Hello, I’m new here and a big planner:) Considering going down the BS application route for the coming year for DC who is currently in seventh grade. Certainly FA would play a major role as we fit squarely into the middle class (I guess that depends on its definition). I wonder if anyone would be willing to share how BS take into account retirement accounts – 401k, 403b, or 457 which cannot be drawn upon until a certain age as well as Roth IRAs which can be withdrawn early under certain circumstances. I believe I read here that one BS was considering 529 as part of the equation when determining need but I wasn’t sure about these other types of accounts. Thanks a bunch as I’ve already learn valuable info here in the last several weeks.
In my experience retirement account balances are not considered a potential source of funds for BS. A large retirement account balance could impact FA though if it appears your retirement is already fully funded a school may consider future retirement account contributions as funds that could be directed towards BS tuition. That is just a guess on my part though. I can tell you that I’m a planner as well. I started 401k contributions at 25 and have made the max contribution for quite a few years. I have a resonable 401k balance, I continue to make contributions, and I receive FA.
Choate definitely expected ALL future cash flow going to ANY type of savings/investment accounts to be available for BS. I remember posting four years ago how this would put a four-year hole in our retirement funds and @neatoburrito quickly pointed out that many would be happy to trade that hole for having any retirement savings at all, and I haven’t complained since. I needed that slap, neato.
I’m still astounded, though, by @WinchesterMom’s announcement that Mercersburg expects 529 funds to be drained for BS when they are ineligible for secondary education and will incur a penalty on top of the misuse. If anyone else’s school does this, please post so future applicants can seriously consider whether this is a viable choice for their family. It certainly wouldn’t be for ours.
I was very surprised to read about Mercersburg. It seems extreme for a BS to expect a family to lose savings to a tax penalty because the BS requires inappropriate use of funds. Makes me glad I chose to fund my 401k, knowing I could borrow against it if necessary, rather than funding a 529.
My impression is that M’Burg expects the family to take out a loan not to drain 529 and thinks the family can afford the loan for BS since less loan would be needed for college due to 529. But then, they offered added merit scholarship last minute so I hope it worked out for WincheserKid.
If you want to find out what your Expected Family Contribution (EFC) will be, I suppose it wouldn’t hurt to dry run the Family Contribution Report. You can create an account on SSS by NAIS account and fill in all the finances and documents. It would cost some fee to run the report ($41) and you need to choose a school to send the report to. There must be schools that are still accepting rolling applications which you may not apply at all. It is a practice run after all.
The point of this exercise is to answer the question -
If the EFC comes out to be very high, say 20K more than you were thinking of spending, due to various details of your finances (having lived responsibly, no debts, large retirement accounts, etc)
would you consider having your child apply to Boarding Schools at all?
It might be useful to have this EFC information sooner than later, in February after you and your child invested months of time applying to BS. Many families are shocked at the SSS Report.
Our EFC came out basically we can afford full pay. There are ChoatieMom and SharingGift who bit the bullet and went full pay as we did.
http://talk.collegeconfidential.com/prep-school-parents/1575928-middle-class-family-getting-ready-to-pay-in-full-p1.html
Also look into Coverdell accounts. These accounts CAN be used for boarding school. However there are income limits and a yearly max contribution of $2000. However all interest earned is tax free if used for qualifying educational expenses.
I had already done the SSS; however, I had stopped short of actually paying. I was interested in seeing which figure from the W2 was actually used for the calculation. I went ahead and completed it this morning and our EFC comes in right about 25k. But of course they have my retirement account balances but not how much I’m contributing currently which is at or near the maximum for me (I qualify for both 403b and 457) and we just increased hubby (which isn’t reflected in the SSS and I guess I should’ve mocked that) so I guess I don’t know too much more than before.
When I say I’m s planner 
this is actually for next year as DC is currently in 7th grade and will apply next year.
One thing to keep in mind is that EFC is one piece of the puzzle. In my experience there are wide variations between what different boarding schools offer based on receiving the same information. By wide I mean > $20K.
Yes definitively @redsoxfan18. My career has been in higher ed and while I’m at a public institution now, I spent many years at a private where the game is the same - tuition discounting. Although putting these admission apps together is a bunch of work, it will be worth it if the package is good. My child’s sport is not an option at our LPS (swimming) so hopefully the effort won’t prove to be fruitless. I’ve actually done a massive spreadsheet looking at times of students as well as graduation year to get a better idea of the schools that will need to fill a hole. Call me crazy!
Chiming in to share our experience with the retirement/FA issue. We have only ever been dealing with one school (exeter), so take this info for what you will. I know every school’s financial aid office has different methods/resources/priorities.
We both work in the public sector so we do not pay into Social Security. But we do have mandatory pension contributions. Although we report the balances of our pension plans on the PFS, according to Exeter, pensions are not considered as assets in the same way that other retirement plans are, for similar reasons. Like Social Security, that money is not available to us at this moment in time to draw on the way that a 401k, etc. ‘could’ be. It’s not ours until a certain age/service date. However, when you report this on the PFS, it absolutely is calculated in the same way that other plans would be. And it skews your EFC. So it’s possible that other schools weigh it the same.
That said, we do also have 457 accounts to supplement our pensions. I was particularly nervous to receive this year’s financial aid award, because we got through his first year by reducing the amount of money we are contributing to these plans and rerouting that to our portion of tuition payments. This helped pay the bill to Exeter, but as you can guess it raised our taxable income, which resulted in more taxes and also looks like we made more money when it came time to do this year’s PFS! The est. family contribution was almost 9k more than last’s year’s.
But the school must really weigh a lot of contributing information, because this is the second year in a row that our package does not look much like our PFS would predict.
We have little debt but VERY few assets, and apparently the school looks favorably on this (in their magical formula) because last year our FA award was about 5k more than the EFC would have indicated, and this year it’s about a 9k difference.
Bottom line: I think if you report everything, and have good communication with the school, and have genuine need, they will come up with a fair award (if they have the resources, of course).