<p>Is the FA process for prep school similiar to the college process in that the schools usually believe that you can afford more than you actually can?</p>
<p>Do they take into consideration mortgage, utilities, expense of raising other children etc?</p>
<p>Yes – it is very similiar to the college FA process. The official stance is that they expect the parents to make sacrifices to send their child to prep school. They will expect you to tap into assets and will expect both parents to work. They do, however, take into account the expenses of sending other children to private school – however, if you have another child in private school, they will expect that you are also applying for financial aid at that private school.</p>
<p>Other special circumstances may also be taken into account – medical bills, childcare expenses, etc.</p>
<p>They will expect you to forgo vacations, expensive summer camps and other “discretionary items” if you are applying for FA.</p>
<p>They do ask about your mortgage, but they also ask about your home equity as well (there is an expectation of using that, I believe). Their formulas take into consideration family size, and as stef mentioned, special things like medical bills.</p>
<p>The schools expect you to send them a copy of all your tax forms as well to verify the figures you provide.</p>
<p>I don’t think it’s at all similar to the FAFSA; it’s a lot more detailed and you get a lot more chances to explain your situation. It also takes into account credit card debt…for instance, if you’ve had life situations which have required you to use large amounts of credit (major illness, job loss, etc). I feel that bs fa offers much more…both of my sons received very large packages at bs, but my older son’s EFA was considerably higher with very little fa (other than loans) at his private college.</p>
<p>If there is no equity available in your house, will that hurt, help?? Also, do they expect families to discontinue retirement plans?</p>
<p>I think it is more akin to CSS Profile in the questions they ask than to FAFSA.</p>
<p>Yes, they do ask your credit card balances and give you space to explain unusual circumstances, but likely compute the number without regards to the reasons for your debt (and likely disregard cc balances). The purpose of the report is to give a financial picture of where a family stands with regard to the ability to afford a BS. It allows a school to take the calculated number is (more likely based upon the income, home equity, and ordinary expenses of the family) and adjust it for things THEY wish to adjust for at their discretion.</p>
<p>Some schools are more generous in their treatment of special circumstances than others. This goes for both prep schools and colleges.</p>
<p>As to home equity, if you happened to be unfortunate enough to buy in at the top of the current market and are heavily leveraged, it may bet to your benefit, as it is one less asset to “tax”.</p>
<p>As to retirement contributions, there is a question where you declare the contributions to “pre-tax” (IRA 401k 403b) plans. I know that with CSS Profile (for college) that is considered “available income” and is “taxed” like any other income (added back to your AGI and assessed against). </p>
<p>Having said that, post-tax (Roth) IRA and 401k contributions do not show up anywhere on SSS or CSS Profile as they do not reduce your income (they show up in your AGI). And they do not show up on your 1040 either. That being said, if you have liquid assets (i.e. savings) that you want to shield from being taxed (by either SSS or CSS Profile) in the calculation of your EFC, putting $8K ($4K for each parent) in ROTH IRAs before you take a balance of your accounts would be an effective strategy for reducing your EFC.</p>
<p>You will find that need-based FA is a competitive game with parents trying to look poor and schools trying to give out as little as possible. Welcome to the FA games.</p>
<p>The SSS also gives you a chance to state if you have any other children in tuition schools and how much you pay per year. If they don’t take all of these numbers into consideration, why do they ask? The SSS certainly allows you to paint a more accurate financial picture. It takes pretty much everything into consideration…it was much more favorable for us, at least, than the FAFSA (and this is counting two bs and two college experiences).</p>
<p>I always wondered about the credit card debt. Do you get “punished” for it? Should you just explain it on the form or should you include another letter to the individual schools that can go into greater detail?<br>
It is definately a balancing game. You get a second job to pay for the difference between your demonstrated need and your award. Then your demonstrated need goes down…UGGH! At the same time, a classmate’s parent pulls up in a Mercedes right from their second home on the beach and to deliver their FA paperwork…And they qualify too! Because the company owns everything or something…I haven’t figured all that out yet. </p>
<p>The other thing that evidentialy does not show up on our 1040 is our health care spending account. That has been wonderful and a great way to have some tax free income to use for medical expenses - everything from co-pays to eye glasses to advil bought at CVS. </p>
<p>Anyway…it’s a game that I too would love some help playing.</p>
<p>I don’t know and I always wondered about that. It also asks for cost of camps and lessons (obviously probably a lot if you’ve been busy raising the best possible bs candidate!) It also asks amount spent on vacation and the cost of club dues over $250. Obviously, they are looking for areas where they would expect you to cut back. Lucky for us, we don’t go on vacation or belong to any fancy clubs! Our camp/lesson expenses were high due to club soccer and gymnastics.
We explained our credit card debt in the space provided. We did not use our cards frivolously at all…it was out of necessity during a period of unemployment. It still adds up quickly!</p>
<p>From what I’ve been able to gather, the SSS calculated EFC, is purely that - a number derived by applying a formula to a set of applicant supplied numbers. Which numbers they use and how they apply them to a the formula, is left entirely to our guesses as it is a fairly closely guarded secret.</p>
<p>With regards to the tuition paid for other children in school, I would imagine they deduct a high percentage of that amount of that from the available income to be taxed as there is probably some feedback from both children’s SSS forms pointing at each other.</p>
<p>Looking back at the previous comment about the FA not being as generous at the private college, the college probably doesn’t discount the money paid to boarding school as the boarding school discounted the money being paid to the college. Probably because the college sees boarding school as an optional (trimmable) expense (they take in plenty of public school kids) whereas the boarding school understands its purpose is to make that college tuition payment more likely.</p>
<p>Uh, Linda… There is a space on the SSS form where you are supposed to add the pretax healthcare account moneys in (item 12C right under the Payments to tax-deferred pension accounts reported on the W2 (401k 403b)). This amount shows up on your W2 and the school can figure out that you may have not entered it and calculated it in for you. </p>
<p>However, if like us you have unusually high medical expenses (DW and DS both have LARGE ongoing pharma bills) you get to put them in line 17 where the unusual expenses go.</p>
<p>It all nets out in the accounting end of things, though. I have had enough accounting in college to figure this all out.</p>
<p>About the camps, etc. I actually have used this as a reason to increase my FA. If a school wants a well-trained goalie, they should expect me to pay some bucks to put in her top hockey camps - especially the ones that will get her recruited to top universities! This actually benefits their college matrics. YMMV though.</p>
<p>Well, I still think it worked out a lot better than the college FA! (Better endowment, I guess).</p>
<p>About comparing SSS and FAFSA - Our numbers come out strikingly close. I think it is because we have low house debt (higher equity) compared with our income. This causes SSS numbers to grow quickly, while home equity does not enter into FAFSA computations.</p>
<p>In our case the EFC came out to about 16% of our AGI.</p>
<p>About the business owners driving up in their company owned Benzes from their 2nd homes…</p>
<p>Vehicles provided by employer/business are supposed to be listed in question 30A in addition to your personal vehicles. 2nd home also have a line (19).</p>
<p>One of my D’s former teammates attends another boarding school. Her dad owns a small restaurant (family type). I heard no end of complaints from him about having to provide every IRS form to the school. They look at his amortization schedules and basically know everything about the financials of his business.</p>
<p>Somehow last year the amount didn’t show up on our W-2.<br>
Or maybe it was our insurance premium that didn’t show up. In any case one of them didn’t show up and so on the 1040 I had no info from my W-2 to transfer…I need to look at that again..sorry.</p>
<p>I’m thinking, this is probably an accounting issue, but since they (schools, SSS) tie things back to your 1040, it must make sense to itemize out the medical expenses, even if you don’t have enough to make them actually deducable. You can include them, but then they would zero out on the 1040 as a deduction if they were not over a certain percent of your income. That way they would match what you claim on the SSS form. </p>
<p>We have used camps - inexpensive ones - as child care and decided to include it as child care expenses in order to work vs. camps for the reasons listed. </p>
<p>I know our current school has said they don’t expect you to use equity in your home (although they don’t meet full need so…duh), but that most secondary schools do.</p>
<p>I think it depends on the type of business and such, but I know it was the a member of the financial aid committee who mentioned it to me that it is hard for them when they have families like us who work really hard and then others like I mentioned. </p>
<p>A friend of mine who is divorced and neither she or her husband remarried, said that was the best thing they ever did for financial aid. Yes, both incomes are counted, but so are both household expenses. AND since neither remarried, there isn’t a 3rd or 4th income added in. I have no idea if that’s true, but it sounds like it should be. How about married but seperated? That might be worth it. LOL</p>
<p>I had actually found the forumla a few years ago on the SSS site…but then the document it was in became part of the password members only school part of the site. I wish I had written it down.</p>
<p>Linda,</p>
<p>It is the insurance premium that you pay pre-tax that doesn’t show up on the W2. Plus they ask you how much you pay for insurance (16B). I believe since they don’t ask whether it is pre-tax or out of your checking account, it is deducted from your available income. I think this is an untraceable flaw in how fringe benefits work.</p>
<p>The use of camps as day-care as long as it serves that purpose is a good way of categorizing that expense. You would have paid regular day care those weeks anyhow.</p>
<p>Another popular strategy for decreasing your bank balance (and the tax SSS has you pay on it) is to pay your property taxes in advance (often due in February). If you itemize (we can’t), it also pulls ahead the deduction.</p>