<p>It is my understanding that if your AGI is below $50K your assets are not considered when filing the FAFSA. Is that correct? If so, and your AGI is close to being below the $50K mark, is it possible to make contributions to a 401K to reduce your AGI? That is assuming you can survive on the reduced income. Do you know of anyone who has done this successfully? and do all the FAFSA calculators you find on the internet really work? Have you found them to be somewhat accurate? We will be filling out the FAFSA in January and want to make sure we get it right. Thanks for any help you can offer!</p>
<p>[FAFSA4caster</a> - Federal Student Aid](<a href=“http://www.fafsa4caster.ed.gov/F4CApp/index/index.jsf]FAFSA4caster”>http://www.fafsa4caster.ed.gov/F4CApp/index/index.jsf)</p>
<p>Money you put into a 401K will be added back in as income for the purposes of determing your EFC. The existing value of the 401K won’t count as an asset, but any money you put in to it during the year is money that could have gone toward college.</p>
<p>There is not a lot of federal government aid. The Pell Grant, the major federal grant is mostly for low income students and is a maximum of a little over 5k.
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<p>Note that the EFC the FAFSA gives you is just a number that shows you how much federal aid you are eligible for. It does not necessarily equivalent to how much colleges expect families to pay. Many families pay more. </p>
<p>Most financial aid (need based) and merit comes from the colleges, themselves. The most generous schools for need based financial aid require the CSS profile and calculate your EFC based on “institutional methodology.”</p>
<p>It is my understanding that if your AGI is below $50K your assets are not considered when filing the FAFSA. Is that correct?</p>
<p>I’m not sure, but I think there is more to it than just that. I think you have to have some other qualifier…like you don’t itemize on taxes, or something like that.</p>
<p>I think that’s to prevent someone who has lots of assets and who itemizes, but only has a small income, can have an auto 0 EFC. Again, I’m not sure.</p>
<p>Hopefully, someone who knows those details will weigh in, cuz I may be wrong.</p>
<p>The person needs to have the required low income threshold AND they must file a 1040A or 1040EZ tax form to be eligible to have no assets counted.</p>
<p>It is also possible to qualify for this, I believe, if the student gets some kind of government subsidy…free lunch for example…</p>
<p>But I do believe that the 1040A 1040 EZ requirement for tax filing is required regardless. This means the family cannot use the the 1040 form or itemize their taxes.</p>
<p>I hope Swimcatsmom sees this because she is the one who is most familiar with this process and what it entails.</p>
<p>This is what is necessary to qualify for the simplified needs test for 10/11, which will exclude assets from the FAFSA EFC calculation:</p>
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<p>Note: The parents can be eligible even if they filed a 1040, if the only reason they did so was to claim education tax credits (and they otherwise would have been eligible to file 1040A or EZ).</p>
<p>sk8rmom…what if the family files a 1040 long form because they are itemizing their deductions…maybe they own a home or something of that sort? Would they still qualify for simplified needs test for 2010-2011…they would not have in the past.</p>
<p>No, they must be eligible to file 1040A or EZ, except for the ed tax credits. So, if they have income or deductions which require filing 1040, they are not eligible for simplified needs. If it was only to take mortgage/real estate deductions, they should probably assess the impact that adding their FAFSA reportable assets would have on their EFC, and their student’s FA, and make a decision whether it’s worth itemizing. Here’s the exact wording of the exception clauses:</p>
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<p>OP, if you’re in doubt about whether the calculators are accurate, or just want to understand how the FAFSA derives EFC from the data you provide, the EFC formula guide explains all this very clearly and includes worksheets and tables for parents and students (use those marked A).</p>
<p><a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/062810EFCFormulaGuideUpdate1011.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/062810EFCFormulaGuideUpdate1011.pdf</a></p>
<p>Thanks for the clarification…I thought that in most cases the simplified needs test requires 1040A or EZ.</p>
<p>The problem is people with most types of assets can’t file the EZ form of tax return.</p>
<p>Thank you everyone for all your posts! What a great forum and that website, fafsa4caster, is great! Thanks so much. I already ran our numbers and then went back and ran several scenarios to see the difference in EFC.</p>
<p>We have filed a 1040A most years. 2009 was the only exception because of losses from a bad car accident - so we itemized those. </p>
<p>So it sounds like we would qualify for the simplified if my husband contributes pre-taxed income to a 401K and reduces our AGI to under 50K? Although, the contributions will be added back in, it will still bypass all those pesky asset questions that tend to raise the EFC. Does it sound like I’m understanding this correctly?</p>
<p>Now I do understand even if we are successful in reducing our EFC we won’t qualify for Pell grants. However, I wonder if a college takes your EFC into consideration when deciding on how much scholarship to give you. For instance if your soon-to-be college student has a very impressive application with lots of volunteerism and participation in extra-curriculars as well as a 4.0+ GPA and very high ACT/SAT scores, impressive essay yada, yada, yada… do you think they would be more likely to offer more scholarship money than if your EFC is more substantial?</p>
<p>My daughter is being contacted by lots of colleges, and I’m hoping for (translated to expecting haha) a very good academic scholarship st her #1 school, but I want to be prepared just in case the scholarship is less than ideal.</p>
<p>Thanks again. This process is very overwhelming! It’s nice to have so many knowledgeable folks out there to help.</p>
<p>Some “merit” scholarships consider need. Also, many schools practice preferential packaging, which gives the best aid packages to the most desirable candidates.</p>
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<p>NO…your income will NOT be reduced by your 401K contributions for the year. Those contributions are added back in AS INCOME on the FAFSA.</p>
<p>I do not believe your income can be reduced by making significant contributions to your 401K. </p>
<p>I think you have it backwards…your 401K account balance is NOT treated as an asset…but the contributions to it for the calendar year of that FAFSA (so for a 2011-2012 school year, that would be the 2010 calendar year) would be added back into your earnings as income for the year. It would not reduce your AGI for FAFSA purposes.</p>
<p>Someone correct me if I’m wrong!!</p>
<p>It will also depend on the school. If its a CSS profile school then your fafsa efc is really not going to come into play. Fafsa only schools typically don’t have as much money to give away as profile schools and are more based on merit then need. If you post the schools she is considering I am sure someone here can advise about the aid.</p>
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<p>Well…not exactly.</p>
<p>The FAFSA is used to determine eligibility for federally funded NEED BASED aid. This has nothing to do with merit. Merit awards are based on merit…your academic standing. Some schools do have awards that require need as well as merit. This varies by school.</p>
<p>So…most FAFSA only schools don’t meet as much need as schools that use other information (their own form or the Profile)…but meeting need is what the FAFSA is all about… not merit aid.</p>
<p>There are about 300 schools that use the Profile in addition to the FAFSA. Included in these schools are some schools with very generous institutional funding…money that is from the school, not the federal government. The information on the Profile is used by these schools to determine the awarding of their institutional money to meet NEED. Again…not related to merit at all. </p>
<p>There are also schools that use the information on the FAFSA to determine awarding of institutional need based aid. These schools typically do not meet full need…again…nothing to do with merit at all.</p>
<p>Now…what about merit aid? Well…merit aid is aid awarded to students based on their past academic performance and standardized test scores. SOMETIMES financial need is considered…but in most cases, merit aid does not consider finances. It is awarded based on your academic credentials, or some special talent that you have (e.g. music merit awards are awarded based on the talent the student demonstrates at the audition, artists based on their portfolio). In most cases, merit awards are done irrespective of need. In fact, many schools do not require the filing of the FAFSA or Profile for merit based awards.</p>
<p>You need to check the required forms for the SCHOOLS you are applying to…this will help you know which forms you need to complete for NEED BASED and/or MERIT aid. This varies from place to place…and the deadlines do as well. All information can be found on the school’s websites.</p>
<p>Thank you for the correction. I guess I should say based on my experience with the schools my son applied to fafsa efc did’nt come into play for need based aid at fafsa only schools. He did receive need based aid from the state and federal but nothing need based from any of the fafsa only schools he applied to, which was the similar experience his friends had.</p>
<p>I guess the point I was trying to make to the OP is not to focus too much on the fafsa efc unless she is sure the schools her daughter is applying to give need based aid based on the fafsa efc.</p>
<p>Thumper is right…</p>
<p>Your H’s 401k contributions are added back in because those are considered a choice.</p>
<p>great info everyone! thanks again! My daughter’s first choice school is SCAD and she has several other choices all liberal art colleges on her list. I believe SCAD uses just the fafsa. please correct me if I’m wrong. And if anyone has a SCAD experience to share - please do (good or bad experiences are welcome). I am all about making informed decisions, and I appreciate all info I can get.</p>
<p>When I ran our numbers in the fafsa4caster form and putting money into the 401K to reduce our agi, it by-passed the asset questions. So it seemed like it worked for what we need (by-passing the assets).</p>
<p>I also ran the numbers looking like we actually had an income under the $50K (no 401K contributions) and came up with an even lower EFC than the previous scenario. Of course this scenario is not going to happen, but I wanted to compare it to the previous scenario which used the contributions. By doing this comparison it does look as though the 401K contributions are added back into the income, as the EFC was higher for the 1st scenario, but both did bypass the asset questions (which is all we are trying to achieve).</p>
<p>Ultimately, by bypassing the asset questions all together we are able to lower our EFC. If the fafsa4caster is accurate, it seems like the 401K contributions will work to ensure our assets are not considered, thereby lowering our EFC.</p>
<p>Has anyone found that the fafsa4caster form is inaccurate?</p>
<p>Thanks so much once again.</p>
<p>You misunderstand. We aren’t saying that you need to add back in the entire 401k as an asset. You need to add back in the one year’s contribution somewhere as income. Not sure what line it gets added back in, but it does.</p>
<p>So, if during one year, your H puts in $5k into his 401k, then that gets added back in on FAFSA. I see if I can find what line that is.</p>