<p>Being able to return to my school for my junior year is now in jeopardy and now I don't know what to do.</p>
<p>Basically, my family's finances are in the exact same state they were last year, and the year before, and how they will be next year. Each year, our EFC has been around roughly 10k, and that's what we've had to pay, out of the 50k my school costs.</p>
<p>However, early in 2009, my family was in a lot of debt, and conveniently ended up getting a chunk of money from my grandmother's farmland that she sold. Not a huge chunk, but a chunk nearly equivalent to our yearly income.</p>
<p>They spent all the money nearly right away paying off debt and similar things, so the money was gone within a couple months, and at this point all our finances/savings (hardly anything, because my parents are dumb) are back to the level they were before.</p>
<p>HOWEVER...the chunk of money from the farm was put under my parent's INCOME so our income is showing up as twice as much as it actually was, and as such, our EFC skyrocketed to $56,000.</p>
<p>That money is no longer in our hands and will not be a yearly thing- it was just a random inheritance.</p>
<p>Will my school understand this situation and overlook our EFC if we explain it to them? I'm freaking out.</p>
<p>Are you saying that their “income” doubled, but your EFC went up by 5 times? That seems odd. </p>
<p>For instance, if their original income was $50k and your EFC was $10k, and with the big chunk, their “new” income is $100k, then their EFC should not be $56k.</p>
<p>Am I misunderstanding?</p>
<p>You do need to contact URichmond, but no one here knows what they’ll do. IF they refuse to budge, you may have to ask to skip a year of school and go thru this next year when your parents’ EFC drops again.</p>
<p>Nope, you’re not misunderstanding. I don’t think EFC/income is a perfect ratio though, so it wouldn’t just automatically double our EFC…though that would be much better than what actually happened.</p>
<p>“conveniently” got a chunk of money? How? Was the farmland also in their name? That’s the only way I could see it as ‘income’. Otherwise, why not a gift? Or inheritance?</p>
<p>If the money that your grandmother gave your parents was a gift, then they do not owe income tax on it. Have them review their Federal tax forms and see where they put that money; the forms can be amended.</p>
<p>The recipient is not on the hook for gift taxes; only the giver. The limit is $13,000 per year that can be given tax-free (per person), but this limit can be avoided by spreading out the reporting of it over several years.</p>
<p>An inheritance is typically tax-free to the recipient as well and not reported as income, with the exception of IRA distributions, unreported interest on savings bonds, and a few other forms of property.</p>
<p>I wish I knew the details of exactly how it was classified. When I said “conveniently” I meant it was convenient because my family was in debt at the time.</p>
<p>All I know is that my great grandmother sold the farmland that was in her name and split all the profits evenly among her grandkids. I don’t think it was a “gift” because I remember my dad having to sign a lot of forms and stuff and it couldn’t go through until everyone had signed their stuff. I’ll have to ask my dad exactly what it’s classified as.</p>
<p>Both would still be reported as untaxed income for FAFSA purposes. It’s puzzling why the EFC would skyrocket though. Kellie, have you actually reviewed your SAR for errors? If there are none, perhaps you could file an appeal for an adjustment in FA with your school. It’s possible that a one-time event would be viewed favorably, perhaps even likely if the debt it removed was something like medical expenses, etc.</p>
<p>Okay, it sounds as if the property was jointly owned and the net profit would be reported as part of the AGI.</p>
<p>We went through and updated our FAFSA tonight so it’s definitely all in line with the way my dad’s accountant prepared our taxes. Maybe I should have my dad give him a call just to make sure it’s right.</p>
<p>Did any other circumstances change, such as a change in the number of students in college?</p>
<p>Can you give us some other numbers? Because with a $10k EFC, the family income can’t be that high (unless there are more kids in college). So, if all of the sudden the income was doubled, the EFC should not go up by 5.5 times. </p>
<p>On the day you filed your FAFSA and had to report savings, was any of this money in savings or had it already been applied to debt?</p>
<p>An EFC of $55K would translate into an annual income in the $200,000 range. Was the value of that land that much? This would have to be MUCH more than double what your family income was with an EFC of $10,000…which would be an annual income in the $50,000 or so range. That’s FOUR times the income…not twice the income.</p>
<p>My numbers are estimates, not real calculated EFC numbers.</p>
<p>If the value of that property added $150,000 to your income and ALL of it was used to pay off debt…I would say…that was a lot of debt…and it’s good that your family was able to pay it off. </p>
<p>I agree with others…go and discuss this with the financial aid office. They may be able to help you if this is a one time occurance and family earned income has not changed. BUT they may say “some of that money ‘could’ have been saved to help pay for college”. I hope they can help you out…</p>
<p>What do your parents say? Is there any way they can help you out now that they seemingly have paid off all of their other debts?</p>
<p>I do have an SAR, and we’ve already gone through and double checked everything - because when we filed it, we were filing a correction (had to add in the farm info after the accountant redid their taxes to include it), so we combed through everything yet again. All the info is in the right place. The SAR is where the 56k EFC came from. It was originally 10k before we filed the correction.</p>
<p>My dad is self-employed and brings in about 80-90k a year, but after business expenses, many more medical bills than your average family, a house they can’t afford, and my parents’ inexplicable inability to save money, they only have like 10k in savings at any given time. And no investments or stocks or anything like that. That’s how we’ve had around a 10k EFC every year. I’m the only one in college.</p>
<p>Their savings are still around that 10k mark now because all of the money from the farm went straight to other things within a few months. There is no trace of that money left, and there wasn’t any when they filed their taxes or the FAFSA or anything like that.</p>
<p>I just glanced again and the money they got from the farm was 125k so it more than doubled their income.</p>
<p>Granted, I have no idea HOW that money disappeared so fast - honestly no idea - but it did. I guess they were just in a lot of debt. Things have always been tight so they also probably spent more money than usual just because they could. My parents are very irresponsible. </p>
<p>And there’s no way they can help me out because like I said before, their savings are dwindling as usual. I think they had built up their savings to around 40k or so but then once the farm money got put into their taxes they got slammed with an extra 30k in taxes so that’s what like all those savings went towards. So now they’re back down to the usual 10k.</p>
<p>There is NO PLACE on the FAFSA for medical expenses, or any costs that have to do with your primary residence (your home). Business expenses are something I am not familiar with…but it sounds like your dad’s AGI was NOT 80-90K per year. It sounds like his business expenses were roughly half of what he earns. </p>
<p>The added $125K in income would certainly add a huge amount to your EFC.</p>
<p>the increase in the EFC does seem high compared with the numbers you gave, but you ask the question “Will my school understand this situation?”</p>
<p>The situation is that your parent’s got an additional 125K last year and still would like to pay only 10K for your schooling. They want the government/state/school to pay 40K for your schooling so that they could use that money on their own debt or purchasing what they wanted to with the money.</p>
<p>Personally, if I were the school, I would not grant you additional money – the school will see that your education should have been a priority for your parents when it came time to allocating that money.</p>
<p>You need to contact your school’s financial aid department, give them a written explanation, and ask them to exercise “professional judgment” to adjust the FAFSA. Here’s what you need to do:</p>
<ol>
<li><p>Fully document the medical expenses. See [FinAid</a> | Professional Judgment | Medical and Dental Expenses](<a href=“http://www.finaid.org/educators/pj/medical.phtml]FinAid”>http://www.finaid.org/educators/pj/medical.phtml)</p></li>
<li><p>Adjust the income to reflect a one-time event. See
[url=<a href=“http://www.finaid.org/educators/pj/principles.phtml]FinAid”>http://www.finaid.org/educators/pj/principles.phtml]FinAid</a> | Professional Judgment | Principles of Professional Judgment<a href=“under” title=“Principles concerning income”>/url</a>. Usually in cases with such a one-time event, some of the money can be treated as an asset rather than income – but in your case, as your parents spent it, I think you should also document the way it was spent. (To pay off pre-existing debt). While it is true that such debt would not ordinarily be considered, I think in your case it is important to demonstrate where the money went. </p></li>
</ol>
<p>I think that you should expect your EFC to go up for the following year in any case. Your parents are NOT in the same position they were before, because they have paid off debt. That means that they are in a better position to borrow – they could take a PLUS loan for the difference in EFC for the next 2 years. But that doesn’t mean that 100% of this one-time gift should be treated as “income”.</p>
<p>*My dad is self-employed and brings in about 80-90k a year, *</p>
<p>Your dad’s AGI had to be much less for your EFC to have been only $10k. None of those other things you mentioned would have reduced your EFC. I was guessing that the family AGI was around $50 for you to have an EFC of $10k.</p>
<p>When you add $125k you have more than tripled your income - that would explain.</p>
<p>You may not have any choice but to delay school one year so that your EFC can go back down if the school won’t make an adjustment. I don’t think the school will make an adjustment because I doubt that they will care that your parents don’t handle money well - that’s not the school’s problem. However, if your parents used the money to pay for a $100k+ outstanding medical bill, then perhaps the school might help. However, if only some of the money went to medical bills and most went towards consumer debt (cars, homes, credit cards, home improvements, furniture, clothes, etc), then the school is unlikely going to help you because it has too many students whose parents haven’t been given a windfall of money.</p>
<p>IF your parents used the money towards debt, then you need to have a talk with them. They can now afford to pay more since less is going towards debt. Since you say that they’re bad with money, you may need to kindly remind them not to get into such debt again because there won’t likely be another windfall coming to bail them out in the future (they got lucky this time.)</p>
<p>Have you asked what the money went towards? $125k is a LOT of money to have just essentially disappeared within one year along with your dad’s income. Does your mom work? If not, maybe she’ll have to go to work to help pay for this year’s schooling.</p>
<p>Did the farm money show up on your parent’s tax return? If so, then their names must have been on the property somehow. An inheritance should not be on the tax return.</p>
<p>How is it classified on the tax return? Long term gain? If so, the bad news for you is that they must have had their name on the property somehow, if they are responsible for long term gains. If so, it really should have been a declared asset in prior years.</p>
<p>If it were truly an inheritance, from what I have read, it does not count as income, but the value counts as an asset.</p>
<p>What will likely happen if you request & are granted a professional judgment decision would be that the amount would be removed from income & treated as an asset. That is preferable, since there is a good asset protection allowance for the parent. We do this for corporate buy-outs - we know that these are one time events.</p>