<p>My sister just called me, having just spent her Saturday completing the FAFSA form, and she is steamed about what she sees as loopholes related to the FAFSA form. </p>
<p>She recognizes what many here have already seen--If you spend your money on luxury vehicles, jewelry, etc and have no money saved, no real investments, you have a much lower EFC. She asked me, albeit tongue-in-cheek, why she hadn't just taken her money out of the bank/stock market/other investing mechanisms and purchased antiques/gold/jewelry/vehicles--even a McMansion for just a few years--none of which count as 'investments' on the form. She would then, on paper, have nothing to show as investments, etc. She views that move as being unethical, but remarked that there are certainly people out there who do just that kind of thing. </p>
<p>I'm wondering how many people choose the high road versus the road that my sister and I view as being unethical?
My guess is we probably all know somebody who's taken the 'low' road! Guess it's virtually impossible to insure everyone's being honest!</p>
<p>It’s not so easy to change houses, luxury vehicles, jewelry, etc. back into real cash to pay for college. I like being able to have the kind of choice that money in the bank gives. If it means that we have a mondo EFC, well, so be it.</p>
<p>Remember that only about 5% of the money in the bank (in the parents’ names) is considered by FAFSA. You’d be surprised at how many people think that spending the money is better for financial aid. And then can’t get even close to sending their kids to college - upkeep on that McMansion is no cheap affair either! And they have a lifestyle to maintain. (Your sister should be glad she doesn’t have to think about selling that McMansion in this economy!)</p>
<p>There are a lot of loopholes in FAFSA, but I think your sister is steamed about something that is not a loophole. Not worth it to invest in those things just to bring down your FAFSA EFC. First of all, unless you get the income waaay down, getting a PELL grant which is the only thing that is guaranteed money is not possible. So you are really talking subsidized Stafford loans. When y</p>
<p>Schools that tend to meet need have PROFILE or their own apps which want the value of the fillings in your teeth. Most certainly collectibles, real estate, etc.</p>
<p>FAFSA is much more driven by income that it is by assets unless the assets are substantial. (up to 47% of parent income over a certain, not very high, amount goes to the EFC, only 5.6% of parent assets do). Federal grant aid requires a very low EFC so that anyone with the income to afford the luxury cars is probably not going to qualify for federal grant aid anyway. So the aid would be mainly in loan form. </p>
<p>As CPT says, profile schools want the value of everything. And they are the schools that have their own grant aid to award.</p>
<p>Well, to a degree savings are punished. If you’ve saved a tremendous amount, you won’t be eligible for financial aid.</p>
<p>But if you’ve saved a more moderate amount, it could make all the difference between having an EFC that your family can cope with, and an EFC that requires your family to both skimp in every possible way AND take out debt. It isn’t uncommon for a family earning $100K a year to have a $30K EFC, but it is mighty tough for most families to come up with all of that through being economical with current expenses. Having some savings in the bank, so that you’re only trying to deal with $20K a year in reduction in spending may make a huge difference. For our family, it is the difference between being able to continue adding to our 401K savings for retirement and not – and not saving for retirement is an awfully scary thought given how big a beating our accounts have taken in the past six months.</p>
<p>She won’t be fuming when it’s time to retire and she can live off some of those assets. I’d rather save and invest and be stuck with little financial aid for my college bound kids, than be living out of a camper when I retire at 65. All those people who are/have been blowing through their money should drink a grande espresso and wake up to reality. I suspect many of those who spend, spend, spend were assuming they’d be inheriting a boatload of money from mom and dad (and therefore didn’t need to be putting aside money for their own retirements) These are the people who may be in for a real shock since mom and dad probably just lost a lot of their retirement income in recent months. Let’s face it, $45K a year tuition OR cat food for dinner when I’m retired. Not a hard choice for me.</p>
<p>I think she’s feeling steamed without much reason, really. As others have said, you have to have a very low FAFSA EFC to qualify for a Pell grant. If your EFC is that low, you don’t have the money to buy luxury items, McMansions, etc. (Believe me, I know… ours is barely low enough to qualify for a small partial Pell award and we have a hard time paying the utility bill… no luxuries in sight!)</p>
<p>So really the only thing she might be missing out on is a few thousand in subsidized loans… if that.</p>
<p>The FAFSA EFC isn’t the total you’re expected to pay. It’s the <em>minimum</em> you’re expected to pay. How much it goes above that depends on the cost of the school, their aid policies (most won’t meet your full need anyway, regardless of what it is), what you’d consider a reasonable budget for your kid to live within, and the student’s ability to contribute through their own earnings.</p>
<p>So it’s really not worth fretting about the FAFSA EFC.</p>
Very true. College financial aid is largely based on <em>income</em> – not assets. If your sister has enough income to afford those luxury items, she would not have received financial aid anyway, regardless of how much she had or didn’t have in terms of assets.</p>
<p>I buried all my extra assets in my home equity (paid down the mortgage). I figured I would use my home equity line to pay for college, and refinance into a first mortgage when the kids are done. Fortunately my home value is no worse than where it was a few years ago.</p>