<p>Looking for ways to reduce my AGI in an effort to increase my chances for FA for my son. I have completed several of the calculators and the EFC is in the $41-45K area. There is NO WAY we can afford that for the next 4 years. As a couple, our combined income is about $160K, but after paying taxes, mortgage, insurance, retirement,new roof, etc. there isn't much left over. Any advice would be appreciate. Thanks</p>
<p>Your best bet is to pay down as many bills as you can to reduce your savings. Depending on where you work, you might wnat to consider cutting back on your hours at work. Many jobs will also allow you to put more of your money towards a protected retirement account or into investments which are assessed as a lower proportion of EFC than your primary income.</p>
<p>It’s a sad fact, but in today’s America working hard and saving your money is taboo. The winners in the fin-aid / welfare state game are the families who were “smart” enough to hop from job to job and squander their money on vacations and summer beach houses in Boca Raton. may not be PC but you have to know how to play the game or else you and yours are going to end up empty-handed…</p>
<p>The problem with trying to reduce EFC is that even if you reduce it somewhat, you still may not get any aid since most schools do not have much aid to give and most don’t meet need.</p>
<p>You might (somehow??) be able to get your EFC down to - say $30k - but if the school doesn’t meet need or have much aid to give, what difference will all your changes make???</p>
<p>Before you undergo any financial gymnastics…</p>
<p>What are your child’s stats?</p>
<p>Where will your child be applying?</p>
<p>How much can you pay each year?</p>
<ol>
<li><p>It was imprudent of you not to have saved more of the cost of your child’s education, which on a household income of $160K was certainly possible with a little foresight and discipline. Don’t blame “the system” for your own failure to plan. It is not “taboo” to save, and the imprudent are not necessarily rewarded at FA time. The people who get through the challenge of paying for college in the best shape are the people who did have the foresight and the discipline to save. Your bad.</p></li>
<li><p>Instead of looking to reduce income so as to “game” financial aid, look to reduce expenses to make more cash available. I figure we’ll save about $6,000/yr in groceries, restaurants, energy bills, car insurance, entertainment, EC-related costs, etc., just by having D1 away at college for 8-9 months per year. Some of those are costs that don’t simply disappear; instead they’re just shifted to your child’s college budget, which colleges will count as part of the “cost” of your child’s education in calculating financial aid. So a pretty significant chunk of your EFC is going to go to things you’d be paying for anyway. But beyond these pain-free expense shifts, there are probably dozens of ways you can economize. Do you really “need” that $3-day, $15/week, $780/yr coffee drink? Do you “need” that $400/month car, when a $250/month economy car would get you to work just as reliably with a lower insurance and gas cost—saving maybe $2500/yr? Do you “need” that big vacation? Could you cut back on restaurant and entertainment expenses? Where else would you cut back on expenses if, due to forces beyond your control, your income was suddenly reduced by, say, $35,000/year—something you must be contemplating if you’re looking for ways to reduce your AGI? Or do you value those little luxuries more than your child’s education? If the latter, I have no sympathy.</p></li>
<li><p>If you’re still short after doing all the creative belt-tightening you can, borrow. Besides student loans there are federal PLUS loans for parents. Or look at a home equity line of credit, or refinance your house to take out some cash and/or to lower your monthly payment. Or downsize your house (but wait until after your child’s first year in college). You have enough income to pay off these loans over a period of years. What better place to invest than in your child?</p></li>
</ol>
<p>Need to add to my post above (#3).</p>
<p>The best way to reduce EFC is to apply to schools that give big merit scholarships for stats…</p>
<p>For merit to reduce your EFC to a more affordable amount, the merit scholarship has to be BIG. Otherwise it will just reduce your aid and not reduce your EFC.</p>
<p>For instance…</p>
<p>$55,000 School Cost of Attendance of a private U
$40,000 EFC
$15,000 “determined need”</p>
<p>Aid package…
$2,000 merit scholarship
$5,500 in student loans
$5,000 in grant</p>
<h2>$2,500 in work study</h2>
<p>$15,000 in FA package.</p>
<p>So…If a school gives you $2k per year merit scholarship, then that will just go towards “need” and your $40k EFC stays the same. :(</p>
<p>Here’s are two better alternatives…</p>
<p>$35,000 School Cost of Attendance of an out of state public
$40,000 EFC
$0 “determined need”</p>
<p>Aid package…
$20,000 merit per year (for instance, a free tuition scholarship)</p>
<h2>$5,500 in student loans</h2>
<p>$25,500 in FA package.</p>
<p>Since the school has a COA of $35k and your aid package is worth $25,500, then all you have to pay is $9500. You’ve cut your EFC by over 75%! :)</p>
<p>$50,000 School COA of private or expensive OOS public (like UMich or UCs)
$40,000 EFC
$10,000 “determined need”</p>
<p>Aid package…
$20,000 merit per year </p>
<h2>$5,500 in student loans</h2>
<p>$25,500 in FA package.</p>
<p>Since the school has a COA of $50k and your aid package is worth $25,500, then all you have to pay is $24,500. You’ve cut your EFC by about 40%! :)</p>
<p>FYI…Federal Direct Stafford student loans are limited to the following amounts…
frosh year $5500
soph year $6500
Jr year $7500
Sr year $7500</p>
<ol>
<li>It was imprudent of you not to have saved more of the cost of your child’s education, which on a household income of $160K was certainly possible with a little foresight and discipline. Don’t blame “the system” for your own failure to plan. It is not “taboo” to save, and the imprudent are not necessarily rewarded at FA time. The people who get through the challenge of paying for college in the best shape are the people who did have the foresight and the discipline to save. Your bad.</li>
</ol>
<p>bclintonk,
WOW, not sure why you feel the need to post what you did (see above). You have absolutely no idea of my personal situation and employment history. Just because we as a family make $160K NOW (and that is the income FAFSA will use), DOES NOT mean we have made that in the past. Nor does it mean we will make that in the future. The industry I presently work in now is very unstable, and will continue to be. I was unemployed for 18 months and we were living on my son’s college savings, so please get off your soap box. There are a list of other unfortunate circumstances that my family endured but didn’t feel it was appropriate to share in my original post. I guess it makes you feel good to call others “imprudent” and undisciplined for not saving the entire cost of a college education. Additionally, I am not trying to game the system, I am simply asking for advice on ways to legally reduce my EFC</p>
<p>^ Sorry to have been so harsh. There clearly could be lots of circumstances I don’t know about, so I shouldn’t be so judgmental. But I guess the main point is, reducing AGI is not necessarily going to get you more FA; and even if it did, it seems to me you’re better off keeping your income at its present level but reducing expenses to the level you could attain if you actually had less income. Very few colleges meet 100% of “need” (= COA-EFC); and of those few that claim to do so, very few meet “need” with 100% grants. So you and your kid are left holding the bag for a substantial amount of self-help. Growing your “need” by reducing your AGI and therefore your EFC may not move you any closer to making ends meet. It could just mean you (and/or your child) get left holding the bag for a larger amount of loans, with less income to pay them off. So I think, bottom line, that trying to reduce your AGI is probably just a self-defeating strategy.</p>
<p>The best course is openly discussing the situation with your child and aiming him at schools you can afford and merit aid schools if he has the stats. Without high stats this will mean a state school and possibly some time at a community college.</p>
<p>bclintonk - Thanks for your reply - no harm done!</p>
<p>I appreciate your advice. I am new at this and trying to figure out ways to make college affordable for me and my two sons. As a family, we have cut our spending significantly. We were never big spenders (we still live in our starter house, drive an 11 year old Honda, etc.) Reducing expenses further seems like a smart way to go</p>
<p>^^ I agree with Redroses that you need to be realistic about finances. At your household income level an EFC of $40-45K seems about right for most schools, though at a small handful of super-elite schools (HYP etc) you might be expected to pay less. I believe under Harvard’s FA policy you could expect to pay 10% of AGI, or perhaps slightly more—Harvard says families with total incomes between $60K and $180K and with “typical assets” now pay on average 10% of their incomes. That’s very generous. But very few schools are as generous as Harvard, and not everyone can get into Harvard. More typically for schools that promise to meet “full financial need” your EFC would be somewhere around $40K and you’d get FA based on the difference between full COA and your EFC. A few of these schools would make the aid package all grants; a larger number would include some combination of grants, loans, and work-study. And most schools don’t even promise to meet full financial need; they may “gap” you, making a financial aid offer several thousand dollars shy of your calculated need, which leaves you holding the bag for something north of your $40K-$45K EFC.</p>
<p>For people in your bracket, approaching the “full pay” level, an in-state public is often (though not always) a cheaper alternative, because total COA for an in-state student is likely to be below the $40K or more you’d be expected to pay at a private college. A year or two at a community college before transferring to the state flagship is usually an even less expensive option. Or, search out schools that are generous with merit aid, because if the merit aid award is bigger than your calculated “need,” you’ll come out ahead relative to a “need-based aid only” school.</p>
<p>I am sympathetic with your plight. We’re in a similar income range—just slightly higher, but with some substantial non-performing assets (a remainder interest in some farmland that produces no current income for us but shows up with a significant asset value because the holder of the life estate is 93 years old). That pushes us into “full-pay” territory, and believe you me, it’s not easy to scrape up an “extra” $53K per year to pay for D1’s fancy private LAC on our income after taxes, insurance, mortgage, retirement contributions, and other non-discretionary expenses are paid. Fortunately we have several pots of savings to draw on, including 509s for both our kids, some personal savings, and mutual funds that have now restored much of the value they lost in the market meltdown. We refinanced our house, saving $400/month (=$4800/yr) which we’re plowing back into automatic transfers to savings. We figure we’ll save about $6K/year in household expenses with D1 away at college, which we’re also plowing back into automatic savings; and we should save a like amount when D2 starts college in three years. We’ve cut down on vacations, reduced the number and cost level of restaurant meals, trimmed our grocery budget, and tightened up on all categories of discretionary spending. I’ve dropped my daily latte, and I bring a brown-bag lunch from home every day instead of going out for a sandwich. D1 took out the maximum unsubsidized federal Stafford loan ($5500 for a freshman, everyone eligible regardless of calculated need), and is contributing $4,000/year from her own savings (she worked and saved all through high school) and term-time and between-term earnings. We’re scraping by. But I figure it’s the best investment we’ll ever make.</p>
<p>The reality is that since most schools don’t meet need, most times when EFC is high, a family is full pay (including a small student loan) even if there is determined need.</p>
<p>I know many families who have highish EFCs. And, even when their EFCs split with a second kid in school, they still get NOTHING from their schools except a loan.</p>
<p>For many students, having an EFC beyond the Pell limits means no free money at all.</p>