<p>I completely agree with you calmom. Your posts recommending that parents call when circumstances change (inheritance, loss of job) and ask what the effect will be are spot on. I’m not sure this family realized that and it’s unfortunate.</p>
<p>Just want to say how much I appreciate the wisdom in this thread. People, myself included, focus so much on the award letter rcvd in April for the freshman year. What receives far less emphasis is that you have to go through this process THREE MORE TIMES and as a returning student - you may not get your award letter until June - leaving you very little time to deal with surprises.</p>
<p>I also want to add that the award letter does not really explain how they arrived at anything - there is no paragraph or two of explanation saying we used this or we considered that. Our family income is much more straight forward than the OP as we are both on salary. Our income went up a by $7000 from 2008 to 2009 and our EFC went up almost $3000 - but the COA of the school also went up $3000 - so I thought we’d be at about the same award. It actually went down a bit - from $23,000 grant money last year to just under $20,000 grant money for this year and the loans went up - from a $4000 Perkins loan last year to a $5500 Stafford loan this year. Not horrendous, but now I have a more realistic picture of what to expect each year - less aid overall and less grant/more loans each year. Our budget is squeezed to the max - but we are managing. But I think it is so crucial for people who are relying on need-based aid - like the OP - to understand that a great award for freshman year does not guarantee anything really for the next 3 years. You have to be prepared for the worst.</p>
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<p>I don’t know anything about estate taxes, but why would a 55k inheritance be reported as ordinary income? Does a 55k inheritance from a parent count as income, or an asset?</p>
<p>An inheritance is not reported as income. HOWEVER if it’s in a bank account on the date the FAFSA/Profile are filed it IS considered an asset. </p>
<p>Re: the OP thinking that the financial aid award somehow was predicated on her daughter’s high school achievements…the PACKAGING of this award could very likely have varied but the amount likely would not have. If the student was a highly sought after student, the school might have included more institutional grant money. If the student got accepted but wasn’t tippy top, PERHAPS the max Stafford loan might have been included in this package and less grant money awarded.</p>
<p>Was this family’s income low enough in the previous cycle that their kiddo was eligible for the max Pell grant? If so, that would disappear with a higher income than for Pell eligibility…and that would be about $5000 lost. In addition, if the student had Perkins loans, usually those are for lower income students as well, and that might also have disappeared. In fact, any federally funded need based aid would likely have disappeared from this student’s award if their income rose above a threshold (and a $15K difference in income could easily have done this). </p>
<p>The student would have continued eligibility for the Stafford loans, but perhaps not subsidized.</p>
<p>The bottom line is this…need based aid is recalculated ANNUALLY based in the current information. To be honest, past years’ awards have no bearing on the current award UNLESS your school tells you otherwise. Every year is a new year…with new and current income, assets and income projections (for the Profile…although truthfully no one really knows how these are used).</p>
<p>Again…to the OP…did your FAFSA EFC change also? If so, this has NO REFLECTION on next year’s earnings or last year’s. The FAFSA EFC asks nothing about income except for the year for that FAFSA. For this fall…that would have been 2009 income year.</p>
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<p>Thank you for clarifying. So, after the asset protection allowance threshold, 5.6% of whatever is sitting in the bank on the date one completes the Fafsa, would go toward the EFC. Correct?</p>
<p>I did not think a one a time family inheritance would be counted as income to calculate EFC.</p>
<p>A one time family inheritance is NOT counted as income EVER on the FAFSA but it is an asset if it’s in the bank (been there, done that). Yes…in the parents’ name it’s 5.6% or so…BUT if it’s in the student’s name it goes up to 20%.</p>
<p>Okay, what you are posting above is what I thought was accurate. I also understand about 20% of student assets going toward the EFC.</p>
<p>Ok…forgot about the rules for inheritance…so change my proposed scenario to this…</p>
<p>The sick grandparent writes the mother a check for $55k in 2009 as a “thank you” for taking care of her and to compensate her for her lack of income that year. </p>
<p>My point is that by the end of 2009, the income exceeded that of 2008. It was not anywhere close to the much lower amount the family had told the school. Therefore, the family shouldn’t have been surprised by what its new contribution should be.</p>
<p>:)</p>
<p>Don’t forget. The family did do a FAFSA with their 2008 earnings the winter/spring of the student’s senior year of high school. THAT would have shown an EFC of about $20k. It was likely THAT number that motivated them to contact the school before their CSS family contribution was calculated. </p>
<p>So, once they knew that their 2009 earnings was $15k higher, why the shock that their EFC would be $20k+???</p>
<p>The OP posted in January asking whether she should expect a change in her D’s FA package. At the time, she never mentioned the details which would have clued people into the obvious fact that their family contribution would multiply. If she had, she would have had several months notice and the family would have had time to consider having her apply to other schools. </p>
<p>Hopefully others who could be in this situation at some point in their children’s college years can learn from this. :)</p>
<p>*I also think that anyone who is a situation where income and assets are likely to vary over the 4 years that their kid is in college does need to understand – at the outset – that a need-based financial aid award is calculated fresh each year. *</p>
<p>Exactly…anyone who suspects/knows that it’s likely that a family will have some income/assets swings during the college years (and the year before college), needs to realize that FA packages will change accordingly.</p>
<p>*I don’t agree with you that how much grant $ a non-merit school gives you has nothing to do with how much they want you. *</p>
<p>Oh, I agree. But non-merit schools that practice preferential packaging do not exceed need. The best they will do is give less loans, less work/study, less/no gaps. They don’t cut into EFC.</p>
<p>Whew…just read this thread in one sitting, and need to take 2 aspirin.</p>
<p>All I can say is I am grateful to some of you posters who are WAY smarter than I in matters such as these. And I thank God (and my D) that she is in such a strong position for large merit aid at her schools of interest.</p>
<p>MomX3, regardless of what you “should have” or “should not have” known, I am really sorry you’re in this shocked and unhappy situation. I hope it works out for you.</p>
<p>Great posts on this thread. Especially fitting to our new post-grad pro-school situation is this part by calmom
After 4 years of absolutely no worry about my D being able to go back to school, and a great (in the scheme of things) first year package at YSM , my stomach is already a bit queasy thinking about next year. (The situation is slightly different as she could borrow another $20K. Every year. But I really hope that doesn’t happen.)</p>
<p>As to this by mom2collegekids
I agree to an extent. They just figure the EFC differently to start with for students they want the most. My D’s EFC varied at the UG level at need-only Colgate (where she was an Alumni Memorial School) and other need-only schools (where she was not) by several thousand dollars a year. They were all Profile schools using the same data. They were just using their discretion and judgment to arrive at different numbers when analyzing our 40 page tax return. Now …you are correct, her status at Colgate meant no loans/ws but there was a big difference in calculated EFC, also. (The total out-of-pocket difference - lower Profile EFC and no loans/ws - was in the teens/year.</p>
<p>Edit: I almost forgot that one Profile school told me flat out that for “Named Scholar” kids they switched from Profile to FAFSA. I asked “Where is that on the website?” He responded,“Well. We don’t put everything on there.” That changed our EFC substantially, also, as we are asset heavy, income light.</p>
<p>Sorry. That should have read “Alumni Memorial Scholar”. Jeebus.</p>
<p>“But non-merit schools that practice preferential packaging do not exceed need. The best they will do is give less loans, less work/study, less/no gaps. They don’t cut into EFC.” </p>
<p>mom2collegekids, </p>
<p>No, they don’t exceed need but my experience was the same as curmudgeon’s - they varied in how they determined EFC. (And yes, there was also preferential packaging.) A few years back, my daughter was admitted to close to 10 Profile meet full need schools, most were also no loan schools-- and our awards in the no loan schools varied by over $5K. </p>
<p>There were also little bonuses and I have no idea to whom they were offered. One school asked for no deposit, many reduced the deposit, at least one increased the estimated cost by adding a clothing allowance for southerners going to school in the north (most of her schools were in the north) and a few covered the full cost of her health insurance. Maybe they did this to everyone below a certain contribution-- I don’t know. </p>
<p>By the way Curmugeon, we had at least one school which was a Profile school but the EFC was definitely the FAFSA EFC. I wonder if they switched her EFC? (It was also the school that waived the deposit.)</p>
<p>^^^
True…the CSS school decides family contribution.</p>
<p>But, in this case…the school is a non-merit school. The family had a FAFSA EFC somewhere about the $20k range. I doubt this CSS non-merit school would just declare that the family contribution is a few grand with only stats being a factor (the stats were strong, but not perfect). </p>
<p>I’ve heard of such schools giving a few extra thousand to a desirable candidate, but not reduce a good-sized contribution by around 75%.</p>
<p>mom2collegekids, </p>
<p>The schools I’m talking about were giving non-merit aid. Like I said, the difference in the OP’s numbers was larger than ours was-- but there was a $5K-$10K difference in non-merit aid in Profile, meet-full need no loan schools. That’s a big difference and I’m not even counting those ‘extras’ I mentioned above. </p>
<p>Yes, the family should have known the contribution was higher (and I think they did expect that-- just didn’t realize how much higher it would be) and yes, they should have called-- but not all schools are very transparent and this family was new to the financial aid process. My heart goes out to them.</p>
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<p>This is pretty much exactly what you should expect. EFC goes up at the rate of about 40-44 cents for every extra dollar earned. When you factor in taxes as well, it means that the the wage earner doesn’t get much of a benefit from increased earnings. This is definitely something to keep in mind if a family has any control over timing of increased earnings or different options to choose from in terms of employee benefits. It is also something to be aware of before taking on a 2nd job or increased hours – it might not be worth it in the long run. </p>
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<p>Almost all need-based colleges increase both the loan amounts and the expected student contribution from earnings each year. Loan increases are built into the Stafford loan structure - the student is eligible to borrow more subsidized loans from one year to the next – and the rationale for student contributions is that the older/more advanced student is capable of earning more. These increases are typically relatively small and incremental – that is, the student was typically expected to borrow $3500 in Stafford loans as a freshman, $4500 as a sophomore, and $5500 in junior & senior year. But obviously they cut into the total. </p>
<p>The thing that caught us unaware was that my daughter’s school does not give work-study or a campus job to seniors, but expects them to earn money via an off-campus job. So my d. returned from time abroad expecting to go back to her rather cushy job as a researcher/databaser for a university academic department, only to find that she was on her own for senior year to find a source of money. The college’s rationale was basically to conserve its work study resources, and to nudge its seniors to positions that would help with post-graduation work. In hindsight they probably were right – my d had to scramble but ended up making some good connections with her off campus jobs – but of course at the time it was just one more financial stress point we had to deal with. </p>
<p>The main thing is that, even at a 100% need school, need-based financial aid is really not “bankable” – the policies shift slightly from year to year, and you would need to become a financial aid expert yourself to anticipate every contingency.</p>
<p>I don’t know what the formula is…</p>
<p>But it seems that there is a certain baseline for families where no EFC is expected (varies by family size). </p>
<p>BUT, once you move past that income - say $25k - a certain % (1/3? 1/2?) is supposed to go to college costs. </p>
<p>I’m not sure…it just seems that when I play around with some numbers on the EFC calculators with a mythical family of 4 in Wisconsin with different incomes, no big assets, and older parent age 48, there seems to be some EFC jumping at certain points. </p>
<p>AGI income = $25k</p>
<p>Estimated Expected Family Contribution (EFC):
Parents’ Contribution 0
Student’s Contribution 0
TOTAL ESTIMATED FAMILY CONTRIBUTION: 0</p>
<p>AGI Income = $30k</p>
<p>Estimated Expected Family Contribution (EFC):
Parents’ Contribution 1797
Student’s Contribution 0
TOTAL ESTIMATED FAMILY CONTRIBUTION: 1797</p>
<p>AGI income = 40k </p>
<p>= Estimated Expected Family Contribution (EFC):
Parents’ Contribution 2721
Student’s Contribution 0
TOTAL ESTIMATED FAMILY CONTRIBUTION: 2721</p>
<p>AGI = $50k</p>
<p>Estimated Expected Family Contribution (EFC):
Parents’ Contribution 4774
Student’s Contribution 0
TOTAL ESTIMATED FAMILY CONTRIBUTION: 4774</p>
<p>AGI = $75k</p>
<p>Estimated Expected Family Contribution (EFC):
Parents’ Contribution 13261
Student’s Contribution 0
TOTAL ESTIMATED FAMILY CONTRIBUTION: 13261</p>
<p>AGI = $100k</p>
<p>Estimated Expected Family Contribution (EFC):
Parents’ Contribution 21979
Student’s Contribution 0
TOTAL ESTIMATED FAMILY CONTRIBUTION: 21979</p>
<p>Once past the threshold level, the formula is basically “up to” 44% of additional income increases EFC. I haven’t looked at the break points because my own income was basically in that range – for a single parent it comes in pretty low, maybe around $40K of income. The single parent issue is important because of the income and asset allowances that are built into the formula.</p>
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<p>Thank you for my “laugh of the day”. OLDER parent…48…ha ha ha.</p>
<p>calmom - thanks for the tip about work study not available to seniors possibly - I will check on that. I understand that our numbers make sense - but I have this constant sensation of being a hamster on a wheel - if our income goes up a little - our FA goes down - even though the COA has increased - it is, therefore, impossible to ever feel like we are making any headway. I am certainly grateful for the FA we do get and I feel so sorry for OP and her dilemma. I just wish there was more education available to hs parents about the cost of college and the pros and cons of FA - and not just a seminar or a good book - you really need to hear real life stories from real people going through the process to make sense of it.</p>
<p>Rockvillemom, the work-study thing might be unique to my daughter’s urban school. Despite my d’s grousing and groaning at the time, its not all that difficult to find off campus work in NYC. But in general, it makes sense to ask, at the outset, questions such as:
*
Does the college guarantee to meet full need for all 4 years?</p>
<p>Is there a cap on the overall amount of loans?</p>
<p>Will the expected student contribution from earnings and/or work study increase over the years?</p>
<p>Will work-study funds always be available to meet the student earning expectations, or does the college sometimes expect the student to meet that obligation with other types of employment?</p>
<p>How will financial aid be impacted if the student moves off campus?</p>
<p>What will financial aid cover if the student opts to study abroad?
*</p>
<p>I could probably think of quite a few more must-ask questions. In my case, I also asked:</p>
<p>*How does the college determine home equity? Is there a cap on home equity relative to income?</p>
<p>What will happen to the award if the older sibling does not attend college next year?</p>
<p>What will happen to the award when older sibling is in college, but over age 24 and therefore independent for FAFSA purposes?</p>
<p>What will happen to our award if ex-husband fails to cooperate with submitting required documentation? (asked repeatedly, again and again, each year as I tore my hair out trying to get the guy to to turn in the paperwork)*</p>
<p>Self-employed applicants might also do well to ask how the financial aid department treats various write-offs on their schedule C, such as depreciation, car expenses, and travel expenses. (Very often they add them right back in, since “depreciation” is not an out-of-pocket expense. )</p>
<p>Maybe this question list deserves is own thread.</p>