<p>Okay, so this is going to be my third go round and you would have thought I could have figured this out before. I'm expecting next years COA at my son's school to top $54K (of which he gets 30K in scholarships)</p>
<p>We have been covering the remaining 20K (and growing) difference with 2400 in perkins and 3500 or 4500 (freshman/sophomore) and my EFC which has been just over 11K. He also has a large work study allotment.</p>
<p>I never pursued the attempt to reduce my AGI just under the 50K limit or to not claim my itemized deductions to lower my EFC a couple of grand by qualifying for the simplified needs test (because there is no guarantee for the school to meet full need). </p>
<p>This upcoming year my EFC will go up about 3.5K because my son earned a decent chunk of money and my salary also increased. </p>
<p>Now an EFC difference of 12K to 15K might not seem like much, but I'm thinking it would be enough to possibly discontinue my son's Pell grant award and large work study allowance, but maybe not with the rising COA</p>
<p>Is it worth it to lower my EFC by 3k+ by putting 2K into an IRA to get my AGI below 50K, choose to not itemize deductions on my taxes (which would have gotten me a bigger tax refund by about $400), but qualify for the simplified needs test and not have any assets used in the EFC calculation.</p>
<p>Are you sure he is currently getting a Pell grant? The maximum EFC for Pell in 2008-2009 was 4042. With an EFC of $12k (assuming that is a FAFSA EFC) he would not have been eligible for Pell.</p>
<p>The pell grant is determined by the school. My oldest got one and she got the same each year - regardless of our EFC which probably went up a little bit, but we didn't have a windfall or anything like that.</p>
<p>I think it's always worth it to sock away money in an IRA.<br>
What is the benefit for the simple needs test? Wouldn't he qualify for a Pell or SEOG grant? If that is the case - I don't see how you can lose. You can always take a PLUS loan if you run short of cash by 2-3K.<br>
Anyway - I am just thinking out loud and admit I don't really know what I am talking about!</p>
<p>No we definitely don't get any pell grant and SEOG </p>
<p>AFAIK, if you don't itemize on your return and you have AGI <50K, they don't assess any of your assets.</p>
<p>As a single parent, I get 21K in asset protection vs 52K for a married couple with the same amount of assets (at the age of 48). If that weren't the case, I wouldn't have anything to concern myself with....</p>
<p>I do already put 12K this year into my retirement (so it's not like have nothing else saved).
I'm just wondering (out loud) if it makes better sense to put go for the simplified needs to keep my EFC low. I want to see inside the FA officer's head and know "hey with the EFC of 15K, no Perkins loan for this kid) or Hey even with an EFC of 15K (vs 11K last year), the increase in COA still warrants the same Perkins loan and 4K in work study allotment.</p>
<p>Yes, I want my son to have as much Federal loans he can get, they aren't accruing interest and they can be paid back (with my help if need be) after graduation)</p>
<p>
[quote]
What is the benefit for the simple needs test? Wouldn't he qualify for a Pell or SEOG grant?
[/quote]
Justamom - I think you are thinking of the automatic 0 EFC. Simplified needs is a different thing - it causes assets to be excluded from the calculation. The income is still treated the same by the EFC formula. </p>
<p>Simplified needs requires an AGI below $50,00 and the 1040ez/a eligibility. If the income were just below $50k - say $49,999 - the EFC would still be too high to qualify for the Pell. Pell is very EFC driven - there is a disbursement schedule and the amount of Pell is based on the schedule. The school does not have any flexibility on how much Pell to award. SEOG is more at the school's discretion but many schools (including both my kids' schools) require a 0 EFC for SEOG.</p>
<p>Sue - have you run the numbers through the finaid calculator to see what would happen to your EFC? I don't think the rules and income limits for simplified needs are changing (other than the displaced worker thing) so it should give you an idea of the effect on the EFC despite the fact that they have not updated the calculator.</p>
<p>Oh yes, I've plugged numbers in to the 'real' formula. The major thing is keeping the AGI below 50K. Shifting 2K of income from the AGI to the "untaxed income" line has NO effect on the amount of the EFC calculated from income (since the AGI and untaxed income are added together). The BIG thing is that having the AGI below 50K EXCLUDES the contribution from assets.</p>
<p>As I stated earlier, because the asset protection for single parents is so disparate from a married couple, when assets are assessed, that is what raises my EFC several thousand dollars (I should have done this all along, ie the past 2 years).</p>
<p>I'm just pondering if in the scheme of things, if it will make one iota of difference to the FA people if my EFC is 12 or 15K. I want to preserve the possibility of the Perkins loan and the work study allotment. We're talking about a school with a COA for next year that I estimate will be 54K</p>
<p>There is no definitive answer, unfortunately. Some schools do have a bottom-line EFC for certain awards. My school has tons of poor students ... a 0 EFC is necessary for most "good" grants. Over $5000 is pretty much work study and Stafford loans only. It is possible your child's school may have a cut-off somewhere between $12-15k ... but you just have to go on what <em>seems</em> best and cross your fingers (unless you can get a sympathetic aid officer from the school to tell you!).</p>
<h2>30000 scholarship (EFC of 12 or 15K wouldn't affect this)</h2>
<p>24000 remaining need</p>
<h2>12000 or 15000 EFC (they always put this as suggest Plus Loan, but I'm paying it out of savings)</h2>
<p>12000 or 9000 remaining need</p>
<h2> 5500 subsidized stafford loan</h2>
<p>6500 or 3500 remaining need</p>
<p>I'm betting that with only 3500 of remaining need, they reduce or eliminate the perkins loan, but I bet if there is 6500 remaining, I have a better shot of him getting the perkins loan</p>
<p>All I have to do to get the lower EFC is put 2K more into retirement money to bring AGI below 50K and not itemized (and get a smaller tax refund of about 2400). </p>
<p>It's like, spend 2400 for IRA and loss tax refund, to get nearly the same amount in perkins loan (vs me paying that $$$ to the school in the form of higher EFC)</p>
<p>He'll be a junior next year, for which I'll be doing the fafsa in january.</p>
<p>I could have easily put some $$ into an IRA the previous 2 years and also not itemized. I didn't realize that I could do that (chose to not itemize even if I was eligible for a bigger refund if I did). had I done so, my EFC would have been a few grand less because of not having assets assets.</p>
<p>The IRA/retirement money is all added together anyway for purposes of assessing income for the EFC, but having the AGI below 50K and choosing not to itemize let the assets not be assessed.</p>
<p>Aren't you permitted to take money out of the IRA to pay college tuition? It might be a good idea to put that money into the IRA to make sure you get the maximum Pell and aid. Borrow to make up any shortfall this year. Then for the senior year, you can take out the money from the IRA to pay your EFC. Yes, you'll owe the taxes for that amount, but that's cuz you didn't pay them when you put the money into the IRA. If you are that close, it would be wise not to risk losing that free money (the Pell).</p>
<p>we're not eligible for Pell (that was a typo on my part, I meant to say Perkins loan). And I have enough cash to pay my FULL efc of 12-15K for the next 2 years in CASH.</p>
<p>I just am trying to exclude my cash from being assessed as part of my EFC and didn't realize how easy it is (and would have been for the previous 2 years) to do so. I didn't realize I could choose not to itemize and put a little into the IRA to get the AGI below 50K and get the simplified needs test. </p>
<p>I'm ****ed at myself for not realizing this 2 years ago. OF COURSE, there is the large probability that I would have paid more than my EFC anyway, but so far NYU has tailored the FA package that my EFC is about what they 'put me down for' as a 'suggested PLUS loan' (that I never take).</p>
<p>If the fafsa gave single parents the same asset protection this would all be a mute point. But my asset protection is only about 21K and I have more than that.</p>
<p>I just want to make sure my strategy isn't wrong</p>
<p>I'm sorry, Sue. It is upsetting and it is unfair. Yes, you can put away income in the IRA and then take it out for the last year. I know a lot of families that do things for the first three years to get the financial aid and then when it doesn't matter any more, that last year, pull out the cash. The fact that you can take out money from an IRA without penalties for college tuition is what makes the difference.</p>