FAFSA tricks

Paying for College
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<p>I disagree dt123 -- I'll bet that the majority of middle-to-upper income applicants for financial aid at private colleges are homeowners who have to worry about how equity is considered; and I'll bet that a majority of lower-income applicants come from single-parent homes or have parents who have remarried. One way you end up being in a lower-income household is by having only one wage earner. </p>

<p>Even if it is not a majority, these are problems that affect a significant number of applicants.</p>

<p>You are also mistaken about the consistency within a single college. Among the vast majority of colleges that do not promise to meet 100% of need, financial aid applicants are treated in disparate fashion, with some applicants being given priority or higher level consideration. So it is very possible that 2 applicants with identical EFC's may get very different aid packages, with the higher stat applicant getting a grant that meets full need, and the lower stat applicant being told that no grant money is available.</p>

22

<p>Some schools give "merit within need" awards, making more of the money in the FAid package for students they really want as a grant or scholarship & smaller loan (that needs to be repaid). Conversely, they give other students larger loans & smaller "grant or scholarship" because either way they're still meeting the "need" by having the total reach the EFC. Of course, everyone prefers the package with the smaller loan. From what I've read, there is NOTHING which prohibits schools from making these types of offers to students & some schools candidly admit that they package FAid in this manner.</p>

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<p>I think I found a way to beat the Fafsa...
The form, although it takes into consideration one's state of residence, does not include the value of one's home. If a person carries a mortgage, it is worth it to invest extra money to pay off the mortgage because "home value" is not declared on the fafsa. Since one's home is still an investment, this would be an effective way invest without it impacting need-based aid.</p>

24

<p>Calmom,</p>

<p>I agree my situation may not be applicable to everyone and definitely do not want to submit it as advice. I just found the system so difficult and random, especially when you are talking about a purchase, investment or whatever you want to call it, that will total well over $100,000 and up to $200,000 at some schools. </p>

<p>I find that aid officers are not particularly cooperative about future year costs as they apparently don't want to tell people how to improve their "snapshot" or make commitments they cannot make. But when a person's situation is very changeable, due to career change, marital changes, etc., I think it would be very helpful to understand just what the whole thing will cost, even if a person has "sizable" assets. If an aid officer won't help with that, they are about the same as a used car salesman.</p>

<p>Another non productive claim that colleges make is that loans are limited to a certain amount. That loan amount is what the STUDENT can get, not what the parents may have to take out against assets they may not be able or want to convert to cash. Again, I don't see why schools don't just ask for what they want and forget about all of this aid stuff. It is an incredible waste of time and effort.</p>

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<p>sanguine, your suggestion would work, but it would be a very large investment with very little return. The reason is twofold:</p>

<p>1) Most of the top private colleges ask for the CSS/Profile, which does take into account home equity. As I've noted already, those are the schools that are most likely to meet full need, and of course they are also the most expensive and the ones you will be most desperate to pay for if your kid gets in. By paying down your home equity, you are decreasing the amount of aid you will get from those school -- and you may end up having to borrow the money back through a home equity loan at a high interest rate, when the money could have been in the bank earning interest for you.</p>

<p>2) The FAFSA calculation looks to income first, assets second. The FAFSA formula assesses parental assets at 5.64% -- so basically, for every $100K you spend down your assets, your EFC is reduced by $5600. The problem is that with $100K invested, you probably could earn better interest than that- so you generally are not better off financially to tie up the money in the house.</p>

<p>The best way to reduce EFC is to reduce income -- if a wage earner can reduce family income to below $50K, then the family qualifies for the "Simplified Needs Test" which disregards all assets. But this makes no sense unless the income was borderline around that level anyway -- its like quitting your job so you can go on welfare. You end up putting yourself in a more precarious financial situation. No matter what, your EFC will rise slower than than your income, so even if you pay more for college you are generally better off with earning and saving more money than deliberately making yourself poor. </p>

<p>There's a great article that covers various strategies to maximize aid eligibility here:
Maximizing Your Aid Eligibility
<a href="http://finaid.org/fafsa/maximize.phtml%5B/url%5D"&gt;http://finaid.org/fafsa/maximize.phtml&lt;/a&gt;&lt;/p>

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<p>MickeyD, I am guessing from your posts that your "IM" EFC comes out pretty high for CSS/Profile schools, and you were frustrated to learn at the end of the process that you qualified for little or no aid. I can see where the frustration comes in, especially if you found at the end of the process that your kid was accepted to a lot of great schools that you couldn't afford. </p>

<p>But the reason there is a needs-based financial aid system in place is to aid families with very limited resources. Those of us who have a lot of home equity may not have much else, but we have borrowing power. The financial aid calculation is based on the assumption that parents will borrow. </p>

<p>I agree that the situation could be more clear. The financial aid rep at my daughter's college was very helpful in discussing possible future scenarios with me. I can't say that my fears are completely put to rest, but I certainly do feel I got honest answers to my questions. </p>

<p>But I can assure you that the aid systems is not a waste of time and effort for those of us who qualify for significant amounts of aid. We never seem to get as much as we would like, and its never easy -- but the fact is that it has made it possible for me to send my kids to high quality private colleges. </p>

<p>The reason that we qualify is that we have a whole lot less money than the parents who don't. As a single parent who makes do on approx. $50K a year, I can only shake my head at families who have twice the income I do and are griping about the aid system. Maybe its wishful thinking on my part, but somehow I think that if I made $100K each year, I'd manage to find a way to put something away in savings -- after all, I already know I can live on $50K, so earnings beyond that look like "discretionary income" to me. I realize, of course, that the IRS takes a bigger bite and life has a way of draining money even when you feel like you are living frugally -- but the bottom line is that the LESS the family earns, the better the system works. So its one of those progressive systems that offers the biggest helping hands to the folks who need it the most.</p>

<p>We all have choices, and most of us middle-class folks live in states which offer less expensive public alternatives. If not, there actually are some out-of-state publics that are priced reasonably - for example, the SUNY system. (Several of my daughter's California classmates are going to SUNY next year - I thought that was odd until I discovered that even with out-of-state tuition, a SUNY costs less than attending a UC campus.) There are also many states that regularly waive out-of-state tuition for high stat applicants. </p>

<p>If we want to have our kids attend private colleges, then there is going to be a cost. I sent my kids to public elementary and high schools because I didn't feel I could afford private school; there is no reason that I can't make the same decision at the college level. </p>

<p>So I agree with you -- the system is frustrating, and it is unpredictable when you are searching for <em>private</em> money. The part about qualifying for federal aid is more clear - but of course that comes in the form of small subsidized loans and work study. The federal aid is really designed to meet the needs of students attending PUBLIC colleges -- why should the federal government subsidize private colleges charging inflated tuitions? Of course they do end up providing exactly those subsidies, but the point is that they the system is not geared to make it easy for middle class families to send their kids to elite privates; it is supposed to be there to enable poor families to send their kids to public colleges. The private colleges are in on the aid game because they have chosen a pricing scheme that makes college unaffordable even for the those of use who can easily manage a public education.</p>

<p>I do wish that there was more honesty- I wish they would quit making their own independent determinations of "need" and drop the fiction that they were meeting 100% need, when they don't. It would be better if they simply stuck with the FAFSA numbers & used their own financial aid forms to seek supplementary information, and simply gave awards that reflected the true percentage of need. They could quit playing word games and simply provide need-based aid packages that labeled things honestly - it is frustrating when "need" is whatever the college says it is.</p>

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<p>Well said, Calmom,</p>

<p>Your knowledge is deep and I appreciate your commitment. I don't consider myself especially privileged, but I do have borrowing power. I also have savings for my children's education from a variety of sources, so they are privileged in that sense. However, I do not have off the book resources like wealthy grandparents. I am really beset by the progressive tax system and every effort to save is counteracted by the aid policies at many schools. The frustration comes mostly from the false advertising and claims about financial aid. Believe me, I saw the sticker prices, but unfortunately believed the claims of maximim loan balances. It caused a lot of wasted time and what I can accurately call grief for my child once we realized the school of dreams would not be possible. There are 3 elite schools that would not have received applications had we know the extent of this deception.</p>

<p>The advertisment that a school meets 100 % of "demonstrated need" determined by someone who won't reveal their method of determination smacks of bait and switch and tactics used in sales of used cars, not the education of our precious ones...</p>

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<p>Believe me, I saw the sticker prices, but unfortunately believed the claims of maximim loan balances</p>

<p>FOr the schools that meet 100% of need they are fairly accurate at least in our experience- however- they don't take into account parental need to borrow the EFC- the loans are for students only
but another caveat- some schools apparently think PLUS loans go toward meeting 100% need.
um no
nother reason to never apply ED if you need aid so you can compare ( and dicker?) packages</p>

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<p>EK, MickeyD's point and mine is that the private, "100% need" colleges do NOT meet FAFSA EFC -- they meet a recalculated EFC that takes into account resources not mentioned in the FAFSA and each uses their own unique formula for calculating need. Why is my expected family contribution $17K at Barnard College and $26K at the University of Chicago? This isn't unusual -- this kind of discrepency shows up all the time.</p>

<p>The calculators at finaid.org are helpful, but they are not at all accurate for the "institutional methodology" because college practices vary so widely. I've got a FAFSA EFC of about $11K, but with my full home equity considered, it comes to $33K - 3 times my FAFSA EFC. If I limit the equity to 2.4 times income, as the 568 group supposedly does, my EFC is $18K -- so why does Chicago, a 568 group school, want $26K? </p>

<p>Barnard uses its own method for dealing with home equity, which sounds fair in theory but comes out worse for me than the 568 approach - according to finaid.org, when I plug in the numbers I should have an EFC of $22K - double my FAFSA EFC. But their award is far more generous; as noted, I have to pay a little less than $17K -- which is starting to look pretty good in comparison to all the other numbers that come up. </p>

<p>The bottom line is that it is confusing, and this stems entirely from the 100% need fiction. If schools simply relied on the FAFSA and then published their policies, or provided their own calculators, for other assets they would consider - then it would make more sense. </p>

<p>For example, lets take a hypothetical school that develops its own scheme; this school takes the FAFSA EFC an also considers full home equity based on current market value of the home, but only uses that to add 2% to the need. I live in California, so I have $400 equity in a shack that most people wouldn't pay $50K for. So be it. With the 2% cap it doesn't hurt nearly as bad as 5.6% did -- so now hypothetical school sends me an award that has a need section that itemizes the figures, looking something like this:</p>

<p>Family Contribution:</p>

<p>FAFSA EFC: $11,000
Home Equity: $ 8,000
Total: $20,000</p>

<p>OK... so now I know. The college has a home equity surcharge, but the policies are transparent so I can fully anticipate what the package will look like, for this year and years to come. I even can use this decision in terms of long term planning, such as choosing whether to take a home equity loan or a PLUS loan. </p>

<p>Maybe college B has a different formulation. However, if the situation is transparent - once again things are clear. I know what to expect when I apply; and I know what to expect in future years.</p>

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<p>Weird
we only dealt with one private school & although they use PROFILE and their own aid form- EFC is same as FAFSA
We do have equity although apparently not enough to make a huge difference.
I looked on the US NEws site- one that I assumed was accurate as to what dollar amount of loans people are leaving with- so I am confused as everybody else-
It looks like we were just lucky that the one school that used forms besides FAFSA- stuck to the info on the FAFSA.
Our aid office has always been pretty straightforward- but if it wasn't- I am even more glad that she didn't apply ED, cause then we would have been stuck.</p>

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<p>Calmom,</p>

<p>You are definitely right about it being an investment with little return if you need to fill out the CSS/Profile, but it just worked out that the schools I was accepted into only required the FAFSA (perhaps because Uconn is a state school and they don't guarantee 100% met aid). Also, in my parents case, real estate turned out to be a much better investment than the marginal bank rates or even mutual fund returns. Housing costs in the New England area skyrocketed after my parents bought in so our home appreciated from about $450,000 to $700,000.</p>

<p>I think your last point about reducing wages is a bit insane. Why should a family of 4 with a house hold earning potential of six figureds suddenly decide to "become lazy" and cut back their hours to qualify for this mark? It definitely makes sense for the people who have a true earning potential below this mark, but simply cutting back to avoid listing one's assets is ridiculous.</p>

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<p>If your wages are $51,000 per year, it makes sense to make them $49,999 per year if it means you can exclude assets from the FAFSA. Obviously at some point the benefits dollar-wise are a wash, then way above that, a bit insane like you say.</p>

<p>I know people who were making six figures, who were thinking of retiring anyway, that decided to cut back to part time and semi-retire. Part of the analysis was impact on FA. One of the many "loopholes" in the FA arena is that a 2 paycheck family of full-time employees is treated the same as one where a professional makes the same income goofing off in semi-retirement with a fully-funded retirement plan.</p>

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<p>Lots of food for thought here as our third child begins the college search process. Older students enrolled at state schools so my experience with the Profile and its impact is limited. Can anyone share some guidelines (even general ones) as to how home equity and retiement accounts are treated as possible pots from which to borrow? Are all applicants expected to borrow from these or just those balances over a certain amount? Is there a ratio of incomes/home equity/retirement that can help us maybe predict what a school might determine their EFC is as compared to the FAFSA EFC? Thanks.</p>

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<p>Most colleges do not ask for information about funds in retirement accounts (IRA's, Keogh's) - so pretty much everything there is sheltered. They have different approaches to home equity, so there's no way to predict, other than to know that for financial aid purposes, the less equity you have the better. They don't care as to what or how you borrow -- basically they just assess up to 5.6% of the value of assets for purposes of EFC -- so you can assume that every $100K in assets = +$5600 in EFC. For lower income families the bite isn't so bad, because there is something called and "asset protection allowance" that shields the first $45K or so of assets. (Amount increases with age). </p>

<p>Best advice: maximize contributions to retirement accounts until the end of your child's junior year; and whatever you do, don't pay down your mortgage ahead of schedule. </p>

<p>I don't think it makes sense to undercut your own financial position in order to improve prosepects for financial aid, but if you have a reason to borrow from home equity for other reasons -- such as a refi+ cashout in order to pay off credit card debt, medical bills, or planned/needed home improvements -- it would make sense to go ahead and do that. Basically, the only "debt" that will be taken into consideration in reducing assets is mortgage debt (which reduces equity) and student loan debt. So it makes sense to use the home equity to pay off any other sort of debt you may be carrying.</p>

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<p>So if you have let's say, $100,000 in home equity, then consider 5.6% of that available to borrow for college expenses? In additon, of course, to 5.6 of taxable investments, and your actual income.</p>

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<p>Yes, but some colleges will cap the total amount of equity they consider in relation to your income, generally at between 2.4 to 3 times income. So if income is $75K and the school follows a policy of limiting equity to 3x income, then even if you had $300K equity, they'd only consider $225K.</p>

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<p>Some schools will consider unreimbursed very high medical expenses if you write a letter, provide documentation & make an appointment & work with the FAid office.</p>

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<p>does having an older sybling attending college, then grad school, and four more college bound syblings after me increase the aid I will get substantially. My parents of six kids are making 90-100 thousand a year</p>

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<p>Having an older sibbling already in college should cut the EFC for each of you roughly in 1/2. Having sibs in grad school are NOT counted, since they're considered independent. The formula will note how many members in your family.</p>

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<p>this phenonema of having more than a couple kids is interesting-
so many on the boards have 4 or more kids!
I admit my community is very different- many of our friends and aquaintances didn't start procreating till in their late 30s or even early 40s ( have to pay off those student loans first ya know ;) )- so that pretty much eliminates having more than one or two-
I do know one family that has 5, but they are pretty unusual ( and very wealthy).
but anyway- other students getting their BA at the same time will reduce the EFC, but students post BA will generally be considered to be independent, and so wont reduce EFC for those students who are still dependent.
Parents attending college at the same time as their children will have a reduced EFC, but the childrens EFC will not be reduced by their parents attending college</p>