<p>Elsewhere on CC, I was reading a checklist for a kid's junior year and the item read: "Parents' assets need to be positioned for maximum protection from financial aid assessment by December 31." </p>
<p>now what exactly does that mean? Or in broader strokes, what steps can I actually take over the next 6 months? My salary is going to be - more or less -- the same next year as this year. Are there practical steps I can take with our savings? (for example, put more into retirement accounts?) Or is this more saying "don't cash in anything big." </p>
<p>Here is my suggestion. Run the net price calculators with the assets you currently have. The EFC calculations are very heavily weighted towards income. You may find that with your income, there isn’t much change even IF you move assets around.</p>
<p>Also, for FAFSA purposes, there is an asset protection allowance as well…which depends on the age of the older parent…but is in the $50,000 range…or more, I believe.</p>
<p>If your kiddo is a going to be a senior fall of 2015, then the current year will be the tax year used for your financial aid forms. Any money you put into a traditional retirement account (tax deferred accounts like IRS, and TSA) will be added back in as income. The money IN the accounts will not be treated as an asset on the FAFSA, but the Profile does ask for balances in retirement accounts (although the reason is not clear).</p>
<p>I think what you want to avoid is cashing in anything big. Don’t sell stocks, don’t withdraw money from retirement accounts, don’t cash in bonds, etc. those things WILL increase your income…and INCOME is the driving force.</p>
<p>Remember also, MOST colleges do not guarantee to meet your child’s full need. So even moreso, the financial gymnastics might not net you any more aid.</p>
<p>Seriously, run those net price calculators.</p>
<p>Thank you @Thumper1 …super-helpful.
(and I just went & ran the mini-FAFSA tool just now…wow, very depressing…at the combined income of me and my husband…we’re both at roughly $70k a year…looks like nada.) </p>
<p>That is why I always say…run the calculators before you do all those financial gymnastics. </p>
<p>Now…look at the thread with a stick pin above called automatic full tuition and full ride scholarships. See if your child has the stats to qualify for any of those. Your income is not considered for merit awards.</p>
<p>Even when one does qualify for aid, and one can get more aid due to some financial gymnastics, one should always keep the whole picture in mind. Yes, when you sell stocks or other such investments, or take money out of some thing, you do get a realized gain which can affect financial aid, but if that still is the right thing to do, you sometimes should take the hit. Just realize what the consequences of certain things are. </p>
<p>OP, with a $70K EFC, if you have another child going to college in future years at the same time as this one, you may qualify for aid. So when you are looking at schools, keep that in mind. Some schools will guarantee to meet need with no issues when the need occurs; some may want to see the change in circumstance and have an aid app on file from the onset. Some schools will carry forward balances kids have in assets from freshman year (Uof Chicago) for ALL 4 YEARS. So in such a case some more forward thinking is in order. All things equal with two kids in college your EFC would be about half, so when you are talking about the priciest private schools, that can make a big difference in aid. </p>
<p>Get the book “Paying for College Without Going Broke” - there are good tips in there. If your child will be a senior next year, then yes, 2014 will be the first year looked at for aid, so there is less you can do now, since retirement contributions made this year will be added back in to determine your income for FAFSA (and, I believe, CSS) purposes. If your child will be a Junior in the fall, then you still have some time to reposition assets into retirement accounts, which aren’t looked at by all schools. You can often reposition the student’s assets into parent accounts, to reduce the percentage of those assets that you will be expected to spend on college (student’s assets can be tapped at 25% per year, parents’ typically at 5-6% per year).</p>
<p>There may be some other things you can do. The book is definitely worth the price, just for help in understanding how the whole thing works.</p>
<p>Harder to deal with high income (I guess you are saying that mom and dad each make $70K/year?) than assets, but again, there might be some things you can do, if either of you is self-employed, or if there is any way to shift income between years.</p>
<p>Very important to begin your college search with a solid understanding of the different types of aid, what exactly the EFC means, whether your child will/might qualify for “merit aid” at various schools, etc. This forum is a good starting place!</p>
<p>SouthernHope, if you’re combined income is $140,000 I think you’ll qualify for FA. But it depends on the school, other assets, equity in your home, etc. I don’t think your income will kick you out of the running though. </p>
<p>Thanks @Living61 — i only did the mini-calculator and maybe I was looking at it wrong…it <em>appeared</em> to say that $140,000 combined household income would qualify D for a $1500 work-study program…and…that’s it. But I am just now getting into this…all of my mental energy has been going into understanding that my daughter isn’t going to get into an ivy league school like I thought before i joined CC – LOL – so the reality of finances is the next thing to sink in…</p>
<p>Re: the post by Living61…I don’t fully agree. At the very vast majority of colleges, the only aid a family with a $140,000 income will see is a Direct Loan ($5500 for freshman year). The vast majority of colleges do not have deep pockets to award aid to those with this income, and the vast majority don’t meet full need anyway. </p>
<p>And remember, those schools that meet full need are mostly highly competitive for admissions AND they require the CSS Profile in addition to the FAFSA (exception is Princeton which has it’s own form). The Profile delves into your finances much more thoroughly than the FAFSA does.</p>
<p>With a $140,000 a year income, the FAFSA EFC estimate would be between $35,000 and $46,000 or so depending on the assets. Schools with very generous financial aid policies (like HYPS) might be more generous. But other schools will expect you to pay at least your EFC amount. For schools that don’t meet full need, you will not be guaranteed any aid above the $5500 Direct Loan for freshman year.</p>
<p>Even work study should not be viewed as a guaranteed award. Federal work study monies are awarded by the colleges, and are typically given to lower income students. </p>
<p>I still suggest that you look at the automatic full tuition/full ride thread. Your daughter might qualify for one of these guaranteed merit awards based on her stats. Your income would not be a consideration.</p>
<p>Thanks for this @Thumper1 …it’s good for me to understand that we’re on our own when it comes to paying for college…because of where we live (large urban city), a $70,000 income for a person who’s been at their career for 25 years doesn’t feel like a wall street level of compensation…but I’m drifting into the conversation that we keep having again and again here at CC…the good news is that I now have clarity! </p>
<p>I’ll put my flak jacket on and prepare for incoming after saying this, but… in my opinion, this would be unethical behavior akin to hiding assets, unless the transfer from the student to the parent is a bona fide gift with no expectation that the money will be returned to the student or used for student expenses.</p>
<p>OK. Don’t forget the “no expectation that the money will be returned to the student or used for student expenses” part. In order to be a legitimate gift, it can’t be a wink, wink, nod, nod transaction. The purpose of the transaction cannot be to “reposition the student’s assets into parent accounts, to reduce the percentage of those assets that you will be expected to spend on college.” If there was no benefit to having the funds titled as parent assets as opposed to student assets, would the parties go through with the transaction? Doubtful. How many college age children give their parents gifts of $14,000?</p>
<p>Who says the transfer can’t be for the benefit of the student? Tax laws allow transfers for all kinds of purposes. The student can benefit from the transfer. The parent can (and often do) pay for college expenses for their children.</p>
<p>MiddKid, realigning assets happens all the time in families, corporations, inheritance. That’s what financial planning is all about. It is no different than planning a child with divorced parents spend one night more with the parent who makes less so that the FAFSA is more favorable by filing with the info of the parent who makes less. Unfair to everyone else who then gets less? Of course.</p>
<p>MiddKid, not that’s really relevant, but I gave my parents several thousand dollars over the course of my college career because they needed help. It’s not incredibly unusual to move money. Students give their parents money as part of their “skin in the game” for college, etc. </p>
<p>To the OP, with an income of 140k, financial gymnastics are going to be completely pointless at the vast majority of colleges. Except for the very generous colleges, you’re not likely to see any increased aid (or any need-based aid at all) no matter where assets are located. </p>
<p>A couple things that are legal to do. One is to maximize your retirement contribution. I made my 2014 IRA contribution right before submitting FAFSA to lower my cash amount. In addition, one may consider paying off any personal debt or to make extra mortgage payment to reduce the loan capital (increase equity of primary home) if you are only filing FAFSA. All these would reduce the assets considered in FAFSA. There is no foul play as one may allocate their assets any time in any way.</p>
<p>It is perfectly legal and legitimate for the student to turn over the money to the parent since it would be counted less that way. It is NOT legal and IS FRAUD to take out the money, put it in a shoebox and not report it. Two very different things. </p>
<p>A few years ago, a family that was really a bit down on their heels in terms of financials got so whammed by UChicago and some other schools. THey had no idea about the difference in student assets and parental. Kid had been saving (with help of family) from day one. Account in his name with a whopping $30K in there. They qualified for fin aid, but that was a $6K hit–even more at some schools as PROFILE schools do not have to go with the FAFSA 20% formula (example JHU uses 30%). Worse yet, UCHicago keeps that amount in mind and carries it forward for ALL FOUR YEARS as part of the student contribution. </p>
<p>A family that had put that money in a 529 or had simply made the account joint with parents name and ssn first would have been hit about $1500 in contrast with no carry forward. Those are the rules and there is no excuse for not knowing. So you learn them and get rewarded for so knowing. The schools do not care if the student reimbursed the parents for past expenses (and what kid does not have past expenses paid by a parent, for cripes sakes?) but if the money is sitting in the kid’s name for ANY reason that day the FAFSA snapshot of assets is shot, it’s up for grabs at 20% to the EFC and possibly more by schools’ PROFILE formula. Them’s the rules.</p>