EFC Calculations - OUCH!!!

Paying for College
61

<p>On the surface, the way EFC is calculated seems unfair, but if you look at the way people abuse loopholes, it makes perfect sense. You have a child a couple of years away from college, and 2 younger children. You want to protect your assets, so what do you do? You put everything in the name of the younger kids. When they get a bit older, it can be transferred out of their names. To keep people from doing that, they treat the whole family as a single unit. It’s the same reason students are considered dependents, whether their parents intend to pay for college or not. </p>

<p>It used to be a common practice for students to take a gap year so they could be independent - the colleges caught on. Students used to spend 2 years in community college because they weren’t ready for a 4-year school, now they do it to save money. The 4-year schools want those students to be loyal to them, and want them there all 4 years (after all, your degree comes from them, and people are going to expect the same level of education whether you started at the CC or the 4-year. So now they give better merit aid to First-time college students (freshmen), and less to transfers.</p>

<p>Our income is just barely 6-figure, and we have an EFC around $30,000. We did our research, and dropped some schools from our list because the NPC was coming in way too high. We can come up with about $25,000 because we planned ahead - $5,000 per year from a 529, and just under $20,000 from salary - we have no intention of taking loans if we don’t have to. But in order to do this, we have always paid extra toward our mortgage, with the idea of paying off before tuition comes due (we paid of this past summer). The mortgage payments will now become tuition payments. By paying extra, we lived a bit below our means - we don’t have $150 a month cable, $200 a month cell phone bills, like our neighbors. Since we don’t have to give them up to afford college, we won’t miss them. We do vacation - on a budget, and generally have nicer vacations than our neighbors, because we own timeshares (bought resale, so no big costs) and leverage them to travel where we want, without big swings in costs. Typical families in our town will all have EFC in roughly the same range, but many who attended the last financial aid night were shocked. The FA officer who did the presentation showed a list of 20 things that could be cut to come up with $25,000. We laughed because we couldn’t cut much of any of them, but we’re also not worried about coming up with the money.</p>

<p>Some may take this the wrong way, but of D’s friends whose parents balk at their EFC, most have been living a bit above their means for years. They will need to make cuts, but if they had made the cuts way back when, they wouldn’t miss any of it. D’s friends will graduate with debt, she will not.</p>

62

<p>The year my husband and I had zero income - husband is retired and younger than 59.5, I was caught in the auto mess and unemployed we had an EFC in excess of $30,000…with zero income except for unemployment. The severance ended up paying out in the previous year. So yeah…every friggen’ cent is an accurate description. County your blessing there are tuition benefits for your kids. Hopefully you told them their “choice(s)” for college :-)</p>

63

<p>I live in an area where there must be 20, 30 colleges well within a 45 minute commute, so yes, I know it’s a lot, especially when you have a freshman. It likely means having to get the kid a car which is small expense which means upkeep for it, maintenance, gas, maybe tolls, and trouble, nearly always trouble and always worry that first year a kid gets a car. But for a state flagship, nearly free tuition and alot of folks in the area making that trek plus job opportunities there not present where they llive, it would have been worthwhile especially considering the costs of the alternative. </p>

<p>Carly, what did you have in mind for college costs before running those numbers? Funny, (not the ha ha kind) when my oldest went to college, the most expensive schools in the country had COAs that are now surpassed by a number of OOS publics. I was thinking back then that it couldn’t get much more expensive. Penn State those days was $8k a year for in state for tuition, I remember and about $13K OOS. These days, though, it is still a good deal among flagship OOS schools, especially the well known ones with some of them coming up at the $50K mark. The instaters in PA have it rough as their own costs for that school is up there.</p>

<p>CTScoutmom, I didn’t think FAFSA asked for sibling accounts, though PROFILE does. The 529 situation exists because when the accounts are in the parents’ names, they can be switched at any times…though I guess the same could be said about any assets.</p>

64

<p>Moving money from one minor’s account to another, besides being unethical, is against state and IRS regulations and can be the subject of lawsuits. Money in a custodial account is to be used for the benefit of the minor. This goes for UTMAs, UGMAs (in states that have them) and custodial (UTMA) 529s. If you were to change the beneficiary of a custodial 529 and use the money for a different child, you are probably in violation of the UTMA. Note that this does not apply to parent-owned 529s which allow for the beneficiary to be changed.</p>

65

<p>

First of all, I don’t believe that there is ever ONLY ONE OPTION. Put it this way - what would your upper bound be on what would still consist of an “option”? Second, yes, some kids would forgo that as an option and not go or do something else - and that would be a reasonable decision, notwithstanding the naysayers on here. Third, yes, I realize that some people commute that far to work. I also know that others cannot or don’t take jobs that far from their homes.</p>

66

<p>Right, there often isn’t only ONE option. For many who can’t afford to “go away” to school, joining the military and getting one’s education paid for that way is a second or third option. For some others, maybe getting someone to co-sign big loans is an option. </p>

<p>However, since most of American’s college kids commute to school, many find that even traveling a distance is the best option when nothing else is affordable. Yes, some may opt not to seek a college education - especially those who have an interest in careers that don’t require such. But, if you want to be a teacher, engineer, or nurse or something else that requires a college education, and you don’t want to enlist, then commuting 45 minutes may be your most reasonable choice.</p>

67

<p>If our EFC is in the low 30’s and we have two kids in college next fall, shouldn’t the balance be areound 16K each kid? It seems that the schools my 2nd is getting into are expecting 22, 24, 28, 30,K / year just for that child. Aren’t schools expected to “split” the EFC once you have 2 in college?</p>

68

<p>That’s not necessarily the case - the federal EFC may be split, but schools’ calculations with CSS PROFILE are different.</p>

69

<p>If our EFC is in the low 30’s and we have two kids in college next fall, shouldn’t the balance be areound 16K each kid? It seems that the schools my 2nd is getting into are expecting 22, 24, 28, 30,K / year just for that child. Aren’t schools expected to “split” the EFC once you have 2 in college?</p>

<p>what kind of schools are these? Most schools don’t meet need so once you’re EFC is beyond Pell, the school doesn’t have to pay much attention to your EFC. Keep in mind that most schools do NOT have a lot of free money to give away. They’re not obligated to give you more money simply because you have multiples in school. If they don’t have the money, they don’t have the money. It’s as simple as that. </p>

<p>EFC is a federal number. Schools aren’t obligated to respect it at all except to see if you qualify for federal aid (which isn’t much).</p>

<p>This can be shocking for families who have a high EFC and expect aid when a second child goes to school. Last year a father posted with his complaint. He had allowed Child 1 to choose a pricier school (costing about his EFC) over a school with good merit because he thought that the next year when Child 2 went to school his EFC would split and he’d still pay the same. Lo and behold he found out that since neither school “meets need” that he wouldn’t be getting any “free money” from either school. He was very upset when he realized that he was either going to have to tell Child 1 that she couldn’t return to her school or tell Child 2 that he was going to have to a cheap school so that he could still pay for the older child’s tuition. Ugh.</p>

<p>If your children go to CSS schools, the split is 60/60 if it meets need. If it doesn’t meet need, then the split can be even less favorable.</p>

<p>I know it’s frustrating, but attending private schools is a luxury. If the schools don’t promise to meet need, then parents have to expect that they may end up paying for most of the cost regardless of what the fed govt says is their EFC.</p>

70

<p>i*daughter is in the top 3% of her school, has a 2120 SAT combined score and wants to major in Creative Writing. She is looking at Pomona, Kenyon, Washington University in St. Louis (her sister is there), Northwestern, Emory, Hampshire and possibly Seattle University and University of Denver. *</p>

<p>If your D gets into WashU or a couple of the schools listed above that “meet need” then your “family contribution” will be 60/60, since the sibling is at WashU. However, some of those schools do NOT meet need, so they may just give a grant that they can afford to give and that’s it.</p>

<p>I’m not sure if the 60/60 split also includes the “student contribution” or not. Also, loans can be included in the FA pkgs.</p>

71

<p>Another issue with CSS schools is that you’re not really given an EFC. You’re just told what you have to pay. So, if your “full pay” for one child, you may wrongly think that your cost will split with two kids. However, you may find that you’re full pay or near full pay for two kids since you were never given an “EFC” for the one child. Your EFC may really be $100k, but a CSS school isn’t going to tell you that. They’re just going to say that you must pay $59k…the COA. So, then when Child 2 comes along, and you think that $59k will split, it won’t. You’ll end up paying at least $100k. That’s also a bite in the fanny for some families.</p>

72

<p>“we have always paid extra toward our mortgage, with the idea of paying off before tuition comes due (we paid of this past summer). The mortgage payments will now become tuition payments”
(forgot how to put that in a box)</p>

<p>Much of what ctScoutmom said seems like a plan we could work with. What affect, if any, would paying off the house have on potential financial aid? I know that if we just save that money it would be considered an asset, but it would then be available to pay for college. Is a paid for house (well under 200k in value) an asset that would negatively affect aid?</p>

73

<p>Home equity is not considered for FAFSA, but is taken into account for the CSS Profile. You would have an asset “allowance,” but any equity above that allowance would be assessed no differently than if it were sitting in a savings account.</p>

74

<p>Is EFC based off total income or AGI? We were given an EFC estimate based on 2011 tax return. When I used the data retrieval tool to correct the FAFSA with 2012 income, it added the exact dollar AGI income increase to the original estimated EFC. I am thinking once I went over a certain dollar amount, it added everything over that set amount. (not sure, but guessing it may have been AGI over 75K…) Still not sure, but we were not expecting the entire dollar amount to be added to the EFC. We are talking about 12K increase in EFC from estimate based on 2011 tax return, so it is not like it was tons of extra income. I expected a percentage increase, just not the whole amount. I wish the IRS Data retrieval tool be have made an error :slight_smile: Am I thinking about this correctly?</p>

75

<p>FAFSA uses AGI. <a href=“http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf&lt;/a&gt;&lt;/p&gt;

76

<p>Your estimates were probably off - particularly taxes paid - this would have given you an artificially low EFC when you did the estimate. Look at the difference in taxes paid between your estimate and the retrieval … was that the reason?</p>

77

<p>Marybee, you can go through the 2013-14 fafsa formula here:</p>

<p><a href=“http://ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf&lt;/a&gt;&lt;/p&gt;

<p>Regular Worksheet A. Seems very unlikely that your EFC could go up dollar for dollar based on the income increase alone. Once your AGI is above the Income Allowance in Table A3, available income goes up dollar for dollar but then it’s likely you paid more tax with a higher income so that subtraction likely increased too. Then table A6 shows the maximum marginal rate of parent adjusted available income(which includes about 5.6% of reported assets over your allowance) for EFC is 47%.</p>

<p>Did you do the retrieval tool for the student also or manually change any of the student’s numbers at the same time?</p>