My father owns a (very) small business (he is the sole owner/employee), and we are on the low income/moderately high assets end of the spectrum. How are business losses factored into the aid package? I read somewhere that they are added back into the family’s income, but I don’t really understand why. Also, how do retirement funds affect aid? The school I was accepted to says it does not consider the money in them, but it knows how much my parents have saved in them thanks to the CSS, so will that affect my financial aid package at all?
Thanks for your input!
Colleges do these things differently. FAFSA doesn’t include small businesses, but PROFILE schools often do. Many times they do not recognize business losses, depreciation, amoritizations, etc and add them back into income. They may look at whether they are "paper losses’ or they may not. They also tend to value the business as an asset.
Most schools do NOT count qualified retirement funds, unless the amount in them are considered very high. I know families that have millions there in and they still were not included. Some schools, however, will count them. BC, I know, does at lower threshhold.
Thank you for your reply! I’ve been trying to figure out a good estimate for what I might receive while I wait for my aid package from Duke. I ran my family’s situation through the College Board’s NPC, but I’ve learned it’s not completely accurate for small business owners, so I’m nervous. . . guess it’ll just be a “wait and see” thing!
Apply broadly and make sure you have a safety you can afford and would be happy to attend.
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we are on the low income/moderately high assets end of the spectrum.
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This can be a red flag. The schools may think, “hmm…how do low income people accumulate high assets?”
They may think that some of those deductions need to be added back in, particularly ones that are for things that other people have to pay for. Depreciation is also a deduction that gets added back in.
One question colleges may consider: what was the business income if depreciation, Section 179 expensing, amortization, home office expense, and contributions to employer-funded retirement were excluded?