Exactly.
For example, UIUC limits total family assets to $50k to qualify for illinois Promise (full ride for EFC 0) and Illinois Commitment (full tuition for income < $67.1k)
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I don’t know of any yacht owners receiving significant need-based aid. Plus the dock fees and all that.
My question is: why are you asking this now? Why not when you ran the NPCs at these schools? Or years ago when you could have planned for this.
As a business owner you had more flexibility than most over the years to move funds into retirement accounts.
As far as your “really nice” house, there are schools where that wouldn’t matter, and there are just plain nice houses that cost less. So, there were options there as well. Why should any college fund the “really” part of nice for you?
My point is that, despite what you paint as a story of your own virtue vs. all those people receiving aid in their yachts, I see someone who didn’t plan well.
But, as others have mentioned, there are many good schools that would cost the 30k you want to spend. There are others, the vast majority of privates, that engage in exactly the kind of differential pricing as the Mercedes dealer.
And, finally, there are FA officers at these schools you can call and explain your situation. That’s what I would do. But I would do it with a different attitude than you expressed initially and with at least a bit of humility. My rather blunt reply was intended to show you there’s another perspective. Apologies if it was over the edge. But I help a few people every year try to figure out the FA process because otherwise they won’t be able to afford college. They aren’t thinking about yachts.
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I have often thought that the people who need lessons in retirement or college financial planning are the least likely to get them.
They should offer classes in public schools for parents of kindergarteners or early elementary school students. And then again at the beginning of middle school.
Many middle class and working class families just never get the chance to learn the best ways to save for college and retirement until it is too late. The people on CC are very savvy but the people I know in real life are clueless about all of this, even if they are being responsible and saving for the future. Then they go to a college financial night and learn that they can get a parent plus loan. It’s actually sad.
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For other folks reading this thread whose kids are younger…
Max out on your 401K, IRA or whatever is available to you given your employment status before you do anything else “for retirement”. There is one reason why I recommend that to everyone- even to folks who like to argue with me that they can get much better returns elsewhere.
And that’s because with every change in the tax code, every shift in the estate tax asset shield, every proposed change to retirement funding…somehow, the 401K/IRA lobbying crowd manages to get anything punitive dropped.
There is ample evidence that unlike stuff that only benefits “rich people” (excluding 20 million or 25 million in assets from federal estate taxes-- who cares?) the 401K/IRA crowd is “regular people”. And they still have enormous clout just because there are so many of them (of us). And I don’t predict that changing, regardless of what happens to federal student loan forgiveness, SALT, AMT, or anything else that could be on the table down the road.
Sure, accelerate the rate at which an inherited IRA has to be paid down. But eliminate the ability to pass on an IRA to your heirs? No. I cannot see anyone with an appetite to make that happen, even the most aggressive “tax the rich” legislators.
There’s more to retirement planning than just rate of return. You have to factor in the possibility that the rules will change AFTER you’ve funded something but BEFORE you’re collecting. But the 401K folks are numerous and noisy and I predict that those funds will be protected from legislative changes for a very long time.
Financial Aid? A side benefit. But you want your retirement funds where you think they are when you need them.
Real Estate- unfortunately for the OP, middle class people view real estate as the province of the wealthy (other than a primary home). So while there are lots and lots of tax breaks for developers, REITS, and the high end part of the industry, there isn’t a hue and cry when there’s a change in the tax code which penalizes small landlords, owners of a weekend home, etc. And financial aid- designed for the “typical” family with “typical” assets which means a house (or not, many middle class families do not own homes), an emergency fund in the bank, and maybe a money market account/IBM stock.
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Agree. And, OP, you are a business owner. You could open an individual 401(K), which has MUCH higher annual limits than an employee 401(k). In 2022 you can contribute (tax-deferred and shielded from FA calculation) up to $61,000! You could have been doing that every year.
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Well, contributing that in 2022 will protect that amount from assets, but the 61k will still be counted as income because the FA formulas add 401k contributions back as income.
Assets are usually assessed at around 5%, while income can be assessed at up to 47%, depending on the school and the income level. The time to funnel income to 401ks is prior to the base year. But that requires that people plan ahead of time, and if they don’t know they are supposed to, then they miss that opportunity.
Edited to add – I clicked the link and saw that the 61k is referring to the employer contribution. I agree with you that the employer contribution is excluded from FA calculations, but it is limited to 25% of salary, so the OP would have to earn approxiately $250k to contribute 61k as an employer,
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61k is the cap on all contributions. That total can consist of employEE contributions up to 100% of earned income and/or employER contributions with a cap of 25% of compensation. There’s a formula to figure those allocations out for self-employed persons.
But yes, the employer contributions typically would not be counted as income by FA offices.
What’s more, with a self-directed 401k the OP could eventually have shifted the entire inheritance used to buy the rental into a 401k account holding the rental in trust, with the rental income flowing to the 401k. All of it invisible from the FA forms.
I agree that not everyone knows all this far enough in advance and saving for college isn’t completely straightforward. But I would think if FA was a concern, chatting with someone about it would have been helpful.
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First, talk to a financial advisor asap about the realities of your current and future financial needs. Find someone who understands financial aid, taxes, retirement accounts, etc…,
Do not sacrifice your financial stability or your child’s to fund an expensive 4 year degree when there may be better options for your money at other colleges.
Next, please do not go into “rabble rousing mode when you start calling financial aid officers at these colleges. This will not get you what you desire. Remember, they may have been in the midst of assisting a kid who is considered homeless through McKinney-Vento, has recently lost a parent and their FAFSA/CSS will not reflect their current situation, or some other situation far removed from your scenario. There will be little incentive to move mountains for you especially if you show up to battle instead of calling to get more information to make informed decisions.
This is the reality. You can not afford colleges that only award need based financial aid or you have different priorities and do not want to pay that price. After you speak with your financial advisor, then talk to your child about what you can realistically afford. Our kids want honesty.
It would help to know which colleges you are concerned about.
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For me, After graduating, the value of graduating with strong grades, a good education, and no debt at all, was vastly greater than any value that might have come from attending a more expensive private university. So it is a take it or leave it risk.