I understand that a lot of families with very nice salaries are still able to get need based aid. We are going to be full pay and it seems to me that its because I screwed up along the way in how I saved for retirement. I’ve always maxed out on my 401k, but since that won’t be enough to retire on, I also have a very healthy amount of money saved in investment accounts (more than what is in my 401k). It is that money that seems to be preventing us from qualifying for need based aid. Does that seem right? Can someone please explain what I should have done differently? It’s too late now of course, but I would like to understand.
If you have a good salary, it more likely that is influencing your not qualifying for need based aid as, well, you don’t need it. The protected retirement savings is limited by yearly contribution limits. You said you are contributing the max, so there was nothing else you could do except get Roth IRAS over the years.
Oh please. The bulk of your FAFSA EFC is based on your income.
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I don’t think I qualify for a Roth. So how are people who make $150k+ a year qualifying for need based aid? Is it that they aren’t saving besides what they have in their protected retirement accounts?
How do people with $150,000 incomes qualify for need based aid?
Well…first…do you know folks with this income level who did?
- If a kid gets accepted to Harvard, Yale, Princeton or Stanford....they could receive need based aid with incomes in excess of $150,000....but those schools are a long shot for almost everyone. So there is one way...have a brilliant kid, with outstanding stats, and essays, and the like...and pray they are in the 5% of acceoted students at these schools.
- Have three kids in college at the same time. If you have multiple kids in college at the same time, your kid might (note...might...because most schools don't guarantee to meet full need....) get some need based aid.
- Don't believe everything other people tell you about THEIR financial aid or financial circumstances.
There is an old saying “stop counting other people’s money” which is what you are doing. Focus on your financial circumstances, and how your kid applies to colleges to maximize MERIT aid potential…which doesn’t take your income and assets into consideration.
Did you do that? Or did you hope you would get need based aid on a $150,000 annual income?
And lastly, do you have any college savings? Is there a second parent working?
I like to understand how things work, so it isn’t about me counting other people’s money. And I was thinking about the top schools that give generous financial aid.
We are focused on merit aid, since I can’t afford full pay except at our public in-state options (very good safety options) and my daughter wants to go out of state. I don’t have designated college savings, but can pay out of pocket for in-state or out-of-state with sizable merit. Yes, there is a second parent working, but we have one of those complicated custodial/non-custodial parent situations and I’m not confident her father will contribute to college, so not factoring that into the equation.
There are very, very few schools where an income of $150k without extenuating circumstances (as thumper says, multiple kids in college at the same time, or extraordinary medical bills, or one-time high income) is going to garner you any need-based aid. Those schools have very low admission rates. So, run the NPCs for Princeton and Yale and Harvard and Stanford, both for your real numbers and for the same without your savings. If it makes a difference, AND if your child is admitted to one of those schools, then there’s possibly an issue. Otherwise, you made the right decision.
And is there really an issue? Let’s say that your kid is in fact admitted to Harvard et al., and you get the most generous possible financial aid have to pay only 10% of your income each year. You’d be receiving about $50k a year of need-based aid in this case, a $200k net benefit at the end. Yet you’d have no supplemental retirement savings–and you’ve written that in this case you would not have enough money to retire on. So you’d be continuing to work for some additional number of years, or you’d have a leaner retirement. And this is the most generous need-based deal you could receive!
If your supplemental retirement savings would’ve been less than $200k, then yes, you made a bad choice…but then you’d have no more than a total of $400k in retirement savings total between the supplemental and your 401k. Without a pension, that’s unlikely (based upon your current salary) to be enough for you to retire on.
And if you have a non-custodial parent, keep in mind that many if the very generous schools are going to ask for your Profile AND a non-custodial parent Profile. Not all…but many. Can you afford to pay when you include the non-custodial parent income into the equation?
Good to be looking at merit options that are not dependent on income and assets.
You could have put all of your retirement savings into authorized retirement accounts…IRA, TSA, etc. You chose to do investment accounts instead. This is not a bad thing.
Our financial planner suggested we maximize all retirement accounts which is what we did. He felt that, if necessary, we could suspend our contributions to pay for college if necessary, and still have a decent nest egg earning interest.
Also, is that $150,000 salary including the 401k contributions you made in the year? Those are added back as income for financial aid purposes. If you contributed $15,000 to those…you will have an additional $15,000 in incime for calculation of need based aid.
@itsgettingreal17 Have you run the numbers and determined your EFC? That’s the place to start.
When we did our spreadsheet for the four year COA at various schools, and we added in an estimate of increased earnings (bonus for H, extra projects for me), AND took the older kid out of college, our EFC went up significantly for the youngest’s sophomore through senior years. (Freshman year, only, looked doable).
We are full pay at our state flagship. When we run the calculator at U of Notre Dame, which says it meets 100% need, we do get “need-based aid”. The Net Price Calculator shows our COA is reduced to our EFC, plus or minus a few thousand. But, we cannot afford our EFC without taking on crazy debt for our income and age.
So, we are chasing big merit money to bring our four year COA below our EFC.
It does sound like the OP is doing the right thing by looking for big merit as opposed to need-based aid. Given the custodial parent situation, I’d wager that even Yale et al wouldn’t offer need-based aid, so having saved for retirement was most definitely the right choice.
Few people with $150k incomes are getting need based (free money) aid.
Those that do may fall under a few categories:
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have more than one child in college at the same time and the school promises to meet need.
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the school is one of those few “super-aid” schools like HYPS and Williams.
Since nearly all schools put need-based student loans and work study in aid pkgs, a family with only one child in college AND who has $150k income AND isn’t going to HYPS-like aid schools, is likely going to have an EFC that is high enough that “need” will be met with a student loan and work study.
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We are focused on merit aid, since I can’t afford full pay except at our public in-state options (very good safety options) and my daughter wants to go out of state. I don’t have designated college savings, but can pay out of pocket for in-state or out-of-state with sizable merit.
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What merit based schools has she applied to? What are her stats? major? Career interest?
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Yes, there is a second parent working, but we have one of those complicated custodial/non-custodial parent situations and I'm not confident her father will contribute to college, so not factoring that into the equation. <<<
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If your DD is applying to any schools that require NCP info for need-based aid, then her dad’s income will also be considered.
My daughter is a junior and we are putting together her list of colleges to consider. She will possibly be NMSF. Top 2% of her class in a very good school district and climbing. Waiting on SAT scores from January test. GT program, all AP’s and honors (4 and 5 so far and will have taken 15 by graduation), good EC’s, worked all through high school. She’s currently interested in applied mathematics and accounting and will explore those during the summer. She’s a URM.
We will not be applying for need based aid.
Good that you’re putting together a list of large merit schools. What is your home state?
If she makes NMF, there will be a number of large awards available.
What kind of schools does she like?
big, small, quiet, rah rah, rural, city, cold/snowy or rainy, warm?? And geographical preferences? Are Catholics ok?
Which URM is she? There are certain states and schools that are looking to recruit certain students to expand their ethnic diversity numbers. However, some schools give no consideration, and some give little consideration to URMs from financially strong families.
Texas (1470/219 PSAT). She wants a big school with big football that is reasonably close to a big city. She is indifferent to climate. She does not want to stay in Texas and she would prefer not to go to a religious school. She is African-American. Do you have any suggestions? Right now she really likes Ohio State, Alabama, and Fordham (no big football but she loves NYC). I’ve put together a long list of schools that have at least full-tuition merit awards for her to consider and she knows that some of them are very, very competitive.
“not to go to a religious school”.
Uh…does she realize that Fordham is Catholic (Jesuit)?
I hope she visits Alabama soon. Top Accounting program. Big Four recruitment. BIG football! If you do visit, then please contact the honors college after you schedule your campus visit so that they can arrange the rest of your day…meeting with appropriate faculty, etc. PM me for contact info.
She very likely will make NMSF in Texas.
OP, your original question was, how can you save for retirement so that you can qualify for need-based aid. The answer is that at your income level, you probably can’t qualify for need-based aid at the vast majority of schools regardless of your retirement savings.
That said, your D will have a plethora of wonderful merit aid options. With some smart application strategies, her college cost can be minimized. Alabama and Ohio State are truly excellent choices. Might not get a full ride, but full tuition or substantial discount is very attainable at these schools with her stats. No harm in looking at some of the expensive privates that offer a few big merit scholarships (USC?) as long as D understands and agrees that she will decline any admission offers without a hefty merit scholarship.
You also asked what you could have done differently. Sounds to me like you did everything exactly right. Bravo.