<p>ebay - are your investments in a qualified retirement account, such as a 401K, IRA or Keogh?</p>
<p>Your EFC includes money from income as well as assets, so part of the calculation is based on current earnings. The percentage from current income is significantly higher than 5%, but I don't really know what it is. But if there is a mistake in your FAFSA, you should file an amended/corrected FAFSA to get EFC recalculated. Whether that will make a difference for the college really depends on the particular colleges -- as noted before, the college may take the retirement assets into consideration even if the FAFSA doesn't, and not all colleges guarantee to meet the need of all their students. But a starting point should be to get the paperwork right. You can get a rough calculation at <a href="http://www.finaid.org/%5B/url%5D">http://www.finaid.org/</a> </p>
<p>I assume that you have already done the math to figure out how much you really can afford to pay out of current earnings, and how much will need to be supplemented from loans or any other source, including borrowing from retirement assets. Do keep in mind that you can always take a loan now and then pay off your loans with those retirement assets later on. Depending on how they are invested, you might be better off to do that.</p>
<p>If your assets are in qualified retirement accounts, they should not have been listed. Your EFC is primarily comprised of a percentage of income, and I am going to guess (yes, it is reckless of me, and this is purely a guess based on some info you gave like older age) is about 35% of that income. Plus 35% of your student's assets, and about half her income. Plus about 5.6% of your assets including home equity. So for next year, if you reduce your home equity by the tuition paid, your Profile EFC could go down by close to $3000 from that move alone, and each subsequent year, it could decrease more. And you can still take PLUS loans out on the amount. When you take money out of qualified pension plans to pay tuition, you are going to get severely penalized the following year as that is considered income and assessed at that 35% figure that I am guessing for you. Plus the equity in your house is increase and you are zapped on that. Whereas if you spend down the equity in your house and use PLUS money and just bear down for three years, you can reduce that equity which could help for PROFILE aid and then repay the home equity once your student is a senior and you don't have to worry about the danged Financial aid forms though your retirement money. The PLUS loans I threw in there to give you flexibility in those 3 years that you will be juggling this to maximize aid possibilities.</p>
<p>Thanks all for your help. My husband fixed the FAFSA. What I will do now is wait to hear back from the Finaid office - but now it may be late in the game. What I forgot to mention is that we have saved what would almost cover my sons first year in college in savings, investments in his name. That may be why we are expected to pay the full amount the first year. I read somewhere you should have never saved in your kids name for college. Well, too late now. This would clean out my sons assets and I am hoping from then on, that we would be able to re-group for year two.</p>
<p>Oh...yowch. Yeah, the savings-in-offsprings-name is a huge no-no if you're trying for financial aid.</p>
<p>Some folks have sneered about starting educating one's self about the college process early. I can make a serious case that long about when your child is in 4th grade is not too early to understand both the financial and academic broad brushstrokes of the process.</p>
<p>Yeah, we were naaive and took the Merrill Lynch financial planners advice that we should save all we can for our kids and he set up the kids accounts when the oldest was in 4th grade. He had to know his stuff (we thought). After all he was an "expert"
Moral - don't let this happen to you!</p>
<p>My D got some aid from the school. I plan to pay about half of her tuition each year in monthly installments through her school's tuition management plan and she'll take out loans for the rest. Her loans won't come due until she graduates. While she's in school I'll pay the interest and after graduation if it is more favorable for me to do so, taxes and other things considered, I'll pay off her loans with my HELOC. </p>
<p>If anyone has any other suggestions, please feel free to advise. Thanks.</p>
<p>There is quite abit of logic from ML when savings in kids name. The taxation situation has changed since GWB and the situation maybe in favor in savings in parents name.</p>
<p>We looked at the problem in another light 20 years ago.
1) Having the ABILITY to pay for ANY college of choice is INFINITELY better than HOPING to get merit or need based programs.
2) We were told 20 years ago that college costs was going to increase 6% annually, average. Which is remarkably close to what current tuition is today. There should be no surprises when parents and kids look at tuition when they are ready to attend post HS education.
3) We targeted to achieve a certain amount of $$ at a certain time using a variety of programs to maximize overall return of money. We looked at college expenses as a retirement program. Which probably what your advisor recommended at the time. (situation and circumstances may now be different.)
4) We wanted to be 100% sure that the $$ belonged to the kid, incase of various stuff that happens as divorce, death, additional kids, while at the same time have some management control.
5) We played a taxation game in a rising investment climate. I am not sure that this game is towards S or our advantage now, but we have achieved the objectives and now winding down our playing.
6) We Understood the rules of ALL the pieces of the college's financial game and how they interact with another.
7) Our EFC is 100% not because we make alot of $$ or because we have alot of assets but because the S has the assets that allow him to chose any college that accepted him. Our initial fundings, 20 years, is but a fraction of what S costs are today. Those people who need to sell or borrow or borrow against assets, will pay infull, full value, and pay in a period when they need to be looking at retirement asset building.
8) The rules always change. I refer to Roger Dooley's essay of the Financial Uncertainty Principle.
9) We believed 20 years ago, that FA, would be an iffy occurrence. We saw that his cohort-generation was the Boomer's Echo, and thus we knew things were going to be different. There would be high demand for admissions for a scarity of vacancies. I would guess that in 10 years from now, when the Boomer Echo has completed college, that they will be plenty of college $$ around because there would not be enough kids to fill the college seats.
10) Would I do it again. YES! </p>
<p>This is not what alot of people want to hear, but having children, getting married, buying home or car does take advance planning and understanding.
I harp on the fact that very few kids understand the theory of money while they spend alot of effort in the Theory of Knowledge (IB program). Which will be more important in their future lives?</p>
<p>Dont beat up on the Merrill guy too much. I sounds as though you have an income that is too high to get any financial aid anyhow in which case it makes sense to have assets in the kids names since they are presumably at a lower tax bracket. I am in the same boat - middle class in CA and dont qualify for anything except unsubsidized loans. Paying the 20K for in-state is a struggle especially when you are living paycheck to paycheck. </p>
<p>I would not touch the retirement money. If you are spending it all on tuition then you already dont have enough. As a rule you should figure that you will live on 70% of you current income in retirement and can withdraw 4-5% of your retirement principle per year. Unfortunately in retirement your health is no longer as reliable so you cannot just count on working forever. Ending up living on your kids backs is a very real risk and unless they are doctors or lawyers they are unlikely to reap much $$ benefit from the education in the tier 1 private school vrs a quality public.</p>
<p>It sounds to me like you need to face some hard realities. Either you cannot afford the schools you are looking at or you may need to trade down to a smaller house and use the extra $$ to spend on tuition. Another option may be a reverse mortgage. I would suggest that you go and talk to a financial advisor. I am amazed how people who do not have the $$ to pay for expensive school think nothing of running up huge debts through long term loans as if the loans will be somehow easy to pay off. Im not suggesting for a minute that you are one of those but they are out there.</p>
<p>Regarding HELOC loans you can write off the interest of 100K of loans if the money is spent on college. If you are paying AMT the interest is not tax deductable.</p>
<p>Ebay - just something to think about in terms of the global picture of home/retirement/college expenses, etc. I'm in a similar situation, with one in college and two to go; I'll be eligible for social security before my youngest will graduate from college. I like the house we live in, but I've already started lobbying with the Mrs. for moving into smaller digs once the kids are gone. I look at it this way: when our kids are grown we won't need 4 bedrooms on a cul de sac in a good school district, but some new family with young kids will. If we plan to sell our house after our chicks have flown and move into a smaller place we'll be able to finance at least part of their education by borrowing against the difference in price, and it will also let a young family move into our family-friendly neighborhood and enjoy some benefits of our current family home that we won't really be able to use anymore. It makes for a win-win situation for the younger generations at no great sacrifice to us. So its savings and a HELOC for us, with the plan being to pay off the HELOC out of escrow when we sell and move out. Just something to think about.</p>