specific categories (such as a deduction for business use of the home) that are most commonly added back?</p>
<p>Mathmomvt - I will send you a private message later tonight… I have to run out now…
Thumper - thanks for all the help… I just can’t way until May 1st comes along:)</p>
<p>* they will send a new report… so we will see… Boy, have I learned alot…*</p>
<p>Wishing you the best! Hope it all works out! Glad you called!</p>
<p>thanks GoGiantsfan29 – looking forward to it</p>
<p>In valuing a service business, there is also the cost of goodwill, which is very difficult to quantify. If your husband is a civil engineer with some contracts and contacts, another civil engineer could for example buy the firm and have an easier time getting new jobs. For example, if a construction company used “ABC Engineering Consulting” regularly and next time they wanted help they approach ABC Engineering Consulting, but this time a different person responds.</p>
<p>Again in a professional business like this, people may not want to deal with new face and goodwill may be less, but when you buy any existing business, service or not, there can be a good will factor that affects the price.</p>
<p>^^and that’s why there are differing methods for valuing a business depending on the service provided.</p>
<p>^^^ and also depending upon how long the business has been in operation, their reputation in the industry etc. It is a tricky issue, and in the OP’s case there may not be much transferable goodwill but that is a consideration in valuing professional firms. So the value is more than just the value of computers and assets. Goodwill can be depreciated i.e. is considered a capital cost.</p>