<p>A hypothetical question. Let suppose a couple retire with no mortgage debt, file 1040EZ which means EFC = 0, do private colleges that are non-FAFSA take into consideration of the retirement account and the home equity?</p>
<p>The CSS Profile asks about retirement assets and home equity. Most schools do consider the home equity, but may limit the amount taken into consideration, usually as a multiplier of family income. (So if family income is $50K and the home equity is $300K, and if a particular college only considers 2.5 the value of the home equity, then for that family only $125K of the home equity would be considered).</p>
<p>The colleges say the are consider retirement assets for informational purposes only - that is, they don’t put it into the formula – but I don’t know. My own retirement savings are pretty small so – for me - I think that’s true. But if someone were sitting on $2 million of retirement assets – I wouldn’t count on the financial aid office disregarding that.</p>
<p>Also remember the primary requirement for the automatic 0 EFC is that the AGI must be under $30k.</p>
<p>I thought from one of financial aid book that I read, automatic 0 EFC is when a parent file for 1040EZ or 1040A, is this not correct information?
So I checked out the 1040A form and the max income is $100K, page 70
<a href=“http://www.irs.gov/pub/irs-pdf/i1040a.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/i1040a.pdf</a></p>
<p>Planning retirement income range would be between $36K to $50K, so only $125K of home equity would be considered. 6% of $125k is $7.5K, this sound too good to be true?</p>
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No that is not correct at all. The primary requirement for automatic 0 EFC is an income of $30,000 or less(for 2009-2010).</p>
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<p>Schools that use PROFILE or their own apps can use any of the information they get any way they want to do so. As a rule, they tend to leave alone the qualified pension funds, but really, if someone say has some ridiculously high amount, say $5million bucks put away for a pension, do you really expect them to ignore that? Of course not. Where they draw the line is their business and that is one reason you will get different numbers from schools as to what they define as aid. </p>
<p>Home equity is another thing that is taken into consideration differently by schools. Some do not take it into account, others cap the amount they ignore and any excess is considered.</p>
<p>Are pensions, 401K and IRA treated differently. I read that $60K/year pension is like having an equivalent $1.6 million. For bankruptcy case, IRA and 401K are treated differently, would $401K and IRA be treated the same or different for financial aid?
How about fixed annuities that are invested with after tax money? Any info would be helpful?</p>
<p>It is unfair, but pensions are treated differently. The present value of a future pension is not included in assets if those assets are that of a company. Sometimes those pensions are absolutely not accessible until retirement or unless certain conditions are met, so they are not necessarily sure things. But sometimes they are. You can’t borrow against those pensions easily either in many cases. That’s why they are not included as assets.</p>