<p>Ds will be applying in Dec. '09 for as an early admit to (hopefully ) attend Biola in Fall of '10. </p>
<p>I'm thinking ours may be a little tricky with dh being in business for himself, and having investments (needed for retirement some day).</p>
<p>Personally, I would not pay someone to help with FAFSA. There are some great books that could be very helpful (“Paying for College Without Going Broke” is a good one). If you do feel you need a professional, please choose carefully - maybe ask your high school guidance counselor for a recommendation.</p>
<p>I talked to one of these guys who said he could help lower my EFC and would fill out all the forms. He wanted to charge a hideous amount of money - something like $5k+ over the course of 4 years.</p>
<p>His big plan to lower my EFC was to suck out every penny of equity I have in my house and put it in some flavor of whole life insurance. While this might have lowered my EFC for some PROFILE schools, it would do nothing for FAFSA, and leave me with a huge mortgage to boot. He didn’t really have any ideas for lowering EFC by dealing with the other complicated areas of my financial life. (For example - he couldn’t really quantify how switching my 401k contributions to a Roth 401k would help me or hurt me). </p>
<p>Filling out the FAFSA form itself is not very hard. It tells you which line of your tax forms to get the data from, and for assets you’d have to compile their values anyway to give to someone else, so you will already have all the data.</p>
<p>The PROFILE is a little trickier, but again the form tells you where to get the data off of your tax return, and you have to gather the asset data anyway. The Business supplement is the trickiest part of the whole thing, but if you do your own taxes it’t not that hard, or your accountant can do it for pretty cheap, it is not a complicated form.</p>
<p>We declined to sign up with him, just didn’t see the value.</p>
<p>The one useful trick i did learn from this guy is to use the Federal housing inflation factor to figure out the market value of my house, rather than trying to use comps or a BPO. This gave me a lower number, although I’m not sure it did anything for me - for all I know the FA people are using Zillow of some piece of junk like it to check/assign a value to my house.</p>
<p>Also: IIRC, for FAFSA, if you own a business with less than 100 employees, the assets are not counted for financial aid. So there shouldn’t be a lot of work here either.</p>
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<p>This is EXACTLY the same idea that I was pitched. I was ready to fall for it too. I didn’t see any other way to pay for college, and yet the idea of taking on a larger longer mortgage had me sick to my stomach. Finally DH weighed in with a brilliant perspective: “Our EFC over 4 years is about the price of a luxury car. We wouldn’t refinance the house to buy a car, and we’re not going to refinance for this.” I knew he was right because my stomach immediately stopped doing flip-flops. We’re going with a combination of spending cutbacks (mostly D being out of the house), and some loans. </p>
<p>Interestingly, I also picked up the same useful tip about the Housing Index Multiplier from my con man. (Wonder if it was the same guy?)</p>
<p>OP: The FAFSA looks intimidating – all those boxes! – but really, once you’ve gathered up all of your tax returns and other docs, it’s fairly straightforward. You’re probably going to end up answering “No” or “-0-” to most of the financial questions. </p>
<p>I also recommend “Paying for College Without Going Broke;” it’s got tons of great info well beyond FAFSA assistance.</p>
<p><a href=“Wonder%20if%20it%20was%20the%20same%20guy?”>quote</a>
[/quote]
Hahaha! Too funny.</p>
<p>I’m in eastern MA. We did at least get a nice dinner out of it, so it wasn’t a total loss. :)</p>
<p>Truthfully, the most important document you’ll need for completion of the FAFSA and Profile is your completed TAX RETURN. On the FAFSA, most of the financial information comes right off of a line of your tax return. The rest is account balances that you can get online the day you complete the forms.</p>
<p>There are several important details to remember.</p>
<ol>
<li><p>Your post implies that you hope to get some need based financial aid and are concerned about the owned business. I would make two suggestions…First, run your current numbers through one of the various financial aid calculators to get some kind of idea of what your EFC (expected family contribution) might be. You should use federal methodology which is what the FAFSA basically does…and you should use institutional methodology for schools that use the Profile and/or a school supplemental financial aid form.</p></li>
<li><p>If you REALLY need financial aid, do not apply early decision which is binding. Your child can apply early action, which is not binding. When you apply Early DECISION, you do not have the opportunity to compare financial aid offers from multiple schools as you are supposed to accept the ED offer of admittance and withdraw all other applications.</p></li>
<li><p>Regardless of what you do…Complete your 2009 taxes as close to February 1st as is reasonably possible. The year that your child is enrolling as a freshman is NOT the year to delay filing until April, or get an extension to October (which I know some business owners do). Your child’s finalized financial aid package will NOT be awarded until you have completed your 2009 tax return and filed (for a child enrolling in Sept 2010). Any financial aid award you receive BEFORE completing your taxes and making changes on the FAFSA and Profile to reflect the numbers ON your tax return will be ESTIMATES…and yes, the financial aid award CAN (and is) adjusted to reflect what is actually ON your return. SO…business owners…talk to your accounting folks and get an EARLY appointment and keep excellent 2009 records to facilitate this process.</p></li>
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<p>Typically, there are also non-profit agencies which hold “Super Saturday’s” (or a similar type of event) designed to help parents and students complete their financial aid. The assistants are usually Financial Aid Administrators, Lenders and Guarantee agencies who understand the entire process, both Federal and Institutional. Also, most high schools host a college night in which FAA’s from surrounding colleges help parents and students get their FA in order…even if you are not attending one of their schools. These types of events are free of charge and always offer sound and LEGAL advice that won’t have you mishandling your assets or financial safety.</p>
<p>I’ll third the recommendation for “Paying for College Without Going Broke.” I’ve purchased three editions over the last 5 years (they update it annually). About $14 on Amazon, and worth hundreds of times that.</p>
<p>I do have some suggestions, as a self employed person:</p>
<p>1) You said you had “investments (needed for retirement some day)” Those investments need to be sheltered in a way that they won’t be considered for financial aid. If they are already in a 401K, IRA, SEP-Ira, Keogh, or some similar plan - you are fine. If not… then they are not “retirement” assets no matter how you label them – but you might want to start shifting them into retirement funds. You cannot deduct this from your income for FAFSA purposes – but if you have $10,000 sitting in a regular bank account now, and you move $5000 of that into a Keogh - then that will reduce the amount of assets you will have to report next year. </p>
<p>2). Does your husband have employees in his business? If so, how many? FAFSA now cuts small business owners a huge break – if the business has less than 100 employees, the business <b>assets</b> are excluded from FAFSA. This means that your husband should be careful about accounting and make sure that assets and investments for business purposes are reflected as business property. Your husband might also have some control as to the amount of draw or income he takes from the business, depending on the type of business. For example, I try to pay all my bills by the end of the year, and might defer end of the year billing in order to push anticipated income over to the next year – that is going to reduce my net income for that year. </p>
<p>Don’t think you can use this as a way to cheat or hide assets – the colleges often will ask for financial records and they will see if there is funny business going on. But the bottom line is that if there is $10,000 in a personal checking account, that is considered for FAFSA – if that same $10,000 is legitimately sitting in a business checking account – it won’t be considered. I say “legitimately” because the amount of balance that would be reasonable would depend on the monthly operating expenses and typical receipts of the business. For a shoestring, low-overhead business like mine, that would be a suspiciously high amount (I’m a freelance writer & web site manager). However, for many others, that would be unduly low. For example, if your husband has $25K worth of payroll to meet every month, you’d expect the business account to carry a higher reserve balance. I’d look at cash flow to get a sense of what the business should be holding in reserves.</p>
<p>If your sure your going with Biola this will not help, but if your going to apply to a school that requires the profile than… do the profile first. Because the profile requires you to gather more info than uses that info to tell you what numbers to plug into the FAFSA.</p>
<p>Irene, I honestly think that you’d be better served to stay away from “professional aid counselors” and to understand the process yourself. There are so many knowledgeable people here on CC, you can post questions as they come up, and so many terrific sites on the web and ways to get a personal response to your questions for free.</p>
<p>I would read/search CC for threads like this current one:
<a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/715046-new-here-seeking-advice.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/715046-new-here-seeking-advice.html</a></p>
<p>If you do seek professional advice, my recommendation would be that you start with a professional you currently work with - CPA, CFP, etc. who actually has been through this with their own kids or for other clients!</p>
<p>Good luck!</p>
<p>^^^ agreed, we’ve read stuff that other people’s tax accountants/financial advisers have told them that were just plain wrong and/or illegal</p>
<p>It is more complicated for the self-employed, but if you are only looking at FAFSA schools, then you should not borrow against your home, you would be better off to use cash to pay off that mortgage- assuming that allowed you to qualify for financial grant aid.</p>
<p>Here is the formula:
[Federal</a> Student Aid - IFAP: iLibrary - EFC Formula Guide](<a href=“http://www.ifap.ed.gov/ifap/byAwardYear.jsp?type=efcformulaguide]Federal”>http://www.ifap.ed.gov/ifap/byAwardYear.jsp?type=efcformulaguide)</p>
<p>Run the numbers, make adjustments if you are able and if it will help. The formula is primarily income driven, if your income is high enough, you won’t get aid with $0 is assets, so there is no sense tying up your assets.</p>
<p>As to life insurance, if you own a whole life policy and it has cash value that is not counted as a FAFSA asset. If the policy is not at least 10 years old you would not be able to access much/any cash anyway, so putting money there is not a place to play games with hiding money. If it fulfills your insurance needs and or estate planning, great, but don’t try to hide money in the short term.</p>
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<p>If EA is binding, I highly suggest you consider the Financial Aid implications. What if you don’t get a package you can live with?</p>
<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/715988-potential-ed-harms.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/715988-potential-ed-harms.html</a></p>
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The idea is to refinance and tap all the equity in your house and buy a single-payment whole-life policy. It has instant cash value because of the large, up-front payment. There are policies set up so that you can withdraw cash value from them when you need it. And since in the short term it would be mostly (or all) return of principal, there is no tax hit either.</p>
<p>Once your kids are done with college, you cash it in and pay your mortgage off.</p>
<p>It costs something to buy these policies, so you lose a few percent off the top. </p>
<p>I wasn’t comfortable having that large a mortgage, the rate would be a lot higher, and there is no guarantee I’d be able to refinance again when I took the money out.</p>
<p>Plus, with the implosion of the mortgage market, it might be more difficult to do this strategy. </p>
<p>I remember reading somewhere that some PROFILE schools are starting to ask about cash value of whole life policies, so they may start plugging this hole. And, if the school offers any kind of equity allowance, this whole strategy is pretty pointless.</p>
<p>2). Does your husband have employees in his business? If so, how many? FAFSA now cuts small business owners a huge break – if the business has less than 100 employees, the business <b>assets</b> are excluded from FAFSA. This means that your husband should be careful about accounting and make sure that assets and investments for business purposes are reflected as business property. Your husband might also have some control as to the amount of draw or income he takes from the business, depending on the type of business. For example, I try to pay all my bills by the end of the year, and might defer end of the year billing in order to push anticipated income over to the next year – that is going to reduce my net income for that year.</p>
<p>If a business has less than 100 employees and the assets are not used on the tax return, is any part of the tax return used for FAFSA, especially if there is no depreciation or profit? When the school says send your parents tax return (1065 c corp) do you send it or just your 1040?</p>
<p>Can an aid officer help with this one?</p>
<p>The FAFSA would not require submission of tax returns – and the only entry onto the FAFSA would be from whatever appears on the 1040. However, if the return is selected for verification, then the full tax returns need to be submitted.</p>
<p>Individual colleges will ask for the tax returns, and they will also go over a schedule C and add back in certain type of deductions --such as depreciation, vehicle expenses, and home office expenses. </p>
<p>I don’t know the answer to the issue about the 1065 c corp – I think you should act on the assumption that they may want to see it – but if a specific college is now asking for the return, you might just contact them to ask whether they want to see that part.</p>
<p>As to the main issue raised by this post: I think the sensible thing to do is make decisions in line with your overall, long term financial planning and stability – NOT to move money around for the sake of getting some sort of financial aid advantage.</p>
<p>For one thing, there is no guarantee that your child will get accepted at a school that meets full need in any case. Just because your EFC is lower doesn’t mean that any college will fill the gap – and that also goes for the colleges that claim to meet 100% need. (Those colleges all factor in other considerations in addition to the FAFSA, and will ask to see tax returns and the like).</p>
<p>You might get lucky… but then maybe you could cash out all the equity on your home and buy up lottery tickets. Who knows? You just might win.</p>
<p>Also - you really can’t assume that your kid is going to stay in one college or finish in 4 years. You hope that, and there’s a reasonably strong chance that will happen – but it is a mistake to deliberately weaken your financial position on your assumption.</p>
<p>The type of moves you should make are those that would tend to benefit you anyway, or are part of overall financial planning. For example, let’s say you are carrying $25,000 worth of credit card debt. Well, it definitely would be to your benefit to pay off that debt along with refinancing your home – that will get rid of a lot of debt AND reduce your home equity at the same time. But that would be a smart move anyway. </p>
<p>Sometimes it isn’t so clear, and you may need tax advice, or you may make a decision with financial aid in mind that you wouldn’t otherwise. For example, I refinanced my house a few years back and could opt for a 15 year or 30 year mortgage. The shorter mortgage means my loan is paid off much faster, which does have an impact on financial aid eligibility. It might have been smarter to go with the longer note … but I decided to pay the mortgage off more quickly. Yes – I will probably pay more to my daughter’s college because of that decision – but then I am going to pay a lot less to the bank over the life of the mortgage. I made that decision because I am older, and I thought it was more important to ask, “where will I be at age 65?” than to worry about saving a few bucks on my kid’s college at age 52. Right now I’ve got more flexibility and a greater earning capacity – at age 65 I might not. </p>
<p>So that’s a good question to ask of the financial advisor: how much more interest are you going to pay on the mortgage, and how much are you going to lose when you put the money into a whole life policy … as compared to how much you are guaranteed to get from increased eligibility for financial aid. (It’s that guarantee part that is the rub – but that’s also the reality.)</p>
<p>Since you already know you are aiming for Biola, read everything you can find on their site regarding how they calculate finaid; you ought to be able to get a ballpark from them as to how they would offer you a package</p>