I was recently asked to help someone apply for a special circumstance EFC recalculation for their school, as we had to do this once with one child at the same college due to a job loss/serious health issue.
However, I’ve come to realize that this family is purposely trying to mislead the circumstances surrounding their “hardships”. . They could easily pay for the balance after grants and scholarships due to some huge financial windfalls they received last year, but because the school now gives full tuition to Pell recipients, they are trying to get the EFC adjusted down to qualify. They’ve gotten Pell in the past but this year’s put them over.
I was honest and said no, I don’t feel comfortable helping with this application. But do I have any legal obligation to "tell’? I don’t want to be a knowing party to something like this, but unfortunately I’m already aware.
Aware of what? You don’t know if they went through with this special circumstances consideration…or not.
Also, colleges are not stupid, and they require some pretty extensive documentation to make changes.
If the family has money in the bank from their “financial windfalls” those will need to be listed as assets on the FAFSA. But maybe those windfalls have been used for other expenses.
I would say…you did your honest thing by not assisting the family.
Thank you for the responses. I’m glad to know I have no legal responsibility - I’m just not well-versed in that kind of thing. They were very forthright with me about their plan and strategy around this and just told me they have already started the process, and I was startled. It makes me sad that the parents are teaching their young adult such a lesson.
Brace yourself for the possibility that they may succeed in their scheme. There are always a few bad apples that slip through. Remind yourself that life isn’t fair, and remember that we can’t control anyone but ourselves. Believe me, I have cringed when giving good aid packages to people I think are gaming the system … I can’t always prove they aren’t. I have cringed when I packaged aid for a student whose family I knew lived in a huge home on a lake but have tax losses that made them a 0 EFC (which gave them SEOG & institutional aid). Policies are made to help the ones who need help most, but sometimes they also end up helping those who don’t really need it so much. In the end, I can deal with that because there are many more who need the aid & get it than there are those who don’t have so much need but get it.
I actually knew the family in question … not personally, but I knew “of” them (I would never package aid for someone I personally know) … and the lake they live on has homes that are very expensive (I don’t need to Zillow to know that). I knew enough about them to know that they weren’t needy in the sense that the vast majority of 0 EFC families are needy. But they didn’t lie on anything, and they received their aid fair & square within federal and institutional policies. Like I say, some get helped who don’t need it, but that’s how it goes.
kelsmom, thanks for your reply and insight. I was away and didn’t see this until today. It must become very frustrating to see people working to game the system and your hands are tied. It looks this family will be successful in doing so. Meanwhile, I watch another struggle mightily with the finances and possibly drop out because they are honest. Makes me sad. Your directness about it is helpful to me, thanks.
@kelsmom - I am curious as to what you think is gaming the system. I can think of so many things people do to get better aid packages. Some I have heard on these boards (I do some myself): Reduce assets by paying, and maybe prepaying, any bill just prior to submission, grandparent owning 529 and not using it till Jan of sophomore year so no extra student income, put more assets in insurance cash value accounts to reduce assets, and other stuff like that. Clearly the extreme case is obvious, but many people do some stuff.
My view has been that colleges have raised prices so high that it has been become a bit of a sliding scale. Many do some things, but unfortunately many that need it the most don’t understand the formulas used. That is my biggest concern. One other point. It would be my guess that many people don’t accurately know what they can afford. If I had $50K less in retirement, is that affordable? I have always wondered where that line is between gaming the system beyond the spirit of the rules and just doing prudent financial moves.
Doing things that make sound financial sense (funding a life insurance policy if you have dependents and a non-working spouse) that also might increase your aid- go for it. Doing things that are dumb financial moves- purchasing an annuity with a high fee when there are many more attractive and low cost investments, shifting assets to your brother who may or may not retitle them back to you in 6 years- if there’s anything left-- since the “gift” to him is irrevocable and you will have zero legal grounds to insist on the repayment if he’s spent the money in Vegas-- these are the kind of things I hear about IRL. And guess what? Caveat emptor. Taking a 10K loss to get an extra 1.5K in financial aid- that’s a moronic financial move.
People do dumb things all the time. Particularly when it involves finances and especially when they think they are gaming the system. I’ve got a neighbor who padded a home insurance claim and guess what- the insurer paid, then dropped their policy, and it’s costing them about 50% more to find a comparable policy with another insurer. Is that REALLY worth the “free” camera you got?
You can’t save people from themselves. And the idea that you could have “too much” in retirement assets- that’s a fiction propagated by the people on radio call in shows who want to sell you something (and they do, quite successfully). Folks get all bent out of shape because of the “gift tax” without bothering to read the pretty straightforward instructions- the person who gets the gift NEVER is on the hook for the tax, and unless you are mega wealthy, you won’t owe any tax either- just file a simple form (which takes 10 minutes and you don’t need a CPA to file).
So sure, game the system. But most people aren’t nearly as financially literate as they think they are, and spend time and money shifting assets around and end up taking a REAL loss in forgone appreciation and growth for the sake of a tiny increase in aid… since most colleges really could care less how much is in your brokerage account, they aren’t meeting your full need anyway!
^Sure, many people make bad financial decisions. I guess if someone tries to game the system and then it blows up in their face, then it seems justice is served.
I am more curious about those making sound financial decisions. Where is the line in that case? For example, I saved about $100K for each of my 3 children in 529 plans. I have 2 in college now. One is getting about 30% of his tuition paid at a meets-full-need school. Through conversations here last month, I realized that if I took the money for my youngest child and moved it to a custodial 529, then there would be $100K less parent assets on the financial aid forms for my child in college now receiving aid. I imagine that could (would?) translate into getting about $5K more aid per year. Is that gaming the system? When is it ok and when isn’t it ok to do something purely for financial aid?
I find that acceptable, as long as the parent doing this fully understands and is willing to abide by all the ramifications of such a move. You take the good with the bad. Getting $5k more per year in need-based aid for an older child means the parent is giving up the ownership rights to the $100k in the youngest child’s 529 account. That money now fully and legally belongs to the youngest child. The beneficiary cannot be changed. The parent cannot take it back. The youngest child, upon reaching the state’s age of majority, can do whatever he/she wants with the money.
I vote with Belknap. Not immoral, not illegal, not shady.
BUT- with the extra 5K in aid next year, you risk funding the world’s biggest bachelor party, a fancy car or two, or a trip around the world for youngest and his/her besties once the account becomes the kids property. You can tell the kid that the money is for college, but the money will belong to him/.her to do as he/she wishes. There’s a reason why high net worth families often put money into trusts for their kids which the kids can’t touch until age 30 or 35… theory being that if the kid is going to spend the latter part of adolescence/early adulthood being irresponsible or a jerk, at least the kid isn’t blowing their inheritance while doing so.
With some kids, that risk is very, very small. In others- hmmm…
And of course- you are assuming that the laws around the 529’s are going to be static or stable from now until when your youngest goes to college. Not every change to the tax code is beneficent. Look at all the people in high tax locations who now cannot deduct their state/local taxes. The mantra was that the real estate lobby was too powerful to allow that to happen- ooops.
When I say that some people game the system, I am definitely not thinking of people who do things within the rules that would reduce their EFC, or even people like the lake-living-Pell-grant-recipients I spoke of (they just got a lucky break). I don’t want to say anything about the people I thought gamed the system, because I don’t want to reveal the things people have done … that is, I don’t want to give anyone ideas (a lot of people read this forum).
In the scheme of things, not that many people try to game the system - but it does bug me when they do. The reason it bugs me is because I have seen so many needy families that are JUST out of the EFC range that would allow them to receive Pell or SEOG or institutional aid - but they really need more money to make it work.
