FAFSA EFC VS Actual Aid

<p>Wow...just when I think I have finally figured everything out, I learn something new. Just never really got that far in my thinking, yet, but I guess it makes sense that you would have to pay taxes on the scholarships. I see what you mean, Sybbie, about it becoming a vicious cycle. </p>

<p>Thanks, everyone!</p>

<p>Thanks Jamimom for doing the math. I appreciate your time very much.
Here is a link to an article regarding the 568 Group.
I believe that there are some excellent points made.</p>

<p><a href="http://www.utwatch.org/oldnews/ny_middleclassaid_7_27_03.html%5B/url%5D"&gt;http://www.utwatch.org/oldnews/ny_middleclassaid_7_27_03.html&lt;/a&gt;&lt;/p>

<p>Thanks for the site, Nopoisonivy. I had heard of this group and their proposals, particularly the one involving the calculation of student's assets, but could never remember the name of the group and so I could not get to that website. </p>

<p>I do have some issues, though, with families like the Bhamibis. It is difficult to justify that someone should get more financial aid when they live in their investment, when there are many who are frugal with housing choices so they could pay for their children's tuition. If that house was worth so much now, the woman could certainly find something more modest for a home. Having moved so many times myself and having lived in not so great housing for financial reasons, I am not that sympathetic. I live in a nice big house in a good neighborhood now which is a real luxery for me, but do not expect to stay here, as our needs change. I certainly do not feel that I have that right. If financial necessity dictates it, I would move to more modest quarters. Have done it before, can do it again. </p>

<p>But the formula does give relief to those who have put some investment into their homes but takes income into heavy consideration. But you can see what it can do when a family with modest incomes with children heading off to college can do with the money--stick it in the house to shelter as much as it as possible, letting financial aid pick as much of the college tab as possible.</p>

<p>My son is now a High School Junior. What suggestions are there that I can do now to help our chances for more financial aid when we apply next year? Our family income is what it is, but what can we do with our assets. Should we sell our stocks and bonds and pay down most of our mortgage since equity is less of a factor than investments? Should we just buy expensive items, which we could sell later (i.e. gold,diamonds, classic car, etc.)? This would reduce our investments while maintaining our net equity? Are these feasible ideas? Any other suggestions?</p>

<p>
[quote]
Should we just buy expensive items, which we could sell later (i.e. gold,diamonds, classic car, etc.)?

[/quote]

In other words, you are asking how you can hide your income so that the government (that is, the taxpayer) will pay more for your child's education through subsidized loans, etc., and the alumni (who donate to the school so that kids without money can get scholarships) will be tricked into paying for your kid?</p>

<p>Nice.</p>

<p>There are some legal and some ethical (they don't always overlap!) ways to deal with financial aid, but this is a despicable question. You can afford diamonds, gold, and a classic car, but want to scam the taxpayers? I feel like clicking the "Report offensive post" link!!!!</p>

<p>Congraduations for early planning. </p>

<p>Direct answer is yes.
The fine print: If your income and/or assets are relatively high then there is little you can do for FA. 1) FAFSA looks for 2 years of income. So for someone attending school in '07, you will need to supply information for '06 and '05. Thus if you can modify your income or assets for '05 then you could possilby gain. 2)
Most of the gains that you can acheive will come from taxation and interest rate hedging thru student loans and mortgages rather than any particular FA. </p>

<p>Changing assets from tangible to intangible is risky business. Buying gold will entail that you shoulder the investment risk and sales charges. Sales charges may be !0% going in and another 10% coming out. There are taxation and risk strategies using stocks. Fairly simple but you need to understand your risk tolerance and how options work. </p>

<p>Kids use option strategies in college selection. ie multiple applications, safety, match, and reach schools. If they and parents use some of the same strategies in affording college, we all would be better off. </p>

<p>You need to be familiar with FAFSA, your 1040, your assets and tolerance for risk. Understand that there is a difference between paying for college and financing college. How you balance this equation can save OR cost you money.
good luck</p>

<p>Poison Ivy:</p>

<p>We are equity high and income variable, being commission only. With no employer funded retirement, in any good year, we put money into our equity with a goal of paying off our home sooner rather than later, in bad years, the lower house payment is all we can afford. I have been told by the private schools to provide a letter of explanation about our situation and they "MAY" consider it. FAFSA schools don't consider it anyway, though some publics (UVA) ask for the info. I'll let you know how we do come April!</p>

<p>Thanks somemom. Interestingly enough I am in a similar situation with not much retirement as I am a sole proprietor of a small business. My home has appreciated much but our income is pretty low. What specifically did they tell you to include in the letter?</p>

<p>How much actual aid should a student with a $0 EFC expect?</p>

<p>Haywire,</p>

<p>It depends on where you go to school and what that schools financial aid policies are. IF you applied to schools that are need sensitive, need aware or are not need blind, having a "0" efc can actually hurt you because these school does look at your ability to pay when making admission decisions. </p>

<p>Having a $0 efc, while make you a pell grant recipient, and eligible for the maximum subsidized loan ($2650), however it does not "guarantee" you a "free ride" any where. Some schools gap, some schools meet 100% of your financial need with a combination of grants, scholarships and student loans, and some school will meet your need with 100 % loans (after pell grant).</p>

<p>Your best bet would be to research the financial aid policies at the schools which you are applying to. See if the school meets 100% of your demonstrated need and how that need is broken down. Find out the average financial aid packages, the average need based scholarships, and approximately how much debt do students graduate with.</p>

<p>nopoisonivy:
It was suggested we simply explain why we have a higher equity than other people might, that our income is highly variable- I would prefer to earn a lot more & pay myself than have abad year! But it is tough to know what will happen each year. They suggested we mention being commission only, and include info about not having any employer-funded retirement.</p>

<p>I guess we'll know soon how they view it.</p>

<p>Are subsidized government or state loans count by the school towards reducing EFC or towards reducing difference between EFC and the coast of school? Since any loan has to be repaid should not that mean that it is in reality part of family contribution?</p>

<p>as9894:
I do not believe the FAFSA asks about student loans. One example of a problem I've seen is:</p>

<p>Borrwo $20k for the years fees, but school requires them paid be semester or quarter, then fill out the FAFSA in January with most of the years fees & espense money still in your bank account. There is no where to account for this. If you can believe it, I called our school a couple of years ago on this and she told me they had no way to account for that and we should simply subtract that amount from the assets/cash listed on the form! Talk about walking a fine line!</p>

<p>read this, scholarships are only taxable if you do not use them to pay for school, if you get a refund, you payed for school and it is left over and you get to keep it. </p>

<p>Tax-Free Scholarships and Fellowships
A scholarship or fellowship is tax free only if: </p>

<p>You are a candidate for a degree at an eligible educational institution, and</p>

<p>You use the scholarship or fellowship to pay qualified education expenses.
directly from irs.com</p>

<p>Candidate for a degree. You are a candidate for a degree if you:
Attend a primary or secondary school or are pursuing a degree at a college or university, or</p>

<p>Attend an accredited educational institution that is authorized to provide: </p>

<p>A program that is acceptable for full credit toward a bachelor's or higher degree, or</p>

<p>A program of training to prepare students for gainful employment in a recognized occupation.</p>

<p>Eligible educational institution. An eligible</p>

<p>but you still have to report recieving the scholarship to your college.</p>

<p>The portion used for tuition & mandatory fees is tax free. The portion applied to living expenses (that is, room & board) and anything leftover is taxable.</p>

<p>"Qualified educational expenses" is what you need to know. They do not include room and board. They do include books, and materials of sorts.</p>