<p>So I am applying for undergrad fall 2010. If I'm not mistaken, the year that colleges and the FAFSA looks at for financial aid would be 2009. Both my parents are working, my Dad is a lawyer. Most years we make a comfortable living, roughly the 75,000-90,000 bracket, but (un)luckily this year my Dad finished a case he had been working on for several years in January. Due to the nature of his work, this was his first income in six months, but bumped our 2009 earnings into the 120,000ish bracket. it just unfortunately worked out that we made more in this year then any other year. will i be getting significantly less financial aid than I will need?</p>
<p>While it’s true that need awards are based on the previous year’s income, consider two things: 1) Need-based awards are revised each year, meaning if your father makes 50k or so next year, then your award will go up. 2) You do have an opportunity to explain exceptional circumstances - mathematical formulas cannot account for everything as complex like a family situation. </p>
<p>That being said, I think that they would count making a lot of money against you and the difference between 75k and 120k would be quite substantial at some schools. At other schools, both incomes would prevent you from obtaining need-based aid, so I can’t give a general answer that applies in most situations. </p>
<p>I’d guess, though, that if you’re looking at schools that don’t cover all need, which most don’t, chances are someone making 75k+ would be recieving at most a few grand in need-based aid… A lot of schools have a cut-off, where you need to have an EFC of less than X before they give you a need-based grant or something… Usually EFC’s generated by incomes of 75k+ are greater than that cut-off.</p>
<p>At schools that meet 100% of need, you will pay more your first year. If your family income goes back down, you would get more aid the next year. Colleges will not see the extra income as a ‘special circumstance’ in this case as it’s not like a one time payment when you’ve lost a job.</p>
<p>If your dad is self-employed, it would probably be a good idea for him to use some of that extra income to pay for business expenses that were deferred from other years, or to pay down <em>business</em> debt (not personal debt). That will help with the FAFSA EFC, though not necessarily with schools that use the CSS Profile and like to 2nd guess various tax write offs. Just because your dad has extra business income, doesn’t mean he has to bring it all home. So the lower the bottom line on the schedule C, the better.</p>
<p>Why do folks think it’s unfortunate that they have earned MORE income?? Congrats to your dad. He earned that money. If he is planning for college for the kiddos, he’ll put some of that earning away in a college fund.</p>
<p>If your dad is self-employed, I would suggest to him that he max out all possible pension contributions. He has to worry about retirement also. IMHO he should see an accountant – he may be able to put away more than he thinks.</p>
<p>Any retirement contributions made in 2009 will be added back in as income for the 2009 tax year for financial aid purposes.</p>
<p>Thumper, I beleive that depends, but you may know more than I do. If OP’s dad has his own practice he may be able to set up a defined benefit plan – this can be cost effecitve if there are not many other full time employees (or if they are an age weighted plan can work great). Defined benefit plans are not in favor as management does not want to subsidize employees, but they may work great for small businesses with fluctuating income and few full time employees other than dad or mom.</p>
<p>Ya my dad is self-employed. Thanks for all your comments. So you know, most schools I’m applying to gurantee to meet full demonstrated need A la Pomona and Stanford</p>
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<p>Xargon, do you know what you’ll need? Unless your parents have told you how much they can contribute, I think this is unanswerable! Talk to your folks and run EFC estimators at college board’s site.</p>