I have been stressing about this and thought about hiring a private financial aid advisor to help me on my approach to FAFSA and paying for D19 (only child) college but thought I would first try this group of wise forum members to see if anyone wants to tackle this and throw out their two cents on what I should do. Here is my situation. First I am single, there is no living father. Last year (my daughters base year) I retired the end of June, so have 6 months of full salary and 6 months of pension which is 90% of my salary that I will report on the FAFSA. I also had $10,000 of built up vacation pay that I was paid lump some the year I retired that I have to report as income. In addition, I took cash on hand and bought a house, 50% down for $650,000. That I now owe $325,000. I sold my previous residence and have $150,000 sitting in cash. That money was intended to go toward my new house by there was a delay before I sold my home so I was thinking of using it for D19 tuition/fees. Last, I have $400,000 in a 401K. I live in high COL area in SoCal. I also made a decision when my daughter was young to not put money in a college saver, since I knew I would be retired when she went to school, I just increased my 401K contributions. Here are my questions.
I know I need to inform Financial Aid office of the change in income, that the base year was unusual and my income from pension is now $40,000 under what the base year salary and lump some payout shows during the base year. Do I do this when we send in the applications, to each school we apply to, or upon acceptance, and if I wait until acceptance will some schools not be able to adjust the number because they might have run out of aid? If I do it earlier do I send it out with application? How does that work?
When I run the numbers it seems like it would be much better for me to put my cash into the house to buy down the mortgage and have less in cash since on the FAFSA the primary house it is protected. If I do this how much cash should I have? and if I do this, that means I will need to take money out of 401K by my daughters junior and senior year to pay for tuition/fees. It would be simpler just to leave it in a liquid account but in doing the numbers this comes out around a $10,000 difference in EFC.
I can easily live comfortably off my pension, I have health care and donât plan on taking out Social Security until 70. I will be 63 when my daughter enters college, so I am comfortable taking some funds out of 401K for daughters college costs. She is a 4.0 10AP student so will receive some merit as well.
FAFSA is used to determine if you qualify for a Pell Grant. If your daughter applies to private schools, you may need to fill out the CSS profile which considers assets, home equity, etc. The FAFSA EFC is generally unrelated to what you actually pay. You wonât pay less than that, but you could be expected to pay much more.
The first question is how much is your income (either salary or the 90% pension)? If that alone gets you to an EFC oer $20k, it really doesnât make a lot of difference if your EFC goes up to $30k for that first year. If you arenât going to get any need based aid based on your salary/pension alone, it doesnât matter that much if you have a lot of liquid assets.
If your EFC with your 90% pension (using your 2018 taxes, for example) is under $6k, and you donât use any of the 401k which would increase your income, then yes, youâd want to reduce your liquid assets, probably by paying the $150k sitting in an account toward the mortgage. Your income is considered from the prior tax year (use 2017 for the FAFSA youâd file in October 2018), but the assets are considered as of the date of filing.
If sheâs picking schools that require CSS, your planning might be different.
I donât see how a financial planner could help with FAFSA planning. They usually donât know more than CC posters.
Some schools give no merit. Some schools only have very competitive merit.
Most schools that give merit base awards mostly on ACT/SAT scores. Too many students have a 4/0 these days. Itâs the test scores that matter most for merit. AP classes donât really play much into merit awards, either. Schools usually get AP scores a month or two before college startsâŠlong after merit awards.
Financial planners are usually awful with anything to do with college aid/merit/etc.
Did your daughter take the psat? When will she be taking the ACT/SAT ?
Am I reading this correctly? If you made $40k more in your base tax year (2017) because you had full salary (instead of pension-level payments) for six months plus you got a $10k lump sum, that would mean your original salary was about $600k.
2017 income:
[300 + (300 x 0.9) + 10] = 580
Post-2017 annual income:
600 x 0.9 = 540
Difference between 2017 income and annual income thereafter is $40,000, as you said. Iâm not a math genius, but I donât see any other way to arrive at that $40k difference.
If this is the case, you should not be expecting any financial aid at all. Of course, as you said, your daughter can try for merit money.
If I am somehow way off here âŠ
You donât send any kind of financial aid narrative to the admissions office with the application. You can explain special circumstances on the CSS Profile when you file itâif she is applying to schools that use the CSS profile. After aid is revealed, which would be after she is accepted, if you feel they did not take your special circumstances into consideration, then write an appeal. One page, bullet points, pleasant tone, deferential. Have it ready and send it the day after she gets the award. If itâs a school that meets 100% of need, they donât ârun outâ of aid. If itâs a school that does not meet full need, then I have a sneaking suspicion your daughterâs not getting anything anyway.
For Fafsa-only schools, thereâs nothing you can do. Fafsa is just for federal aid, meaning Pell grant and federal student loans. I have a hunch your daughter wonât be getting a Pell grant. Anyone can get a federal student loan, though.
So she will be applying for instate UCâs but also OOS privates (still working on list) and yes I said FAFSA but also want to include the CSS, and yes 2017 is her base year. I am not sure I understand why it doesnât matter. California also has a middle income grant that she might qualify for and from what we were told we should fill out the FAFSA to include other merit, if there are possibilities. No we arenât counting on merit, just want to make sure we are setting ourselves up for the best possible outcome. Donât want to say âI should haveâ Daughter got 1500 on SAT, may take it again. Had a bad day for PSAT and because she is in CA wonât make the NMSF cutoff. She has exceptional EC as well. I know the UCâs will probably be our best bet for cost (she is also a math science girl) but I want to at least be prepared for any college she chooses to apply to. I really donât want to get into what colleges she can or can not get into, I have been studying that one, I just had huge questions on whether buying down my mortgage was a good idea or not since it is not something I can change once I do it.
Anyone know the best way to address an unusual base year? Is it possible to do this with the application?
It is only a âbase yearâ if you are at a CSS school that designates it that way. For FAFSA, you complete the form every year and the FA is based on the new FAFSA for the next year. For FAFSA 2019-20, the tax year 2017 will be used and as you said, it will be 10% of your salary for 6 months higher, plus $10k for vacation pay, than 2018 will be. It really wonât make a difference if you are talking $100k in salary or more.
(I thought the middle class tuition help in California was for incomes at about $100k for two parent families?)
A few schools do set the FA in the âbase yearâ as you say, and then guarantee to meet that level for 4 years. Very few schools do that. Those schools use the CSS and you can explain that your 2017 income is $10k higher, plus that your income will be 90% of former levels. For FAFSA schools, you have to answer the questions as asked (what IS your income, not what WILL it be) but you can send in an appeal to each school with a change of circumstances, that you have retired and new income is $XXX.
But again, if your salary/pension is above Pell levels, you wonât get much relief.
But to give you the best advice, what is your pension income?
True, some schools require the Fafsa to be filed to get merit aid. But the merit aid will be based on her SAT score, not whatâs on your Fafsa. Not sure why they want the Fafsa. Maybe if they see you are a kazzillionaire they wonât bother with the merit money. I wouldnât worry about rearranging finances to get merit aid.
No, they want you to file the FAFSA to get merit aid because they want to make sure you really donât qualify for a Pell grant or extra money. Schools want to give out their own money LAST.
This year my daughterâs school gave out 60 tuition scholarships to 60 lucky students. However, they made sure that ALL the other sources were applied first, like Florida bright futures, residentâs grant, any tuition scholarship the students got. It makes no difference to the student, but the school gets more outside money.
^^^ @twoinanddone
Got it. Of course. That makes sense. So my advice stands. No need to move money around for a âmore advantageousâ Fafsa if you are just chasing merit.
My pension is 105. It was around 128 when I retire. I made a general statement estimate when I tossed in my vacation pay. I think there is also a middle income california grant for those under 145 and low assets that asks for the FAFSA. The base year all the odd income bonuses is about 145.
The middle income Scholarship is great. It is a sliding scale though 10-40% so I thought it might benefit for having less assets. Thanks everyone for the comments, it is interesting because when I completed a few schools calculators it made as much as 10,000 difference between 105 with $50,000 assets and 145 (what is on my tax for income in 2017) and 150,000 in assets. I was just doing the simplified calculation on the school website though.
You can find the FAFSA formula for 2018-2019 by googling EFC formula 2019. You will get a link to the PDF, and then can work through it on paper with various scenarios. As a single parent with an income of 105k, you will have a fairly high federal EFC. And of course the formula can change every year.
When your daughter applies for aid, you will file the initial paperwork. At that time you can also contact the financial aid offices to ask what to do about the income information that is due to retirement. Some will be able to adjust immediately. Others will ask you to wait until packages are determined, still others may require you to wait until a formal admissions offer has been made. Just do whatever A asks for A, and what B asks for B.
And of course make sure your daughter knows what can be afforded out of pocket, with student loand, and summer/school year jobs for her. That way she can identify good safeties that are financially viable if all else goes wrong in the admissions and aid process. Her GPA and SAT are very good. She might like one or more from the Automatic Full tuition list at the top if this forum as her back up options.
In your case, as a single parent, I would suggest you use the FAFSA formula and work through it yourselfâŠUNLESS the net price calculators specifically ask if you are single.
Iâm a little confused. How much aid will your daughter need to attend college? A full free ride? Full tuition? Partial tuition?
What kids of schools is she looking at?
Here is what I think you should doâŠ
Look at your current budget...and decide how much you think you can really pay per year for your kiddo to attend college. Include the $5500 federally funded student loan in your budget if you want to...as your daughter will be able to take that loan.
ButâŠyou need to pick a budget for college. ReallyâŠthe EFC doesnât matter if itâs something you canât afford or wonât pay for any reason.
SoâŠset that budget.
Have a college money talk with your daughter. She needs to understand your financial limits before she applies to colleges. If the money really matters,she also needs to understand that she can apply anywhere, but if sufficient aid isnât forthcoming from a school it will need to be dropped from consideration.
You are fortunate to live in CA where there are a ton of excellent Cal States, and UCs. There should be one at least that meets her college needs...and if she the Middle Class Scholarship still exists, that would be a bonus if she got it. There has, over the years, been discussion of eliminating that MCS so just beware of that.
Figure out whether you want to use that âextraâ money you have in the bank for college costs. You might want to consider putting it in a 529 account...but thatâs your decision.
The balances IN your 401k accounts are not considered income...but the amount you put into them In thefafsayear IS added back in as income. But really...Iâm not sure you can add to those accounts on unearned income only...so this might not matter after 2017 tax year, and that 2019-2020 FAFSA...@mommdc??
Start looking for merit aid awards that are guaranteed. You wonât find any if those in CA. I donât believe any colleges in CA have guaranteed merit (well...except USC 1/2 tuition for NMF). But there are some good schools across the country where your daughter could garner merit aid.
Your daughter has a 4.0 GPA...and a 1500 SAT? What majors is she considering? Any restrictions on part of the country?
University of Alabama, for example, would give her a very decent guaranteed merit award. @mom2collegekids
At some schools the early bird catches the worm in terms of merit aid. And some colleges do have an earlier admissions application deadline for merit aid consideration, especially their larger awards...so keep a very close eye on deadlines and donât miss them.
And lastlyâŠI hope the poster with this sage advice will respondâŠbut do not do anything for financial aid purposes that you werenât intending to do anyway. Life has a way of throwing curveballs.
OhâŠand lastlyâŠyou will see that some NPCs have very few questions. The more robust the questions on the NPC, the more likely they will be closer to accurateâŠcloserâŠ
You are using NPCs for students starting college in 2018. The schools will update late summer for students starting 2019âŠand YES policies and their formulas do change sometimes.
Thank you everyone for the detailed responses. I have picked up some good ideas and helped to confirm other thoughts. When you havenât gone through the whole process it is hard to fully understand the steps of when you need to do what. I think I will come up with a number I feel comfortable buying down my mortgage but not go crazy. To answer a few questions asked, My daughter is a strong STEM girl (hasnât missed a question on math on any test PSAT, SAT 1, SAT Math II). Loves math, chemistry. She just started to talk about possibly finance so we are exploring both science and business. I also mentioned that our safety to reach are the UCâs. She is open to most UCâs, which she should get into one which covers match - reach. if she is really unlucky or she doesnât pull together a good application, she can always go the community college transfer route, that is her safety. She has looked at the Cal States and hasnât seen any she likes. With that as a base she also wants to explore other campuses outside of California. No real preference about where, but I have been thinking it shouldnât be a two plane ride + two hour drive trip to get home. I do not have a budget for her for campuses, I know people on this list donât like that, but I am completely comfortable with it. I have other income options I can explore if I decide it is important enough to supplement my pension for a few years. I also have tried some of the NPC which is how I started thinking that I might be better off putting some of the cash into my mortgage.
to see if anyone wants to tackle this and throw out their two cents on what I should do. Here is my situation. First I am single, there is no living father. Last year (my daughters base year) I retired the end of June, so have 6 months of full salary and 6 months of pension which is 90% of my salary that I will report on the FAFSA. I also had $10,000 of built up vacation pay that I was paid lump some the year I retired that I have to report as income. In addition, I took cash on hand and bought a house, 50% down for $650,000. That I now owe $325,000. I sold my previous residence and have $150,000 sitting in cash. That money was intended to go toward my new house by there was a delay before I sold my home so I was thinking of using it for D19 tuition/fees. Last, I have $400,000 in a 401K. I live in high COL area in SoCal. I also made a decision when my daughter was young to not put money in a college saver, since I knew I would be retired when she went to school, I just increased my 401K contributions. Here are my questions.