<p>You just really have a complicated situation -- and you may need to appeal whatever package you are awarded.</p>
<p>The biggest problem you are going to have is that with little income and large assets, your parents will have problems getting an equity loan.</p>
<p>Since the assets are all in your father's name -- is he at least willing to help pay for college? Does he realize that he is expected to contribute based on his assets? Many kids end up with problems because their dad's don't want to pay.</p>
<p>Unfortunately, I don't know much about financial aid and small businesses (which is what the rental properties are -- a business). the only thing I do know is that parents with farms and small businesses who apply for financial aid usually complain that the EFC is ridiculously high and that they would have to sell their business assets to pay for college.</p>
<p>There are new rules this year for FAFSA, so if the RE rentals are organized into a real business, they may not have to be claimed on FAFSA. You might also present the situation that way on Profile, not list the assets on the personal asset page, but on the business listing page</p>
<p>A million dollars in RE assets of which one of your parents is sole owner having $500K in equity, and this is spinning off around $12,000 a year?</p>
<p>FAFSA looks at four factors: parent(s) income, student income, parent(s) assets, student assets, subtracts some standardized deductions and then calculates an EFC. </p>
<p>There are two alternative FAFSA calculations (the automatic zero EFC, and the simplified needs test). First, if the parents AGI is under 50K, and the parents file a short federal tax return (1040EZ/1040A), then two of the factors (parents assets, students assets) will be excluded from the FAFSA calculation. This is called the simplified needs test. The second exception: if the parent files a short federal tax form and the parents AGI is under 20K, FAFSA will automatically set the EFC to 0 (the automatic zero) and all other inputted info on FAFSA will be ignored. </p>
<p>Financial aid packages can include money directly out of the schools own pocket and from an outside source (e.g., fed govt.) If the school can get money comes from the feds pocket, they will try to do so because it means less money out of their own pocket. Money obtained from the feds pocket will be based on the FM (FAFSA). If a package has the schools own money, it has discretion about all the reported FAFSA info even if the school only requires FAFSA, and even more discretion if it also requires the Profile. This is because the Profile also asks questions about assets (e.g. equity in primary residence) that FAFSA does not.</p>
<p>Here, you indicate that parental AGI is 12K coming from rental income. Putting aside the issue Someone raised in post #42 above about RE rentals and an organized business, it is entirely possible that parental gross income is substantially higher than the AGI of 12K, with much of it is written off through the real estate activity. If the write offs are justifiable, its perfectly legal. If the deductions are not justifiable and simply inflated to evade taxes, thats a different issue. The problem here with FAFSA is that the alternative FAFSA calculations require the filing of a short tax form, and if there is rental property, I believe the long form is required. This would probably put the equity in the rental property on the table even for FAFSA purposes.</p>
<p>jugulator is correct -- with rental property as a business, there is no way the parent can file the short form. so the equity in the business will have to be shown. It really gets complicated when it comes to small businesses -- so hopefully your father has a good accountant who was able to help with the paperwork and show the true value of the property -- not an inflated value.</p>
<p>The trick is the valuation of the rental property. I think calmom once posted a link on how to calculate the value of your real estate from the Federal Method. For example, if you purchase the property in 1996 for $400K, the property is now rise to $750K( plus and minus a few thousands) while in actuality your house could be worth more, let say $1.5M or something like that. Your actual home equity is only $750K - $400K = $350K not $1.1M.
For simplicity sake, I assumed that the price you purchase is the same as the mortgate.</p>
<p>Do I have this right? The father owns a million dollars worth of property of which half is mortgaged. He rents out the property and after expenses, shows income of 12K (including depreciation expense). And everybody is trying to find ways to have the child's college completely paid for by taxpayers because dad doesn't want to contribute? Please correct me if I missed something.</p>
<p>If you read back through the posts, you will see that the OP's father has never refused to pay and he isn't looking for a free ride -- just a better understanding of how the system works.</p>
<p>He and his family already paid for a full year at University of Chicago and didn't apply for FA -- so I don't think he is gaming the system.</p>
<p>From what it looks like, his parents sunk all available cash into rental properties -- and they take time and money and don't always give back a good return (my parent's have rentals -- what a pain!). Depending on how savvy a business person his is, his dad might have some real issues in borrowing on his assets.</p>
<p>I do believe that parents and kids should pay for their education -- but the OP needs to figure out how to accurately represent his parents assets and income.</p>
<p>Thank you, hsmomstef, you have explained the situation quite clearly.</p>
<p>Yes, the income is rather low since most of the money that is being received from rental property is paid as mortgage to banks. My father wanted to bought a couple of houses with very little downpayment, and now he has to pay a lot in mortgage, while paying off the houses. He does not want, of course to contribute much to my education except for miniscule parental support. </p>
<p>Simba,
the assets are illegit in the sense that they weren't purshaced as "the useual" assets from money that people earn in U.S they were purchased on the money that my dad brought from another country</p>
<p>3bm103
You missed a lot, so before making any assumptions go back and read my posts, and then make comments, if you wish to do so. I am not trying to get my full tuition aid, i am just trying to see how the system works in a rather complicated situation of mine. Its not that my dad doesn't want to pay for school, its just that he can't without selling his houses.</p>
<p>dendankin -- definitely let us know how Amherst's FA package turns out. It would be educational for kids that end up with similiar situations in the future.</p>
<p>Dendankin- I think some people are confused or put off by your assertion that these are illegit assets, that makes it sound like something sneaky is going on. They are not illegit assets, your Dad had some cash and he bought real estate, if he can afford to keep it and hold it for 20-30 years and the market timing is good, he may have built a very nice retirement nest egg. He would be feeling like he leveraged to the max to get in and all the income is sucked up by the expenses and he cannot afford to put any money toward EFC..........BUT this is where the schools do not really care. </p>
<p>Yes, if he had $500k in a corporate big job retirement those assets would have been successfully sheltered (until this year I don't think any one asked about that...I believe now those are asked for on the Profile)</p>
<p>Yes, the only way to access that money in equity is to get loans against it which he cannot afford or to sell it which ruins his future plans. I understand the frustration, my sister lives in a small (cheaper town) and now owns 3 houses which she has accumulated 1 at a time, paying down mortgages on a low income, now with appreciation they are worth a great deal, but the three together are not worth as much as my brothers one house in SOCal which is protected by FAFSA- so, yes, it is not always fair, but what your Dad is doing is smart and will work in the long run. I have a friend in his 60s who struggled to accumulate rentals all through the last 20-30 years, he just sold everything in the last SoCal boom and is retiring in style after years of scrimping with paper wealth. Even though it does to work well for finaid, it is still a smart thing to do!</p>
<p>All I can tell you is that they try to come up with a fair formula and it is never fair for every one, your Dad will still be better off than the average guy in the long run, if he can hold onto the properties.</p>
<p>Well, thanks again for replies, I got my offer today:</p>
<p>The parental contribution is 27700 and staff loan is 3500....Amherst scholarship was 8790 +gov't grants..say hello private loans</p>
<p>I hoped for a little better outcome, at least that which the finaid calculator provided me with (20k parental contribution). Anybody appealed and do you think I should?</p>
<p>Remember, those calculators only provide you with an estimate...not your actual EFC. I would say Be happy with what you've received and be prepared to find alternate funding unless your parents are willing to let loose of some of those assets.</p>
<p>Please, don't do this again...i mean don't say "unless parents are prepared to let loose of some assets" if you read the thread, you will understand what I mean.</p>
<p>Dedankin, you would have to run through the numbers and talk to FA at Amherst to get your answer. I can tell you that a good friend of mine is really taking a financial beating and a risk on his future well being in paying for his two kids' tuitions. He is disabled and earns a modest but living income from investments that he made from a settlement and prior savings. That represents retirement assets as well as the source of income. In order to pay for college, he has to dig into the principle which in turn reduces the income. It also reduces his pension. Since his income is not considered "earned" under IRS rules, he cannot set up a retirement plan to cover these assets. Considering his disabilitites and the high likelihood of needing extra care in the next 10 years, it is unfair that his assets are counted that way, but "Them's the rules". There are alot of unfair situations in financial aid as there are in all rules.</p>
<p>so I get from your EFC- your grant from Amherst and your Stafford that Amherst expense is $40,000?</p>
<p>Don't you have any work study as part of your package?
See if you can get at least $2,000 during the school year- pref through work study or elsewhere on campus
I would also suggest to earn $3,000 during the summer- to put toward your school expense for the next year.
I dont think extensive private loans are worth it-
Are your parents prepared to pay the $20K EFC that you originally thought would be the expense?
I think taking some time so perhaps find a few scholarships and a job will give you the money to make up the difference</p>
<p>I am sorry, but with HALF a million dollars in assets...I do not feel one bit sorry for your situation. There are millions of students who are taking on a tremendous amoutn of debt who only DREAM of having assets at their disposal. Financial Aid is designed to help make college more affordable to those who cannot afford it. If your parents can afford to have $500,000 tied up in assets, then they should expect to have to liquidate some of it to help pay for your education...or else you should seriously think about attending a school you can afford without their assistance.</p>
<p>I don't mean to sound so cruel, but I just got off the phone with one poor student who was sobbing because her financial aid package will leave her about $1600.00 short...and she has no idea how to come up with that amount of money. For her that is an entire month's worth of pay. I bet she would love to have assets to help her cover her shortfall rather than have to stop her education before it even starts.</p>