<p>Does anyone have experience with how BS financial aid offices handle the impact of Roth IRA conversions on income?</p>
<p>In the year of a Roth IRA conversion both income and taxes paid go up substantially on the PFS via SSS. So, it looks like the family has more dollars available to pay for tuition than they actually do. I am wondering if the financial aid officers are familiar with this problem...</p>
<p>Thanks!</p>
<p>Discuss this with the school. I had a similar conversation with the Director of FA at my daughter’s #1 college choice (which she now attends). I was contemplating a similar move that might inflate my income in the coming year. He put a note in her records and assured me that they would take the artificial nature of the change (it really wouldn’t change our fundamental financial position) into account when calculating future aid grants.</p>
<p>No impact at Andover but it did have an impact at Univ. of Penn negatively (sigh.) No FA from Penn. </p>
<p>Andover is committed to be need blind for those students who get in.</p>
<p>Polyglotmom, what you are saying is that for the same year, when the “Roth IRA convert” happened, Andover kept the support level for one of your kids while Penn changed its FA for your other kid. Correct?</p>
<p>Update: 1 school reply so far - advised to send a letter of explanation to both SSS and the school.</p>
<p>Still concerned - I am imagining an over-worked financial aid officer trying to plow through a stack of apps. The Roth conversion will make the income look really high even though the money is not available to pay for school. So, on first glance of the numbers, the app could fall into the “no fund” pile and stay there.</p>
<p>Next year, 2010, will be a busy year for Roth conversions as the income limits will be removed. I am thinking that next year FA officers will be more familiar with the issue and perhaps SSS will change their formula - but this year the issue is less common. Also thinking that a reduction in FA can easily wipe out any advantage of the Roth Conversion. Tough decision!</p>
<p>Update - heard from 4 schools - the consensus is that a conversion from a traditional IRA to a Roth IRA should not affect a financial aid award but ultimately the award is the school’s decision.</p>
<p>One suggestion was insightful - use at your own risk - don’t report the converted IRA funds as income on the PFS but do report the taxes paid and a comment that says something like “$XX IRA converted to Roth IRA.” This way the PFS is not misleading and the discrepancy between the PFS and the tax forms will be explained in advance - a clear message that there’s no funny business going on.</p>
<p>Good Luck to All!</p>