FA Questions Regarding Job Loss

Paying for College
1

First time posting my own thread. I anticipate confusion over the next two years regarding our FA because our situation just got complicated. I’m putting this out there in case others have had similar experiences and might be willing to share how it worked out.

On Monday, DH was given 60 days notice that his position is being eliminated. He is being offered a very generous severance package. In effect, he will be receiving nearly two years of salary in 2017.

D15’s last two years of college are pretty much taken care of between savings, fed. student loans, and grandparent gifts. I spoke to the FA office and we will need to fill out a form asking for FA reconsideration for next school year. We will do this because it might help us with S18. However, I don’t think it will change anything since she has both merit aid and a talent scholarship.

I think we now have the situation where the net price calculators won’t work for us. Is that correct? I took a look at some of the NPCs of the schools that S18 is considering. Nowhere is there a question about unemployment. There is also no spot for that in the FAFSA4caster. But, there is a line for that on the actual FAFSA.

Can I assume that, in addition to the reconsideration paperwork mentioned above, I will be needing to fill out special circumstances paperwork for the colleges my S will apply to next year? Next year, FAFSA will look at a normal year’s income for 2016. The following year will show a double income year for 2017, where, in reality, H may only have half a year’s income and we might be stretching the severance to cover an additional year and a half. I suppose there is the potential for no income going into 2018, though, I assume at that point we both would take whatever we could get. We’re 53, so I know it’s harder to find equivalent employment.

Hopefully, DH will find a new job ASAP and this situation and all of these questions will be moot.

2

The net price calculators will reflect the money you earned in the year the financial aid forms will require. They will NOT reflect the current year…or next year if your husband doesn’t find another job. In other words…they won’t reflect that current income is lower.

Well…here are your issues.

  1. The 2017 income will,be used for the 2019-2020 school year...which is two years from now. If I'm reading this correctly...your 2017 income is going to be quite large, right?
  2. BUT that is two years from now...the net price calculators NOW are not set up for,the 2019-2020 school year...and won't be until summer 2018.
  3. Once the NPC IS set up for,the right school year...you will be inputting your 2017 tax return information. That will be the high income.

In addition, if this money is sitting in a regular bank account, it will also be counted as an asset.

  1. I hope there is a strong chance your husband will find a new job. But if he doesn't, you will be asking for a special circumstances consideration for the 2019-2020 school year. The colleges each have their own procedures for this.
  2. In terms of the daughter in college now...you will have income through 2017, right? Actually you will have been given salary for two years...so really through 2018. When is her last year of college?

I think your worry will come IF your husband doesn’t find another job by the time your younger kiddo goes to college.

In the meantime, i know you are worried about college…but your husband is very fortunate to have a two year severance package. Very fortunate. So…work with that…and we will all hope his job search is a positive one!

3

The FAFSA does not ask questions about special circumstances. You have to complete the form with the correct inome and assets, and then appeal your circumstances to each college. Any individual college may consider the job loss or not. You will have 2 years of income, and a huge asset sitting there.

You assume it will not change your #1 child’s aid, but you will have a very big asset sitting there when you file this October.

4

Sorry about the job loss. I hope that he finds a job soon. I think the best thing that he can do now is to not take his money as lump sum. This way he will not have a big tax hit. Find out if he can be paid over the next two years just like if he were working in able to provide some financial stability in your house hold while he is still looking for work.

For financial aid using prior, prior

For school year 2017-2018 you will use 2015 income

For school year 2018-2019 you will use 2016 income

For school year 2019-2020 you will use 2017 income (he will be collecting severance)

For school year 2020-2021 you will use 2018 income (he will be paid for this year)

For next year (school year 2018-2019), in October you will be using your 2016 income. While the school is telling you to appeal the financial aid because of the job loss, I doubt if there is going to be any change in the package (which will come out late 2017/early 2018)

As long as your husband is being paid out over the next two years, the same way as if he were employed, there should really be no change in your NPC, with the exception of the years that your children will overlap.

If your husband is paid out as a lump sum, you could find your kid getting no need based aid on the premise that he should have been putting some of the severance away for college. If he is paid all of it in 2017, there is a big chance that he will get no consideration when you file the fafsa for 2019, because financially you are still whole.

@BelknapPoint (btw, good to see you back) , what are your recommendations?

5

^^^
Good thought process here, especially the idea of spreading the severance over multiple years, if possible, primarily for the tax considerations. More information will allow better decisions, and the biggest unknown is the new employment question. That’s a big wild card and will probably have the biggest impact on both basic family finances and future need-based aid.

6

If he is given two years of severance before you file your FAFSA and Profile forms in October…and that money is in your bank account, it WILL be counted as an asset for financial aid purposes.

However, if your husband does NOT have a job…the college MIGHT (and I say MIGHT because these are done on a case by case basis) do a special circumstances consideration with regard to the assets…as they will understand that this money is actually what your family will be living on.

But remember…assets are assessed by FAFSA at 5.6% of their value for EFC purposes. Profile schools have their own ways of assessing assets, but even Profile schools are not going to expect 100% of your asset to be used for college.

Another couple of questions.

  1. Does your daughter's college guarantee to meet full need for all? If not...this all might not matter anyway.
  2. You don't mention your income. If it's above a certain threshold, you wouldn't qualify for need based aid anyway...

Re: the next kiddo…perhaps when the time comes, he should,look for colleges where he will get merit aid…and this fluctuating income won’t be considered.

I’m speaking a little from experience. My DH got laid off December of our first kid’s freshman year of college at an expensive private university. We contacted the college. That particular college would do NOTHING until,the severance package time was over AND an additional 90 days had passed. Their assumption was that the person might get a job.

My husband got only a couple of months of severance. He received it all in December when his job ended…which meant we had some extra income that year. And yes…our EFC went up. But DS’s college didn’t meet full need anyway…so nothing happened in terms of his aid. We just didn’t get need based aid anyway.

When we inquired, we were given a list of things the college wanted for when they would consider a special circumstances consideration. We had it all ready…pink slip, date of termination, unemployment eligibility, severance amount and when it ended.

In our case, DH found another job pretty quickly, so we never needed to do it.

So contact your DD’s college. Get the info you need.

7

Thank you all for your comments. DH has to take a lump sum. He spoke to a tax attorney who said that even if he takes 1/3 (6 months worth) this year and 2/3 next year, he will still have to pay the taxes this year since he will be in constructive receipt of the money. And, I think his current employer prefers to cut all ties.

Because of the large asset sitting in the bank, it seems to me that we should file 2018/2019 FAFSA, not in October, but as close to the preferred deadlines as possible. If unemployment continues through 2017, about 1/3 of the money will be gone by December. The 18/19 FAFSA will be for the one year of college attendance overlap for D and S. D graduates in 2019.

D’s college is not a meets full need school. However, the FA officer I spoke with said that I should fill out the reconsideration form. He said that they understand that the large payout does not accurately represent our financial situation. When they look at the total picture, they will look not only at the income side but also the expense side. But, since we can pay for D’s 2017/2018 year, I’m not too worried if they don’t adjust it. It’s really the 18/19 school year where I will have 2 in college that I worry about. I’ll have to go back and look at S18’s list to see which schools are FAFSA vs CSS.

I’m sure all the college stuff will work out. The other thing that is an even bigger concern is health insurance. I was diagnosed with stage 2 breast cancer in February and had a lumpectomy in March. I start radiation treatment next week and it should be completed before DH’s separation date. Whew, on that one! But, I will have continuing care. At the moment, we’ve met our deductible, met my yearly out-of-pocket, and have met about 3/4 of our family out-of-pocket. I’m hoping he finds employment quickly so that we mostly won’t care about having to start all over with deductibles and copays because we’ll have the severance.

8

Check his employer for Cobra for that health insurance. In your situation, I would consider paying the extra for that so you have continuing coverage with the same company.

Or does his severance include health insurance for your family?

The year you have both kids in college, the fafsa EFC will be decided about in half. That doesn’t mean younwill get more aid (which is dependent on colleges and their aid awarding policies), but that is true. Even Profile schools give a break for two kids in college but it’s 60/60, not 50/50.

The thing is…you want to have a good financial plan for your son for all four years.

If he is a competitive applicant for schools that are generous and meet full need for all…he just might have the SAT/ACT and GPA scores to get decent merit aid someplace.

9

They haven’t given him any numbers on COBRA yet, but they did say they will subsidize for 12 months. But, that means nothing without the numbers.

S18 has about a 3.6ish UW and 32 ACT. We targeted merit LACs for D15, and we are doing the same for him. She had about a 3.7ish UW/32 ACT when she applied. She ended up with $28K merit and talent combined. If he can qualify for about the same or even just the merit amount, I think we will be fine as long as DH finds a new job soon. I will look to up my civil service as-needed status to half time (or even full time), if necessary, to get health insurance.

10

OP here. Just wanted to provide an update. I think we’re mostly dodging a bullet on this one. DH has a job offer which will limit his unemployment to six weeks. The downside is that it will require relocation to another state with a significant pay cut. The plan is that DH will move in a few weeks and S18 and I will stay behind so he can continue at his current HS for his senior year. We have two years to use the relocation package, so we will likely sell our house just as S18 is heading off to college.

We’ll just have to see how all this works out re: FA once we know real numbers as time goes on. I think we will still be ineligible for FA even with the pay cut. We’ll just have to see how much of the severance remains after using it to maintain two households for about a year.