I have a HS junior so her first FASFA will require my 2019 tax return.
Here is my situation. I am a single mom and losing my job in October (company sold). With that I am getting severance, a stay put bonus and the payout of any accrued bonus. 2019 will look like a fantastic year however it isn’t representative of a normal year so wondering what I could do.
Since none of these items have been paid out, I have already asked if my company would defer payment to next year, which for now they have said no.
I don’t have a new job and am looking like crazy. This money will hold me over but for the FASFA it looks like I can easily pay for college.
Any thoughts, strategies, or experiences you have had with others in this situation?
I do have other details that I can share if necessary.
“If you (and your family) have unusual circumstances that might affect your financial situation, complete and submit the Free Application for Federal Student Aid (FAFSA) and then notify the financial aid office at your college. In some cases, the financial aid office may decide to take these unusual circumstances into account and adjust your cost of attendance or the information used to calculate your Expected Family Contribution (EFC). Provide the financial aid office with adequate documentation to support any unusual circumstances.
Possible examples of unusual circumstances may include:
Tuition expenses at an elementary or secondary school.
Unusual medical or dental expenses not covered by insurance.
A family member who recently became unemployed.
Changes in income or assets that may affect your eligibility for financial aid”
Which means you have to contact each and every financial aid office and discuss that situation.
Your daughter will be applying to college next year when you will have more than half the year income established and as good of an idea on what future months will hold as most anyone. If you are unemployed, or making far less than what you were in previous years, this would be a subject to discuss with the schools.
However, when a friend of mine experienced this very situation, her kids’ college refused to give any concession to that lump sum payment even though it was a clear aberration in earnings They took a gap year. It made that much of a difference in their financial aid. It was not an easy decision for them to make because the older student had already taken a gap year to maximize financial aid—giving the family two in college at the same time. But in the end it was well worth it to them.
You might run the NPC with both the ‘regular’ income and the ‘new and improved’ income. It may not make any difference at a ‘doesn’t meet full need’ school or for things such as a Pell grant
You have to fill out the FAFSA and answer the questions as asked, so you will have to put all that extra income down. Worst case, by Oct 2020 when you fill out the FAFSA you’ll have spent all that extra income and ask for professional judgment (appeal) from the FA office. Best case? You find another job and you have all that bonus and extra income banked to pay for college.
Assets only hit about 5,6%. The problem is that the payout is going to count as income for 2019 income is hit 20-40+%. That hurts. If the payout is banked and still sitting there when FAFSA is filed, yes, it gets hit AGAIN as assets.
This is an issue that comes up a lot when an unusual payout is received FAFSA, financial aid rules are such that it is hit like any income.
After all, it is possible the OP finds another job paying about the same as her prior one and that payout is extra. My SIL received a severance settlement and was hired a month later. The payout was nearly all gravy. Had she not gotten another job, it would have had to have supported her the next year.
If you look st it from a tax perspective, the OP is going to have to pay income taxes on this payout this year, which May put her in a higher tax bracket Doesn’t matter that the payoff is used in lieu of wages the subsequent year, and no job prospects lowers tax rate significantly. Still get hit when paid.
Some schools will treat the payout as an asset, rather than as income. This is more beneficial due to the asset protection allowance. But you have to file the FAFSA reporting everything as income & file a special circumstances review request with the school . Because it is a Professional Judgment situation, different schools will have different processes, different policies & different outcomes.
They aren’t REQUIRED to apply to all T20 schools. The point is that if you are seeking financial assistance and cannot get it or cannot get enough through need-based FA, the student can apply to schools where he/she is eligible for merit aid.
This happened to me in 2016/17. I lost my job 12/31/16, thankfully found a new job starting early January 2017. But my severance was paid 1/2017. Since we were pretty much full pay, it only made us lose the subsidized portion of the federal loan. I didn’t bother to appeal because I did find a job immediately, but the school does have an income appeal process.
Something else to be aware, not sure if it will impact you - I rolled my 401k over when I started my new job. If you do the online retrieval with the IRS, they will count that money as income. I knew the severance would hurt, but when our EFC went from about $25k to $175k, I knew something was off! I had to work with the university directly on that too.
If your daughter is accepted to any of these schools on her list, and you cannot get the financial aid offices to move on the income issue, she can take a gap year. Your 2020 income will then be used for financial aid that year
That is your choice. And I don’t see what that has to do with the OP to this thread at all. If your kids have the stats to get accepted at T20 schools and you need money to attend…they would very likely get accepted to schools where merit aid is possible.
To the OP to this thread…your kids do not have to apply to and attend T20 colleges. You might want to look for schools where merit aid is a good probability…or is guaranteed based on their stats.