ins-and-outs of FAFSA

Paying for College
1

<p>I'm cautious to post too much financial stuff but I can't seem to wrap my head around some FAFSA details.</p>

<p>My husband is a minister with adjusted gross income around 25000. He has a housing allowance of around 22000 (which I understand has to be added into income on the FAFSA). When I use the FAFSA worksheet I can tell my daughter will be very close to getting a Pell Grant but when I change a few numbers here or there we are close to losing out.</p>

<p>We do have a fair bit in savings (we pinch every penny). We pay cash for cars and know we have to replace one in the next few years and have to reroof the house in the next several years also. We can put some of our savings into retirement (we don't have hardly any) or pay down our mortgage on our house but we know these expenses are coming up and don't want to put too much out of reach.</p>

<p>How to I figure out how much the savings will hurt us? Any other suggestions on how to work the whole FAFSA game for someone in our income bracket?</p>

<p>She will be heading to college in the fall so we are planning to file our FAFSA this January.</p>

2

<p>The first thing you need to know is that even if your daughter does get a full Pell grant, and is awarded the maximum amount of work-study, and takes out a full federal loan, there could easily still be a ginormous gap between that aid and the cost of attending the college/university in question. Be sure that she has at least one place on her list that is entirely affordable for your family without any aid other than the federal aid and/or any guaranteed state aid (Hope, Bright Futures, Blue & Gold, etc.) and/or any guaranteed merit-based aid from the college/university itself. For most families it does not make sense to spend down every last penny in the hope of getting better financial aid.</p>

<p>Which FAFSA worksheet are you using? This one? <a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/091312EFCFormulaGuide1314.pdf&lt;/a&gt; If so, this is the best one for 2013-2014. It may be modified between now and the beginning of the year, so remember that this is still only your best estimate for the FAFSA. For your best estimate for financial aid at the individual colleges and universities, you should run their own Net Price Calculators. Use the search functions at their websites to find them.</p>

3

<p>homeschoolmomof3,</p>

<p>The FAFSA has what is called an asset protection allowance. It is the amount of your assets that will NOT be considered available for college funding. It is based on the age of the older parent and whether there is one parent or two parents in the home. You can figure out what it is for your family by looking at page 19 here: </p>

<p><a href=“http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf&lt;/a&gt;&lt;/p&gt;

<p>So, for example, if your husband is 52yo, the first $49,200 of savings will not be counted. Assets past that are assessed at 5.6%. Not all assets are counted. Cars and home equity (of your primary residence) are not assessed for FAFSA. </p>

<p>The FAFSA also does not count retirement savings in protected accounts but it does add back in any amount contributed on those taxes. (So when you apply for 2013-2014 financial aid, you will use 2012 taxes and the formula adds back any retirement contributions deducted for tax purposes.) </p>

<p>However, colleges that use only the FAFSA for financial aid applicants do not guarantee to meet students’ full need. The few colleges that meet full need use the FAFSA and another form (often the CSS Profile but, if not, sometimes their own supplemental form). This is important because there are assets that are handled differently depending on the form. The Profile collects information on home equity and may ask about retirement savings, cars, stepparentss/ non-custodial parents’s income and assets etc-- and it is up to the individual school to determine how or if they use that information.</p>

4

<p>Don’t forget to add back in any other allowances (social security, car) along with the housing as untaxed income. If your package is adjustable (you determine how much is designated as housing), run the numbers to see if having more of it as taxable income can work to your advantage.</p>

5

<p>

A <em>max</em> of 5.64%. If you are lower income your assets are assessed less. You have to work through the sheets in the EFC guide linked above.</p>

<p>If you think the cost of a new roof and new car will make a significant difference, I would recommend doing it now. I’m guessing the cost for both would be in the $30-40K range, so having that money in the bank would add at most $2200 or so to your EFC.</p>

<p>If you live in a state that allows home equity credit lines, you could pay down the mortgage and open a credit line to get the money back out when you need it.</p>

6

<p>25000. He has a housing allowance of around 22000</p>

<p>With an income of $47k (of which 22k is unearned so will have a tougher calculation), I wouldn’t expect much/any Pell Grants. </p>

<p>Pell Grants are graduated from $5550 down to zero. </p>

<p>So, the max Pell Grant is only $5550, and that’s for an EFC of zero. Your EFC will be closer to 5000, which means any Pell Grant will be VERY small. </p>

<p>Your point about “losing out” of a Pell Grant may not be that real since you wouldn’t likely qualify for much in the first place. It’s not as if one barely qualifies and then gets a “full Pell grant”. No, it’s a graduated system, so “just losing out” only means losing a few hundred dollars. </p>

<p>Keep in mind that FAFSA is only for Federal aid, which is NOT much at all. Federal aid doesn’t pay for a “go away to college” experience. </p>

<p>Most schools do NOT meet need. Schools are under NO OBLIGATION to use your FAFSA EFC to give you more aid. Most schools don’t have much of their own money to give. </p>

<p>So, a school may cost $30k per year, and you may have an EFC of 2000, but the school may only give you a very small Pell Grant, some work study, and a student loan AND still expect you pay more than $20k per year. </p>

<p>Your child needs to be sure to apply to some financial safety schools. These are schools that you know FOR SURE that you have all costs covered with ASSURED grants, scholarships, small fed loans, and family funds. </p>

<p>If your D has good test scores and GPA, then have her quickly apply to some schools that will give large merit awards for her stats. Many schools have Dec 1 deadlines, so be aware fo that.</p>

7

<p>I am a pastor with a housing allowance. I suggest your daughter look at schools that offer generous merit awards. </p>

<p>But I also remind myself that the bit of need-based financial aid that we lose due to the “untaxed” (yet subject to self-employment tax) housing allowance is made up by the money that doesn’t go to the fed and local taxes, and the savings we get by double-dipping (not paying income tax on the housing allowance, but also able to deduct the mortgage interest and property taxes on schedule A). It all evens out in the wash, as they say, and try to keep it in perspective.</p>

8

<p>Thanks all, especially for the links. They will really help and I will do some more digging in them. My daughter has one school she really wants to go to and is applying to some others. She will receive a fair bit of academic scholarships from her top choice. Between this and summer jobs and the amount we are willing to pay she will be really close. The school also has some financial aid they give out based on FAFSA. She is very determined not to take out loans which with our background we really, really support!</p>

9

<p>There can be other benefits to qualifying for even the smallest Pell grant ($602 in 2012 with an EFC of $4,995 as compared to $0 in 2012 with an EFC of $4,996). For example, only Pell grant recipients are eligible to apply for a Gillman Study Abroad scholarship. On any need-related scholarship application, the ability to state: “I am a Pell Grant recipient” can result in greater success.</p>

10

<p>Yes, there can be benefits at time to be PELL eligible. However, if you are not, you are not. In terms of actual grant dollars, it’s not as though you lose a cliff amount,which can happen with some aid. .</p>

<p>Play around with the EFC estimators and see if there is anything that can benefit you if you are that close. Otherwise, there really isn’t much else to do in that area.</p>

11

<p>With an EFC of $1 over the Pell limit, $602 is lost. Isn’t that a cliff?</p>

12

<p>Somewhat, yes. But I’ve seen worse.</p>

13

<p>Is your husband’s denomination affiliated with any colleges that offer discounts for children of clergy? For example:</p>

<p>

</p>

<p>[Lutheran</a> Scholarships](<a href=“http://www.capital.edu/lutheran-scholarships/]Lutheran”>http://www.capital.edu/lutheran-scholarships/)</p>

14

<p>Our church is nondenominational. My daughter’s first pick does give her $500 I think. Not a lot but of course every little bit helps!</p>