FAFSA for the self-employed

Paying for College
1

My youngest D is still a couple of years away from applying for college, but I recently started studying up on all of this stuff again so I’m prepared when the time comes. I got a ton of useful info on here from mom2collegekids when my oldest D applied to colleges. She ended up at the University of Alabama with full tuition, plus engineering $$. My youngest D is very different. She wants to get a BFA in theater/drama or musical theater. Some of the schools she likes right now are USC, NYU, CMU, Juilliard. Yeah, this kid has big dreams. I’ve already studied up on the realities of getting into those programs and she will not put all her eggs in those highly selective baskets, but I also don’t want to be in a position where she gets in and then we can’t afford it. Anyway, she has a good GPA at a highly competitive school, but not sure how good of a tester she is. I see that Alabama’s minimum score for the Presidential scholarship has gone up.

So after all of that background, on to my main question. I keep seeing that if you’re self-employed or own a business, the FAFSA worksheets aren’t going to be accurate. I downloaded the one Google docs one posted on here to play around with, but I guess it might be a waste of time to use. Can someone explain to me further why and if there’s a way I can still get a good idea of what our EFC will be? All of our income is 1099, independent contractor income.

And I know that most schools don’t even meet the EFC, so if anyone knows which ones do offer good need-based financial aid and which ones have merit and talent scholarships, that would be great too. All along I kept telling her she can’t apply to NYU because they don’t give out enough money, but recently I’ve had people telling me I’m wrong and that it is possible to get good packages from NYU. Sooo this is why I’m starting early on all of this! Not only does she have to figure out all of the audition stuff, I need to know realistically what to expect as far as aid and possible merit packages.

Sorry this is so long! Thanks for any info!!

2

The FAFSA worksheets will be fine.

It’s the net price calculators that won’t Be particularly accurate for you as a self employed person.

It’s “possible” to get good money anywhere but it’s less probable at some places than others.

If your kiddo is applying to Tisch, she will need to be at the top of the audition pool to get performance merit aid. Actually…she will need to be tops to get accepted.

I would suggest that you post some of your questions here:

http://talk.qa.collegeconfidential.com/musical-theater-major/

That’s the musical theater forum here…and folks there have walked in your shoes…or are currently doing so.

3

Thank you! Yes, I’ve been lurking on the MT and acting pages for the last month. Very eye opening!!! My daughter goes to a strong performing arts school, and many of her friends now attend those top schools, Michigan, NYU Tisch, Elon, Harvard, Juilliard. I’m soooo glad that I started reading up on the realities of getting into those programs. Of course I understood it was extremely competitive, but with so many of her friends having success, I didn’t realize how CRAZY competitive it is! I will post some more specific questions over there as well, but wanted to ask the experts over here about need-based aid.

Once you know what your EFC is, how do you figure out what you can expect individual schools to offer as far as need-based aid? Seems like that’s the big problem for families who haven’t done enough research… they assume schools will at least come close to offers that match a family’s EFC.

And as far as merit and talent money goes, do most schools list what they have to offer and the criteria? From what I’ve been reading, most families seem surprised by these and didn’t know what to expect. I’d hate to tell my kid she can’t apply somewhere if there’s a possibility of merit/talent money. I will prepare her, though, that it’s a long shot, if I know the criteria.

4

The EFC is only to calculate eligibility for federal aid programs – Pell grants, direct (subsidized) loans, work-study. If your EFC is less than the COA, then you are eligible for loans & work study. If your EFC is less than about ~$5000 (varies from year to year) – then you are eligible for Pell grants. The maximum Pell grant is also in the ~$5000 range. There are also some other small federal grants that may be available to those who qualify for Pell.

EFC does not mean “what the college expects you to pay.” EFC does not equate to “need” at colleges that promise to meet full need.

As far as I know most of the BFA programs are at schools that do not guarantee to meet full need of applicants. If a school doesn’t promise to meet full need, then your EFC doesn’t mean much except for that federal aid eligibility. They could give aid, or not.

If your daughter does apply to colleges that promise to meet full need, it means need as the college determines it – they almost always are asking for financial information beyond the FAFSA and considering assets that FAFSA doesn’t count. That’s where the self-employment problem comes in – they’ll ask to see full tax returns with schedule C’s, or busines P&L statement, or have you fill out additional forms related your self employment. They will adjust your income back upwards to counter various work-related deductions you might be taking. So predicting financial aid might depend a lot on the type of self-employment you have. The bigger the difference between your annual gross receipts and your self-employment income after deductions, the more of an unknown the aid becomes.

If self-employment means that income fluctuates significantly from one year to the next, then that can be a problem for both FAFSA and college determination of need-- because your financial aid in subsequent years could be very different than aid offered for the first year.

I don’t think you are going to find any sort of guaranteed merit aid based on objective criteria for BFA programs either. Academics are important for admission at the more selective programs, but they are giving merit money based on perceived talent, not ACT scores. Merit aid is the way that colleges “buy” the students they want most – and for a musical theater, they may mean the student with the best voice, or best stage presence. And obviously competition is steep.

If your DD is exceptionally talented, then you and she may be pleasantly surprised at her options. But other than that it’s a tough path — and you probably really do need to have some hard discussions with your daughter about finances and also plan for alternatives.

5

Ahhh, okay, I get it. Thank you so much!!! I know we won’t qualify for a Pell Grant, so the FAFSA worksheets aren’t going to help me too much. It looks like what I really need to do is go school by school and research what kind of need-based aid they give, which might be more difficult because I’m self-employed and they can choose to look at my deductions and put them back into my income.

So does each school have a calculator that gives you a good idea of what to expect? It really seems like a lot of people are surprised by how little they get, so if the schools do have such calculators, are they not very accurate or are people just optimistic that they’ll get more? I’m just gleaning all of this from reading all the threads lately about kids being accepted and surprised that they got way less than they need. I have seen a few where people are pleasantly surprised that they got more, but that’s definitely not the norm, obviously. I lucked out with my oldest daughter. She saw that she could get full tuition plus from Bama, didn’t have to write an essay, and she could just enjoy her senior year. That’s definitely not going to be the case with this one, so I’ve got a lot of homework to do!!

Thank you again for your help!!

6

The NPC is not really going to be accurate anywhere with the self-employment income – but again, that really depends on your line of work and the difference between your gross & your net. If your self-employment is low-overhead – that is, if you are mostly a free-lancer who works from home without many out-of-pocket expenses (as I am) – I’d suggest running the NPC twice, once using your net income and the other time using gross income from self-employment without deductions-- and that will give a sense of the range that you might expect.

But if you have more expenses-- for example, you have employees, you pay rent on an office or shop where you do business, you sell stuff and have to factor in the cost of materials, etc. – that’s not going to work because you are going to have a bigger discrepency between gross & net. You’ll probably want to work with a spreadsheet and factor out some expenses and not others. Every college is different, but here are some things they tend to disfavor: depreciation; travel and entertainment; vehicle costs. They probably aren’t too fond of the home office deductions either. Try to think like a college administrator and draw a line between what expenses seem absolutely necessary for the business to operate; and what expenses seem like things that are more of a tax break or personal benefit – and see where that gets you.

But I honestly think that the best thing you can do is identify for your daughter what you can afford if you assume no aid – hope for the best and plan for the worst, and give your daughter some guidelines as to what is needed in order for her to go to Ticsh or Julliard or whatever she has her heart set on. And consider options other than the theater major as well.

My daughter was a dancer and also attended an arts high school, so I can understand where you are coming from-- though fortunately for me my daughter didn’t want to major in dance.

But however complicated your finances are, mine were worse:
single parent, self-employed
noncustodial and non-contributing parent, self-employed in high overhead profession
homeowner in state with inflated home values

I had no clue what any college would give and fully expected that no private colleges were going to be affordable, especially since my daughter’s test scores weren’t going to attract any merit money, so the whole idea of a financial safety (in our case, in-state public) was the foundation of the college search. She could reach wherever she wanted…but only if her feet were on solid ground when she was doing the reaching.

As you say you are still a a couple of years out for D2, her standardized test scores may be very important – there are certainly many public u’s that do offer aid based on test scores - particularly National Merit if she can score high enough - and which also do have theater departments. University of Alabama does have offer theater majors- both BA or BFA – and I am sure that most other large state universities do as well. It may not be her “dream” program – but her career options post-college will be a lot better if she isn’t saddled with college debt. (Because, as you’ve probably figured out, employment is pretty much catch-as-catch-can for anyone who wants an acting career)

7

The FAFSA bases the formula for EFC on AGI, income from working, other untaxed income, and assets.

There are LACs that base their aid on only FAFSA. They have net price calculators that ask for GPA and SAT to give merit estimates.

She might want to apply to some of these.

Also she could look at the NAST member institution list to find programs that have BFA and are less selective.

What instate schools would have the program and would be affordable?

Muhlenberg is often mentioned here as being generous with merit and need based aid.

I have read a good report of a parent about Western Michigan’s theater department.

So she might want to research “for sure and likely” schools first, where she can be accepted to BFA and it is affordable.

8

Each school has a net price calculator. BUT like I wrote in post 1 response…the NPC will NOT be accurate for you as a self employed person.

You listed Elon, Michigan, Juilliard, Harvard, NYU TISCH.

Of that group…only Harvard guarantees to meet full need for all students. I’m not sure why you have that one on a list for a musical theater major. But your choice. Regardless…the school admits about 8% of applicants, and even drama majors would need to meet the high bar for academic admission. The school gives NO merit aid…only need based.

Michigan only meets full need for students instate. Are you a resident of Michigan? Or are you lower income? Michigan offers free tuition for all students with incomes below a certain amount @billcsho ?

Juilliard and NYU TISCH admit by audition…and the admit rate is right up there with the most selective colleges. Neither of these guarantees to meet your full need, and both are very expensive.

Elon, great small school…but it’s an outlier compared to the others you have listed. It’s in a rural area of NC. Yes, good department…but not accessible so that students can easily SEE other performing arts performances.

I have to be honest with you…performing arts majors usually receive performance merit awards based on their audition. (Harvard doesn’t give merit…so ignore that idea for Harvard). The vast majority of these arts schools do not have the funds to provide a large amount of aid to their accepted students, and many…many are full pay.

One of our kids was a music major, and the process was similar. He got a performance merit scholarship which softened the blow…but no need based aid anywhere he applied. Even when his sister was also in college…he got NO need based aid…none.

I would strongly urge you to set a budget for what you CAN and WILL pay annually for college. That number is actually the most important number in this discussion. Your kiddo needs to understand your financial criteria…and if it’s a firm one…that any school where the money is not forthcoming in merit aid to being down the cost to your budget…is a NO go. That is hard to do…but if you NEED to do that do it now…rather than later.

Simply put…if your kid gets accepted to TISCH…and the net cost is $72,000 a year, or whatever…are you able and willing to do that…for all four years?

9

There are MT schools that are very inexpensive. If your daughter has her eyes on NYU, she might not want to consider them but they are there and they are cheaper. UW-Stevens Point, Coastal Carolina, Wyoming. Those schools have merit aid for academics too.

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@calmom thank you for that suggestion. Yes, my self-employment status is similar to yours, independent contractor that has a home office. I do get a 1099, so running the numbers with and without my deductions can at least give me some idea, hopefully. I also live in an area with high home values, and having bought my home 20 years ago, I do have a lot of equity. I was hoping most schools don’t look at your primary residence, but I guess some do. Since we do have time, I will suggest that she take some time to focus on her testing skills. Her GPA is great. I’m just not sure if she tests as well as her sister for scholarships like Alabama offers. I did show her their website last night. They’re building a whole new theater complex! “She could reach wherever she wanted…but only if her feet were on solid ground when she was doing the reaching.” Love this advice too!

@mommdc and @twoinanddone I will put those schools on a list to take a look at. I’m starting to look early just because I know how complicated this whole process is!!

@thumper1 Sorry for the confusion, I only mentioned Harvard because she has two friends that attend there. It’s not on her list. And no, we’re not in Michigan. Once again, just one of the schools that someone she knows attends. She started performing when she was 8, so she has lots of older friends and so far her info comes mainly from where they end up. So as you can see, it’s a very unrealistic viewpoint! I’ve started this research a little early because I don’t want her to be in the boat of a lot of the disappointed kids on here. Of course if she gets into her dream school and the numbers don’t work, she’ll still be disappointed, but I’m hoping the more she understands upfront, she won’t feel blindsided. We both also know going into this how competitive it is, but after reading the drama/theater and MT boards, it’s even more competitive than I imagined. Haha, I blame her crazy talented friends who all seemed to get into their top choices for our optimism! At least I was already familiar with CC from my older daughter’s journey, so now we can really go into this with our eyes wide open! Your expertise and advice is greatly appreciated!

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@Rose808

We had one kid who was a music performance major…and the other an engineering major.

Everything, EVERYTHING about their college searches was different.

Adding in the audition piece is the loose cannon out there… cause YOUR kid will be competing with those auditioning when SHE applies…and there is NO WAY to predict the strength of the applicant pool two years from now at any college.

What state ARE you in? Are there any programs in your state? It’s worth checking…especially if affordability is a concern.

12

@thumper1 Well, looks like I have a very similar path as you then! My two daughters couldn’t be more different, so almost everything I learned for D1 isn’t going to be as helpful for D2. EXCEPT I know where to go to find the answers… the CC experts! We are in Hawaii. UH does have a theater program, but it’s a BA. She’d prefer a BFA. UH can be a safety, but by the time she’s ready to go to college, she will really want to be on the mainland, where there will be more opportunities for her. She makes the most of every performance opportunity here she can find. In addition to the shows she can do at school, she has done community theater, Hawaii Five-0, student films. Originally she wanted only NY, but now she’s been looking more into USC or Chapman because she has been doing more film lately and so would like to be in LA. Meanwhile, I’m explaining to her the financial part of it. Fortunately, she gets it. So while she looks at all her dream schools, I will try to find the schools that maybe aren’t as well known, but possibly give out more money or are just more affordable to begin with.

13

Chapman meets full need, I believe. You would need to check that.

Of course you would be responsible for your family contribution.

14

Almost every school that meets full need also will weigh in home equity as an asset, but they each have their own practices as to how they weigh the equity or value the home. Some have caps tied to overall income. I think most should factor that into their NPC however. But that still can be misleading. My daughter went to Barnard with far more generous need based aid than any other college that admitted her, in part because they used a method for home valuation that was beneficial for me. But I would have had no way of knowing that before she was admitted.

Some colleges that meet full need also have need sensitive admission policies; so having high need can also be a factor in the admissions decision.

Even though it’s frustrating, in the end there are multiple paths for your daughter to meet her goals. So as long as she clearly understands potential financial limitations, she will have options…they just might not be the big name “dream” schools that first come to mind.

15

I have a question…what do I need to send to a college that requires a CSS profile? I am also self employed and own a business that is incorporated. We own a home and the property where the business is but to be honest with 2 mortgages and so many other expenses we do not have much left for income. We are lucky that our business can keep up with the bills but there really isn’t much left for anything else. Not sure what they will be requiring and how much we will actually qualify for.

16

You can look at the documents for this year and see what you’ll need. The FAFSA has little information boxes you can click on to get a more detailed explanation of any question.

17

Once you have a more likely list, you can contact the financial aid offices and ask what factors are considered in their evaluations. Some will share their formulas. That would give you a better sense of what is possible.

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Im sorry @twoinanddone …what documents? I know stupid question. Can you attach a link for me?

19

@Skippy00 – each college has their own documentation policies, so you need to carefully review financial aid information posted for each web site.

20

Just open up a FAFSA and fill it out. It will be for this year so only an estimate of your EFC for a future year (with a different base tax year). As you fill it out, if you aren’t sure of where certain information should go, there will be an ‘i’ in a circle and if you click on it, it will tell you what to put in there. For example, the first time I did it there is a place to put in any retirement savings from that tax year ‘like 403, IRAs, Roth’ and it didn’t mention 401k. When I clicked on it, of course 401k contributions made were to be listed.

You can do a CSS too, but each school uses the information of the CSS in a different way, so it isn’t going to give you an EFC like the FAFSA does. There is a question asked about family cars, but you won’t know which school will care whether you drive a Honda or a Porsche.