<p>I know that our income will figure prominently in the financial aid formula. But what effect will the following have? How much equity we have in the house, value of our two cars, value of our musical instruments, value of retirement investments such as TIAA-CREF, Roth IRA, etc., value of educational investments (NY 529).</p>
<p>A related question: am I right that my 11th grader should not keep his savings from his summer jobs in an account in his name? Is it okay for him to have that money in an account that's joint with me, or would it be better for him to park that money in my savings account?</p>
<p>Any advice much appreciated.</p>
<p>Out of the thousands of colleges about 300 use both the FAFSA which allows students to take out direct loans and gives colleges funds to disperse to low income students AND the Profile. FAFSA does not take into consideration home equity and does not count income in retirement accounts like 401ks and IRAs but does count the income that is deposited in the year being considered and of course assets. Profile colleges obtain information on all sorts of situations like business income, home equity, etc. although each college uses the information individually, so not all profile schools do the “same thing.” FAFSA does consider a higher percentage of student funds than the percentage that is assessed parent funds. The best thing for you to do is run both calculators. You can play with the numbers and get an idea of how the college will view your personal situation. If you are self employed the Profile colleges will generally add back to income some of the deductions. I’m not familiar with TIAA-CREF so you’d probably need to read the form fine print. Finaid.org has much of the basic information. The most basic answer is finaid is determined by income AND assets.</p>
<p>Thanks for answering. I should clarify that I’m not yet at the point of distinguishing between different ways schools calculate our contribution. Rather, I’m trying to figure out how to safely bolster our retirement investment, which is not in very good shape.</p>
<p>You said FAFSA “does not count income in retirement accounts like 401ks and IRAs”. I find this quite reassuring. It sounds like I can go ahead and put some more money in without that having a detrimental effect on our financial aid picture.</p>
<p>When you talk about assets, I think you must mean the two cars, the savings account and the musical instruments.</p>
<p>What about the NY529? I got a break on the state income tax for investing in it. It’s a state-administered education investment. I think each state has one but the name might be different.</p>
<p>Thanks again.</p>
<p>Assets in retirement accounts are not counted by FAFSA, but any money contributed to a retirement account in the tax year being reported on FAFSA is added back to income in the EFC formula. In other words, you can not reduce your income for FA purposes by contributing to a retirement account.</p>
<p>FAFSA does not ask about things like cars and musical instruments. The primary home is also not a reportable asset. Reportable assets are things like bank and savings accounts, stocks, bonds, real estate other than your primary home, trust funds etc etc.</p>
<p>Students have no asset protection and 20% of the student’s assets go to the EFC. Parents have some asset protection based on age of the older parent, then only up to 5.6% of remaining parent assets go to the EFC. </p>
<p>529 accounts are treated the same as other assets - so up to 5.6% goes to the EFC. But 529 accounts in the students name get a break, they are reported as parent assets so are only hit by the 5.6% rate rather then the 20%.</p>
<p>We were never asked the value of our musical instruments on the Profile. We have two kids with a total of ten instruments. Never was asked on any financial aid form… Certainly one college knew… The kid was a music major.</p>
<p>The equity in your home might be used to some degree by some Profile schools. The balances IN your retirement accounts are not listed as assets, although the Profile does ask for the value.</p>
<p>. I find this quite reassuring. It sounds like I can go ahead and put some more money in without that having a detrimental effect on our financial aid picture.</p>
<p>Deposits made into retirement accts are counted. So if you deposit money in 2012, then when you file in 2013, that money will get counted.</p>
<p>Your son’s savings will get counted. I don’t know if putting the funds in a joint acct changes anything since his name would still be on the acct. I think the entire amount would have to be in parents name only.</p>
<p>First find out if your income/assets are too high for aid anyway. Sometimes people do these financial gymnastics and then find out their income/assets are too high no matter what they do.</p>
<p>Having accounts in the students’ names is an automatic extra hit so yes, he should pay you his expenses or pay his own expenses, to keep that balance down. That is part of smart planning and is recommended by any guide to college costs and planning.</p>
<p>As for money you put into 401Ks and the such, it’s not as though you are getting adverse treatment of the contributions. It’s just that unlike for taxes, they do not get exempted from income. At the end l ikeof the year, they will not be included in assets as they would be if you did not put them in such a vehicle. </p>
<p>The schools that tend to be the most generous and meet all or nearly all of need, will be those schools that use financial aid applications in addition to FAFSA such as PROFILE and they look at everything. They tend to be easier on qualified accounts but they do eye them and if they feel there is plenty in there, they are taken into account by a number of such schools. They do want the information on them. Boston College out and out says they do take those accounts into consideration , for example.
Good advise everyone here is giving you. As Mom2collegekids says , do check to see where you are in terms of aid eligibility. You may be going through a lot for nothing if your need figure does not qualify you for aid.</p>
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<p>YOU…the parent, would need to be the primary holder of the bank account. We had accounts for our kids where we were the trustees and where WE got the 1099 I statement every year. If your kiddo receives that form, it’s HIS account.</p>