How to "hide" money so colleges can't see it

Paying for College
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<p>There are many legal ways to move your assets and change your lifestyle to get more financial aid. Nothing wrong with it and it is smart planning, in my opinion. Colleges themselves give advice in that area. Spend down those kids’ assets, Pay down your house, move up some expenditures that you are saving for so that the money isn’t sitting there to be hit by the fin aid process. It’s just common sense and any financial planning advice will tell you to do these things.</p>

<p>When you start getting into shady areas, you start taking on shady risks. You can lie about your assets, sure. Get caught, and the potential for fraud is there. Hide your assets with someone else, and they can make off with them. For every sham, there is a risk. People lie and cheat all of the time, and financial aid for colleges is not an area exempt from fraud. But that is not what I am talking about when I say everyone should look over assets and income before college and see if there are some things that can be changed to maximize aid possibilities. THis should not be done in a vacuum there are always some fools that gain a few potential bucks in aid and lose out in other areas like risk, return , taxes, flexibility, etc. Make sure you are looking at the whole picture with the college finances included in there.</p>

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<p>I think it’s all in how you approach it. Most would agree that “hiding” assets and lying on a FA form is wrong. But there is nothing wrong with moving money around to improve your financial picture and increase FA award. Simple example - you have $10,000 in a bank account and a $10,000 car loan. Pay off the car loan, since the cash in the bank account will be counted by FA towards your available assets and since FA does not consider consumer debt. It’s just like tax planning to minimize your tax bill - same concept - there are steps that parents of 10th and 11th graders can take now to increase their chances at receiving FA later.</p>

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<p>That’s exactly what I mean. The financial aid forms are a snapshot of your accounts on that day you file so you may not want to cash that return of a loan check and have it sitting in your checking account until you press that send button. And you better get that check for the roof repair cleared. That’s common sense.</p>

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<p>The described process is often referred to as a mortgage/insurance strategy. It works only when the following criteria are met:</p>

<p>-Cash in the insurance vehicle is 100% secure (NO variable universal life)
-Cash in the policy must be available without surrender penalty (I only found one policy where this works, and they changed it 2 years ago making it less desirable)
-The resulting change in EFC must be greater than any associated mortgage or tax costs</p>

<p>In my opinion, this strategy was quite effective when introduced 10 to 15 years ago. With the changes in insurance policies and other factors, its application is pretty limited anymore.</p>

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<p>Odd dilema here–not much money in the bank, zero in IRAs, zero in son’s name, but we own several rental properties. Relatively new ownership of these properties, so rents cover the mortgage and expenses and provide a little income. Also husband has a small business (less than 20 employees and makes modest salary). So, with modest income from husband business and very modest income on properties, how does that figure into the equation? Our tax returns are honest and accurate and show we dont make much income, but those properties are all in our name…</p>

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<p>Rental income would be included in your AGI along with salary. If you have equity in the properties, that would be counted as an asset (parents do have an asset protection allowance under FAFSA) unless you qualified for the simplified needs analysis. Remember that it’s only the net value of the asset that will be reported. </p>

<p>I don’t know how modest your income is, but I was in a situation two years ago where I suddenly inherited a property from my mother. It was put in my name for her estate planning purposes, but was actually meant to be sold and divided with four other siblings. I found out, via this very board, that I could sign my kids up for reduced school lunches which we (barely) qualified for and the asset, which was a serious but non-reportable drain on my income until it was sold, was not reported for FAFSA. It was perfectly legal and above board.</p>

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<p>If the rental properties were owned by the business they would not be a reportable asset. Since they’re owned by you and your husband directly, you would report the net value as an asset. If currently highly leveraged by a mortgage, then the net value of the properties (the amount you could reasonably expect to receive if sold, minus selling costs and debt on the properties) might be minimal. Have you done that calculation?</p>

<p>The value of the small business is not reportable on FAFSA.</p>

<p>As sk8rmom says, if income flows through to your personal taxes, that would be reportable as part of your AGI.</p>

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<p>I think this thread is really a disgrace to society. It doesn’t matter if you call it “hiding money” or “rearranging money”. It doesn’t matter if it is legal or illegal. The fact is that people who would normally be determined to be able to afford college are exploiting the system. It is not the duty of the government to pay for the education of your child. However, financial aid for education was started in order to pay for the education of children in the inner city whose parents couldn’t afford it even if they moved out of their small apartment, sold everything they owned, and lived out of a box.</p>

<p>My family is a great example. We brought in an income of about $6k this year. If we count my sister income, who is currently attending a community college and have bills outside the house, I could probably say we make between $10-12k per year. As you can tell, my family wouldn’t be able to pay for my college expenses and still eat every day. Financial aid should pretty much be for people that bring in less than 35k per year (honestly 25k). In other words, you should have to be below or close to the poverty line. </p>

<p>A lot of these rich and upper middle class people complain about the poor receiving benefits, but you never hear the poor complaining about having to eat noodles their entire life and live in a neighborhood were bullets fly through their windows. Then you go to high school and graduate just to find that you can’t afford to attend college. This creates a chain reaction of poverty and it was the reason that the financial aid program was created. There are a lot of people who don’t even realize that many people seeking financial aid are living off of less than 10k a year. In fact, I know a load of people living off of less than 5k a year. The average person in my neighborhood is <10k. </p>

<p>Now I come on this forum and I see people who have 300k worth of savings and making over 50k per year, and saying they can’t afford their child college and need financial aid. That is a bunch of crap. If you make 50k a year and can’t afford your child education, then you should consider changing your lifestyle, and maybe moving into a smaller home and cutting spending. With people living off of 5k per year, you could surely live off of 25k and use the remainder of the income to put your child through school. These rich people just don’t want to make the sacrifice. </p>

<p>It should come down to two questions when considering filing for financial aid.

  1. Can I cut 1/2 of my income and still stay alive?
  2. Is 1/2 of my income enough to put my child through school?</p>

<p>Now. As for children going to Ivy League schools on financial aid, I disagree with that. If you need financial aid then you need to go to a state school that is affordable. The claim that poor kids are going to Ivy League schools on financial aid must be incorrect. Sure, there are poor kids going to Ivy League school, however, I doubt financial aid is tackling the majority of the bill. They probably have merit or need based scholarships, not government money.</p>

<p>So I guess it comes down to the idea that if you can afford your child education without being homeless, then you shouldn’t receive financial aid. The terrible thing is that some people don’t understand that the “poor kids”, whose financial aid they envy, has lived below the poverty line their entire life. Therefore the financial aid benefits did not come without years of heart aches, pain, blood, sweat, tears, and brief moments of starvation.</p>

<p>Why am I wasting my breathe? Rich people don’t care about the poor…too busy stuffing that mattress and rushing down to the nearest financial aid office.</p>

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<p>^There are so many things wrong with that post that it’s difficult to know where to start. Acidify, I’m pretty sure that your entire family is not being housed, clothed, fed, and educated on $6K a year without substantial public support. The people who are making the princely sum of $50K a year are not “stuffing the mattress”, they’re paying dearly in the form of taxes to fund the programs that support low income people, and pay for other things like schools, roads, national defense, etc. - where do you think the government gets that money? They’re not receiving free lunches, housing assistance, free medical care or other benefits…these all come from their own pockets, in after-tax dollars, and it adds up very quickly. There is absolutely nothing wrong with people wanting to save or enjoy the fruits of their labors as long as it’s done legally. </p>

<p>This is not a thread that applies to your family, and therefore you don’t have to worry about these problems right now…but hopefully you will someday have a better situation and I’m willing to bet that you will not want to pay more than you legally have to either.</p>

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<p>Whoever acidify <em>really</em> is he/she is making a point… and a valid one. Sadly, many people do abuse the system. That was the point of this thread when it was started 5 years ago. Unfortunately seems like not much has changed since that time.</p>

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<p>I’m gonna jump into this thread.</p>

<p>My grandparents, from a foreign country, decided to put substantial savings into our family’s account some years ago. Now we have 400k in savings, which will hit us hard in the financial aid process. So, my question is, is it fraud to move this money back to the grandparents who are in another country? Advice would be good, but “proof” of some sort would be great.</p>

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<p>Acidify, yes, sadly there are those who abuse the system and who even outright cheat and lie. There are smart things that anyone should do when applying for any aid, loan, grant, and so it is with financial aid as well. The way financial aid is structured, really unless a family is on a cusp to receive something, rearranging is not going to yield a whole heck of a lot from the government. Only the PELL is guaranteed at certain EFC levels. </p>

<p>Our financial aid system does make it so that most anyone can go to a local college. The PELL amounts and the availability of Staffords make that possible. For private aid, those who have something a college wants, will get their bids. Part of capitalist structure.</p>

<p>As for those who live at a level that is not even sufficient for housing, food and other necessities, college is not the priority. We want to get the family in decent condition. A zero EFC means PELL money for commuting to a local state school for any college bound kids.</p>

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<p>I just wanted to add that I work hard everyday, fulltime for past 34 years non stop, and many of us are making it possible with our tax dollars to fund programs that help the needy. Some of these programs we are not entitled to. When I need stuff, I cannot get. I also don’t like people who cheat the system and it happens on all levels, poor and rich, who work the system. I see it everyday in my line of work. So even though my salary is fair,its never enough. However, it is people like me who pay our fair share and can’t get some of the things we would like because we fall out of the numbers and that includes financial aid.</p>

<p>My best advice to acidify is to get yourself in order, take advantage of PELL and go to the local community college to get yourself out of poverty. That is what My tax dollars are suppose to do and it is a success story when it happens.
By doing that it will affect your family and those around you positively and you can give back to society.</p>

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<p>There are really two conversations going on here. 1. What the rules are right now and how to comply with them in a way to maximize the amount of aid granted. 2. What the rules should be as a policy matter to most efficiently distribute aid to those determined to need it. Conversation 1 is appropriate to this forum – 2 is better for a politics forum. I view conversation 2 as kind of a waste of time for current students and parents. Interesting yes, but useful no.</p>

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<p>I see it everyday in my line of work. So even though my salary is fair,its never enough.</p>

<p>You know what they say about happiness, it isn’t having what you want , it is wanting what you have. ;)</p>

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<p>I disagree with your comment. I’m the mom of two soon to be college students. We are a middle class family. We did the responsible thing by starting to save for college when the kids were born and now we have sufficent funds to send them to college. However, that does not mean I want to spend $50k a year on college when others (who were NOT responsible and saved nothing for college) are paying much less. It is not fair that we are penalized for being responsible.</p>

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<p>Thread’s three years old. </p>

<p>Second, you don’t have to send your kids to $50k/year schools.</p>

<p>As for “penalized”, approximately 5600 is added to your efc for every 100k you have in savings. Whoopty doo. That means you still have 94400 to spend more than the non savers. Do you <em>really</em> think that they’re in a better position?</p>