Low Income, High Assets?

Paying for College
1

<p>Applied ED to UPenn back last week, but with FA deadlines looming, I'm beginning to wonder whether I should apply for FA?</p>

<p>My parents have no income whatsoever. None. Reason being that my father was diagnosed with stomach cancer four years ago, had his full stomach removed, etc., and hasn't worked since those four years ago due to physical impairment.</p>

<p>Fortunately/unfortunately, my father had saved up lots of cash in his savings account over the years, expecting some sort of tragedy like cancer. So we have about $2 million in assets, if not a bit more (I don't know exactly how much).</p>

<p>So while we're financially secure living as we are, it becomes somewhat stressful if my parents have to pay my full tuition, especially since my father might fall ill again (i.e. cancer returns), and because it's the only source of money that we can live on now.</p>

<p>My father can't work anytime soon either, due to being easily fatigued, so job prospects are low (if not nonexistent).</p>

<p>Question is, should I even bother applying for FA? Is there any way I can explain the situation when doing the forms? Or am I just screwed out of financial aid due to high assets?</p>

<p>I also have a sister attending Northwestern, and she's in her senior year now. We paid full tuition all throughout, not asking for FA, since we couldn't apply due to high income+high assets at the time. Will that negatively impact us as well?</p>

<p>Would really appreciate any help, since Penn's FA deadline is tomorrow at midnight.</p>

2

<p>Do you qualify for the simplified needs test? Here’s some information.</p>

<p><a href=“How College Costs and Financial Aid Affect Tax Returns”>http://taxes.about.com/od/preparingyourtaxes/fl/Choosing-the-Right-Tax-Form-Tips-for-College-Students-and-their-Parents.htm&lt;/a&gt;&lt;/p&gt;

<p><a href=“https://fafsa.ed.gov/fotw1314/help/fotw03c.htm”>https://fafsa.ed.gov/fotw1314/help/fotw03c.htm&lt;/a&gt;&lt;/p&gt;

3

<p><<<
hasn’t worked since those four years ago due to physical impairment.</p>

<p>I also have a sister attending Northwestern, and she’s in her senior year now. We paid full tuition all throughout, not asking for FA, since we couldn’t apply due to high income+high assets at the time. </p>

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<p>???</p>

<p>If your dad hasn’t worked in four years, then what “high income” did your family have during your sister’s previous 3 years?</p>

4

<p>Is he officially disabled? All the colleges will take into consideration as special financial circumstances is recent extraordinary medical expenses. If he didn’t have any the last year, I don’t think you will get much consideration. Did you run the net price calculator to see what it said? Those will indicate if you are eligible for any aid. If some of this money is in retirement accounts or primary house it may be protected from the calculations and generous schools may still offer something–I don’t really know the cutoff point for assets, maybe someone else does, wait for more replies… Parents are expected to contribute 5.6 percent each year, after asset protection allowance and excluding certain assets as mentioned… If you want an expensive school and have assets it is going to be expected that you use some of those. Best way to cut costs is your state college or hunting for merit aid. If you are eligible for Penn you are eligible for merit aid many places. But you have to indicate on your application if you are seeking aid. If the NPC indicates it may be possible then of course you should apply in case you get something. But better strategy is not to ED and be more strategic and seek merit aid at schools that give it, imo.</p>

<p>Oh and some colleges want you to apply for aid freshman year even if you don’t get it or you won’t be eligible later at all, in case of some further change of circumstances. Probably a good idea to put the paperwork in.</p>

5

<p>No, he is not officially disabled.</p>

<p>Nor is any of the money is retirement accounts, or in the form of real estate.</p>

<p>I applied ED because my parents insisted, as they didn’t want me limiting my choices due to financial issues. They technically <em>can</em> pay for my tuition, but it’d mean they’d have to really lower their annual expenses after it’s all paid off so as not to go bankrupt somewhere down the line. And that’s not something I want my parents to have to suffer just to pay for my education.</p>

<p>I do have my eyes on multiple financially safe schools, like Georgia Tech (in-state). The problem is if I get accepted by Penn ED.</p>

<p>I’m just really conflicted as to what to do right now.</p>

6

<p>@mom2collegekids‌ </p>

<p>Doesn’t financial aid/other forms require income from up to two years back? At the time my sister enrolled/attended, it was the same year my father had been diagnosed with cancer. So we had high income for the past two years at that point in time, which I believe was the reason why we didn’t bother applying for financial aid since we assumed we’d be instantly rejected.</p>

<p>And the actual income varied by year, but it was $500k+.</p>

7

<p>Aid is just calculated one year at a time based on the previous year. Like now, for next fall awards your 2014 income and assets will be used. You fill out the CSS Profile for Penn now, based on estimates for the year. You will get an estimated award if eligible. You file the FAFSA as soon as you can once it opens in 2015.</p>

<p>It is ridiculous to think that someone is limited just because they don’t go to one particular school. Also, making sound financial decisions is good practice. It’s a fact of life that we can’t always afford everything we want and financial constrictions are just reality. Throwing common sense out the window so you can have a luxurious fantasy isn’t something I can understand, people put too much importance into it. Maybe your father should have been consulting his financial planner and see if that is really a feasible use of funds taking into account he might not work again and have medical expenses in the future. If he didn’t do so, I would modify my application to RD. When you ED, you don’t get to see where else you get in and compare offers. </p>

8

<p>Well, “bankrupt” was a hyperbole. Financially difficult situation would have been a better phrase.</p>

<p>And I know/understand/agree with your reasoning, which is why I’m looking to see how I can remedy the issue.</p>

<p>But said financial decisions will be discussed with my parents soon enough. For now, I just need to know whether or not someone like me is eligible for financial aid.</p>

9

<p>You are not eligible for federal aid. You are eligible for an unsub Federal Direct student loan. Different colleges have different formula to determine if you can get any institutional aid. With such high assets it may be unlikely. The colleges don’t let you reserve money/assets for future contingencies unless it is in retirement accounts. No one knows if you need it or he will make an internet business and strike it rich. Did you run the Net Price Calculator yet? </p>

10

<p>If your parents have $2,000,000 in assets and they pay $250,000 over four years for college, they will have $1, 750,000 remaining…and that does not include interest on the accounts.</p>

<p>If your family income is REALLY $0, and I believe that would include unearned income in the form of interest on that $2,000,000 account, then you would qualify for simplified needs, and need based aid.</p>

<p>$2,000,000 earning 3% interest would be $60,000 a year in interest. </p>

<p>And your FAFSA EFC on $2,000,000 would exceed $100,000 a year…well in excess of the cost of attendance.</p>

11

<p>Thumper is right…the family income isn’t really 0…there is income from the investment of that money.</p>

<p>My point was, once your dad stopped working 4 years ago, there was no attempt to contact sis’ school for FA due to major change in financial circumstances…which schools do consider. </p>

<p>I suspect that if your dad was earning $500k per year, that he has more than $2M saved. That’s probably why your parents aren’t worried. If they were truly worried all of this time, your mom would have returned to work. I suspect that your dad has more than twice that amount saved. Is your home paid off? </p>

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<p>??? What’s the problem. If you get accepted ED to Penn, but you feel that it is unaffordable, you decline. Period. If you have GT as your back-up and will likely be cheap with the HOPE scholarship…then go THERE if you’re so worried about money.</p>

<p>What will your major be?</p>

<p>Do this…have a frank conversation with your parents. Ask them if they have a lot more than $2M saved. If they say, “yes,” ask them how much income that money brings in each year. They may not want to tell you but if you’re determined not to go to Penn because of money, they may decide to be honest with you. </p>

<p>If your parents tell you that they barely have $2M saved, then you have a right to be concerned. Your parents may not be old enough to be able to outlive that money once $300k is subtracted for college. Wish @dstark would weigh in…he’s the CC financial guru.</p>

12

<p>If your parents say it’s okay, believe them. If you feel like you would like to help out, get a job and save the money for your books and spending money. Maybe even take out the Stafford to start paying off after you graduate. Between that loan and your earnings, you may be able to contribute up to $35,000 and save your parents that amount.</p>

<p>On another note, I wish your father the best and am hoping for a good prognosis.</p>

13

<p>I agree…have a chat with your parents. It is very possible that they have a 529 or other college savings for you…worth finding out. </p>

<p>And put in an application to U of Alabama where you will likely get a guaranteed merit award…which could help your family. Get it done now as it is due by December1. Just in case Penn doesn’t work out.</p>

14

<p>Thank you all for the help and suggestions. Appreciate it :)</p>

15

<p>Right, it doesn’t sound like zero income. Those assets should be bringing in interest or returns in some way and if it is property there would be rental income. </p>

16

<p>Even if there is zero income, the 2 million dollars in asset would lead to no need of financial aid.</p>

17

<p>Actually, if there was no unearned income from the assets…and the student qualified for the simplified needs test…the assets would not count at all in the FAFSA financial aid formula. BUT for Profile schools, it is highly like,y the assets would count in terms of institutional néed based aid calculations.</p>

18

<p>I’m assuming he meant no EARNED income.</p>