<p>scubasue,</p>
<p>Since it can be expected that all families of the various applicants for this scholarship should have finalized versions of their FAFSAs by now, could your committee simply ask each applicant to produce copies of the updated SAR? That way the committee would have the most recent (and presumably most accurate) numbers available when they make their decision.</p>
<p>I do think that January is too early to have filed taxes and finalized the FAFSA form. I would think the scholarship committee is well within their rights to verify the family SAR. You need to ask them for a copy of their most recent UPDATED FAFSA which shows that they have completed their taxes. I’m quite sure that they didn’t completely do so in January as some of the tax code was still in the process of changing.</p>
<p>Re: the house purchase…there are a number of ways for them to have acquired this house but not with out of pocket money (money saved, money from previous home, money given from family, an inheritance). Home equity doesn’t count on the FAFSA anyway.</p>
<p>I’m sorry but if $340 is really their EFC, and they need scholarship money, they should not be offended and should be readily able to provide you with the necessary documentation. It’s if they DO NOT have this EFC that they will be reluctant and offended.</p>
<p>*“If there is - say - a $250k mortgage on this property, there’s no way their income is low enough to have that low of an EFC.”</p>
<p>Huh? It depends on how the mortgage is structured.
*</p>
<p>I can’t figure out how a family could pay a $250k mortgage, prop taxes on a $500k home, pay for house/fire insurance…and basic utilitites and food…and have incomes low enough that their EFC is THAT low. </p>
<p>For a family of 4, to have an EFC that low, the income would have to be about…$34k. I find it hard to believe that a family with that income could pay a $250 mortgage and all the costs I listed above.</p>
<p>I think it is possible to have filed taxes by mid-Jan if the parents are self-employed. Unless they’re waiting on 1099’s, proper record keeping should be enough for a self-employed person to file.</p>
<p>My mom was able to file her taxes on time for a Feb 2nd FA deadline for me because all she had to do was pull together all of her receipits and invoices. On the other hand, this family seems to have a much more complicated financial situation than my mother.</p>
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<p>I’m not sure about where you are…but when we bought our current land, DH went to the town hall. The records there were very abundant. He was able to find out not only the amount of the mortgage on the property but what kind (it was a business loan) and the lender and mortgagee.</p>
<p>mom2collegekids,</p>
<p>"For a family of 4, to have an EFC that low, the income would have to be about…$34k. I find it hard to believe that a family with that income could pay a $250 mortgage and all the costs I listed above. " It is a family of at least 5 with 2 in college.</p>
<p>It’s possible to have a private mortgage-- for example, to have relatives lend you the $ with a balloon payment when the house is sold. They would probably build in a decent profit as an investment but the family would be able to live there. </p>
<p>Home insurance varies a lot but I believe that amount of home insurance would cost under $1,000/year where I live. I also lived in a place where low-income families could have property taxes lowered, depending on income. </p>
<p>It’s possible for low-income families to have govt help with utilities, phone service, free school lunch, health insurance for kids. On top of that, I can’t tell you the surprise I always have when I find out that someone who seems perfectly healthy to me gets some sort of disability check. Not all social security is listed on the FAFSA. </p>
<p>So it IS possible. I honestly think that checking on their property records is a bit over the top if the scholarship committee had a guideline (Pell grant eligible or EFC below a certain amount) and no mention of house value. I don’t think that it’s unreasonable to ask for the completed SAR or maybe even the completed taxes to make sure the FAFSA is accurate. </p>
<p>It seems to me that by using the SAR, the committee decided to use federal methodology to determine need for the $5K. If that form is correct (and they have a right to check and see if it’s correct by asking for the correct SAR and maybe even for a copy of the completed tax return), then I don’t think it’s appropriate to start asking personal questions. (“How do you afford hockey?”)</p>
<p>Apparently last year’s EFC was similar. It’s not as though this was an inconsisitency. That the family has a nice big house means nothing. Someone else could be holding the mortgage, paying the mortgage, paid for the house. Why is it so difficult for that to be possible. If grandparents take care of house and other major expenses, they can be living just fine on $30K a year from their business. They could also be having some lean years at the business bringing that EFC down very low and living off of business loans.</p>
<p>I agree that looking at property records is over the top…just was saying…it’s there.</p>
<p>I would think the scholarship committee would want ALL applicants to provide their finalized FAFSA forms…not ones from January. Like I said, particularly this year, most anyone filing in January was going to be amending as the tax codes had not been fully finalized by that time. An amended return could mean changes to the numbers on the FAFSA.</p>
<p>It IS possible for this family to have a pricey house and a low income. As others have noted…there are many ways for this to be possible.</p>
<p>The question now becomes whether a family who is so well subsidized from some source that they can afford to live in a nice big house, have kids in ECs and a child in an expensive LAC because of fin aid and others’ generousities should be getting even more in an embarrassment of riches when another family who is living in true need clearly does not have this kind of benefactor. </p>
<p>It becomes a question of how to define need, just by the FAFSA page or by a more holistic method. How important is need in terms of a component in awarding this scholarship?</p>
<p>Thank you all. It is a dilemma isn’t it? Because this is a small town, if we award the scholarsihp to this particular student, the public school student whose parents are renting the small apartment are going to know, very well, to whom the scholarship was awarded. </p>
<p>My question about the home was not at all related to potential equity, but to the amount of income they would have to have to qualify for a loan. As some have said, there may be no mortgage on the home at all. </p>
<p>Their home value is roughly equal to ours…taxes are around $5200/year. Our county offers a break to senior citizens but not low income homeowners. </p>
<p>Need is the main criteria for this scholarship. However, we have 51 scholarships, with many different criteria and use the same application for all awards. </p>
<p>The application has a spot for students to mark if they were eligible for free or reduced lunch. He did not mark this box. </p>
<p>The SAR from last year has a mid January date also. </p>
<p>I am not going to ask them personal questions, but as I said there is more than one indication here that something <em>might</em> be amiss. I also don’t think it is right to ask for more forms, unless we do so with all of the applicants.</p>
<p>If the parents are self employed, then it is very possible that their bottom line income for a given year (or series of years) could be quite low. They still could have assets and records of income from prior years, or a business that is strong enough, to qualify for a mortgage. Keep in mind that the FAFSA will (a) not ask for home equity, and (b) not require reporting of the business as an “asset” unless it is large enough to have 100 employees.</p>
<p>So lets assume that business has been bad since the recession hit – but not so bad as to justify going out of business. Let’s say that they’ve got a modest size business that generates plenty in the way of gross receipts, but they have business rent to pay and salaries for a dozen or so full time & part time employees, plus taxes, etc – so that the bottom line reported on their schedule C – what they take home at the end of the year, has been running under $30K for the past several years. </p>
<p>Let’s also say that they had saved up a good chunk of money from past years, but decided to put it into a down payment on the new house – banks are much more liberal about qualifying if there is a 20% down payment. My ex husband and I were self-employed, and that’s how we qualified – we’re lawyers and we got a big settlement in a case, and we took ALL of the money from that one case and put it in a down, because we had to work with a mortgage broker to qualify. We had to provide a lot more docs about our respective businesses (P&L statements, etc.) because our bottom line income wasn’t enough to qualify – but the extra documentation did get us into our house. </p>
<p>That doesn’t mean there is any fraud going on. One perk of being self-employed is that many expenses that others have to pay out of pocket can be written off as business expenses, at least partially. For example, if you own a car and use it half for personal, half for business – then you can write off the business end of the costs. There are a additional deductions that self-employed people can take related to self employment tax and health insurance that further reduce AGI. </p>
<p>None of that is going to impact the FAFSA. A private college WILL look at those factors before issuing financial aid – the private college will count home equity and will want to see the business records - they will add back in deductions and may attribute an asset value to the business based on its gross receipts. But it wouldn’t be all that strange for the FAFSA numbers to show up very low.</p>
<p>That’s one reason that simplified needs test doesn’t kick in for anyone who has to file a 1040, by the way. Self-employed people, pretty much by definition, never qualify for that benefit because their lower-end incomes are less likely to reflect their true economic circumstances. A self-employed person who has accumulated a large nest egg may be motivated to invest more money in their business – for example, expanding their business, taking on new employees – which will further reduce their taxable income – so aside from financial aid considerations, it’s often a smart economic choice. </p>
<p>I’d note that it would also be smart, for financial aid purposes, for a family with parents who are self-employed with a thriving small business and sitting on a lot of assets to shelter those assets – and for FAFSA purposes, one very nice shelter is a family home. So this particular family could be very much aware of what they are doing – even so far as to take $500K and paying cash for a home, reserving only, say, $45K in their bank account (below the FAFSA asset protection allowance for a couple their age, so not impacting their EFC). They know that they have enough flexibility with their business to bring home more money if needed, and certainly it’s a good time to buy a house (home prices are low, likely to go up in the future). </p>
<p>There would be nothing at all fraudulent in this practice … except it may very well be true that the family doesn’t really need your scholarship! I think that it would be appropriate for a scholarship committee to ask to see P&L statements from the self-employed parents, as well as copies of the tax return. Again – that is what just about any private college would do in assessing need. (And its why the moving-money-around thing doesn’t really work in the end for families who want to see their kids get an elite education)</p>
<p>This private college (pricey @$42K/year, but not prestigious) is a FAFSA only school. Home equity is not a factor in their FA package either. (I know this because my freshman S applied there)</p>
<p>*I think that it would be appropriate for a scholarship committee to ask to see P&L statements from the self-employed parents, as well as copies of the tax return. Again – that is what just about any private college would do in assessing need. (And its why the moving-money-around thing doesn’t really work in the end for families who want to see their kids get an elite education) *</p>
<p>I agree.</p>
<p>What kind of business are these people in? (if you say, “restaurant,” my eyes are going to roll…LOL)</p>
<p>Most FAFSA only schools don’t promise to meet full need – and they usually do offer merit aid as well --so even in that situation the family may not get the money the would like from the college, and if they do it may be more due to merit than money.</p>
<p>Also, many FAFSA only schools will still ask for documentation in appropriate cases, including copies of tax returns – so just because they don’t require the any forms other than the FAFSA doesn’t mean that they won’t take a look at the schedule C and attribute assets to the family if warranted by a large disparity between gross receipts and net income. </p>
<p>Anyway, my point is that the family may be acting in a perfectly legal and appropriate way in terms of planning and allocation of their assets - but at the same time, your scholarship committee is justified in asking for more information. I’m just saying that this doesn’t mean that the family is cheating in any way.</p>
<p>Keep in mind that self-employed people often have very unstable and unpredictable incomes and so it’s not like everyone is living high off the hog all the time. Sometimes when incomes fluctuate a lot, it makes sense as a lifestyle choice to spend big on worthy investments like buying a home when the money is there, and tighten belts when it isn’t. That’s just how life is – I grew up with a self-employed father, my kids grew up in the same type of house – we’d live on our credit cards when times were lean, then pay off the cards and buy expensive items, like a new car, when the money came in… and then weather out the next lean period. My dad was a personal injury lawyer so he was always taking big cases on a contingency basis – he knew the case was good and that in the end there would be a big settlement or judgment, but sometimes he had to carry the expenses of that case for years before it settled – all that time investing hours of time in investigation and case preparation.</p>
<p>“What kind of business are these people in? (if you say, “restaurant,” my eyes are going to roll…LOL)”</p>
<p>Construction…so I know they are working…have no idea if they are making money, but they are working</p>
<p>Are you going to request the same amount of financial information and back up documentation from all of the other candidates?</p>
<p>IS requiring all of the back up financial documentation a requirement for getting the scholarship (you stated that they only had to complete page 1 of the SAR which the family did).</p>
<p>What is the objective criteria being used to award this scholarship?</p>
<p>Have they broken any rules?</p>
<p>Sybbie: from my post #30: “I also don’t think it is right to ask for more forms, unless we do so with all of the applicants.”</p>
<p>The SAR is a report. It is not anything you complete. You have to complete the FAFSA to get the SAR. </p>
<p>Objective criteria for this scholarship is current college student, majoring in science with demonstrated need. That is it. </p>
<p>Have they broken any rules? I think they have. But without getting more documentation, I can’t prove it. Nor do I want to. As I said in an earlier post, this is a family I love. The whole thing is very uncomfortable and I want to bury my head in the sand and forget about it.</p>
<p>Do the rule say it has to go to the student with the most need, or just a student with need? Since this student was awarded it last year, it seems there should be no problem with it going to someone else this year.</p>
<p>Is it possible to recuse yourself from the decision? You seem to be too close to the situation due to a D’s relationship and a S’s EC. This won’t answer the question of whether there is fraud but maybe you’ll be able to get some sleep. :)</p>
<p>Interestingly, my position on this committee this year is in a organizing/advertising/facilitating function. I will be running the selection meeting but will not be “voting”, so that is a good thing. </p>
<p>Some of the committee members are older and won’t know this family. There are other committee members who do have high school age kids and all of them will also know the family, so it will be interesting to see if any of them bring up the issue. We only have one high school in our town. </p>
<p>Cap, this student did not get this scholarship last year. He was awarded another need based scholarship for graduating seniors, but no particular major/career plan was required. </p>
<p>The other candidate also got a scholarship last year.</p>