<p>sonofsam, you should be feeling on top of the world. You are 18 or so and at Cal Tech, a school with terrific financial aid. The world is your oyster.
I can’t understand why you are spending Saturday writing bitter posts. You are some combination of talented, hard-working, and lucky. Probably all three. Please enjoy your life.</p>
<p>swimcatsmom:
That sound you hear is a big, giant groan. Coverdell is custodial. I wonder if I can move it in to the child’s name only and have her spend it down first freshman year.</p>
<p>I don’t know if you can do that - I would guess probably not. And really you are probably better with it the way it is. Only 5.6% of a parents asssets go toward EFC compared to 20% of a students. It can only be ‘spent down’ penalty and tax free on qualified education expenses anyway.</p>
<p>is income different than assets?</p>
<p>what are the assets that are viewable by </p>
<p>profile?</p>
<p>fafsa?</p>
<p>what are excluded?</p>
<p>
Yes. Income is money coming in - ie a salary from a job, interest on a bank account, dividends from investments.</p>
<p>Assets are - well - things or money you have in your possession. So the money in your bank account is an asset. Shares are an asset. A house is an asset.</p>
<p>For instance if you have a job and earn $10,000 in 2007 then the income from the job is $10,000. If you spend the whole $10,000 then you have no asset. If you save $5,000 of it then you have an asset of $5,000.</p>
<p>The main assets that are not included in FAFSA are a primary home and retirement accounts (IRAs, 401ks etc - not money you have just earmarked for retirement - it has to be in retirement account). Of remaining reportable assets there is also some asset protection for parents which varies according to the number of parents and the age of the oldest. There is no asset protection on reportable assets of students.</p>
<p>Most other assets are reportable - money in the bank, money under the bed, trust fund money, UTMAs, CDs, stocks, secondary homes etc. Possessions such as cars, the bed under which the money is hidden, computers etc are not assets for FAFSA.</p>
<p>swimcatsmom said “money under the bed” is an asset.</p>
<p>So if it’s sewn into the mattress it’s not?</p>
<p>(Just KIDDING!)</p>
<p>I know I am in the minority here but I don’t see sonofsam’s post as bitter. It raises some of the same points I raised in my earlier post on this thread.
I do think there is a line though between a poster like purplexed who is trying to make intelligent decisions about financial moves, much the way you would in financial/tax planning, and someone who is trying to completely game the system.
The point sonofsam makes that I also made is that in trying to increase your eligiblity for financial aid, it is prudent to make sure the decisions you are making are sensible.
Using your home as a piggy bank to purchase toys, or spending your home equity is not a good plan in almost every circumstance. Taking an asset which should appreciate to buy things like cars that will depreciate is not a good idea. There are a lot of people in foreclosure right now who can testify to this.</p>
<p>Good discussion.
Kid’s dragging me out to go buy a J. Crew dress coat right now. This is the fun part, as a reward for all of yesterday’s research.</p>
<p>I’m sure she’ll get four years out of this coat…going to church every Sunday while in college. (Yeah, right).</p>
<p>Hah, purp, I can top that. My D, a college freshman, convinced us a couple weeks ago to buy her a new bicycle to ride around campus, saying it was too far to walk to her Bible study on Tuesday nights. Try saying no to that.</p>
<p>There are so many different thoughts of what can/should be done in regards to this.</p>
<p>My first point is that some of these things should be done by Dec 31st of the JUINOR year. Example - income for the FASFA for the first year of college is counted Jan 1 of juinor year to Dec 31 of senior year…meaning that you want as little as possible in that time if you can move it forward. It can be assessed at up to about 40%, so wiht taxes can take up about 70% of income. I was able to get part of my bonus for 2008 (my daughter graduates 09) move up to 2007. I have a friend who has invested for years in a stock to use for partially for his kids education. If we assume he has a $50000 gain and he sells the stock before 12-31-07, the income will be on 2007 instead of 2008 when his kid needs it, so it will not count as income for FASFA, but it will count as an asset (5% vs 40%). No “gaming” just good planning.</p>
<p>Second point is that if the ROTH IRA rules are still the same as when I first did mine, there was a 5 year waiting rule until you could take out contributions penalty/tax free. We first fund our work place plans to the full amount that we want/can put away for retirement, which we also get an employer match on. We then put what we can into a ROTH IRA - ususally the full amount allowed. This way if our kids to get good finanacial aid or scholarshiops, or if we have a financial set back we have a retirement “chusion”. If we need it for college, it can be drawn out as needed. But again, CHECK THE 5 YEAR RULE!</p>
<p>Just a comment on something another poster had mentioned. I know some people think it is wrong to try to “protect” the money that we have worked very hard for - at times 80 hours per week each. But yet another family that may have had the same income for 20 years, but choose to live beyond their means and have all the toys and trips etc but never saved anything would do MUCH better as far as financial aids gos. Sooooo in my mind they got to “have more” then - the things I would have loved to enjoy - and they get to have more now too. Were is the justice in that? So NO, I dont have a problem protecting what is legal within the law.</p>
<p>DJD</p>
<p>
</p>
<p>Because he is right. The finaid system is screwed up and penalizes savers, big time. Sure, it feels good to not have to take out loans to finance an education, but it does not feel good to fill out all the stupid forms only to realize that you have worked hard to save, and will be asked to continue working harder so you can pay more and just stay in place. </p>
<p>Consider the following situation:</p>
<p>Family 1:
Income $70k/year, savings $50k, mortage $1k/month, house value $200k, equity $50k</p>
<p>Family 2:
Income $70k/year, savings $5k, mortgage $2k/month, house value $300k, equity $75k</p>
<p>A kid from family 2 will get more finaid than a kid from family 1, substantially more. The finaid system needs to be based on income, not on assets. Don’t give the spenders a free ride just because they managed to blow off everything they made on cars, McMansions, plasma TVs, and fancy vacations.</p>
<p>Groovygeek - the financial aid system is based on income as well as assets. Under FAFSA the 2 examples you show would actually have a very similar EFC because the housing equity does not affect FAFSA EFC and most of the assets in example 2 would be protected. There would be maybe a $300 difference in EFC. If the savings were in an IRA there would be no difference in the EFC.</p>
<p>Untill you get into major assets (not home or retirement related) income probably has a higher impact than assets.</p>
<p>Seconding swimcatsmom, last year for a two parent family with the oldest parent age 50, $48,700 of financial assets were protected and not assessed.<br>
For the coming year, $50,000 or more are likely to be protected.
Savings are at least protected to this extent.
And how many people have over $50,000 in financial assets outside of retirement accounts? Not me and not many. I’d say the lucky few.</p>
<p>Actually, before we read up on financial aid, we had less than $5K in our retirement account and about $50K in EE bonds and a regular account. My husband felt it was better to have it “available” in case we needed it to run our business.</p>
<p>That is why I recommend Paying for College Without Going Broke by Kalman Chany to all my friends. I advise them to read it ASAP, BEFORE their child is a senior.</p>
<p>danas said–
last year for a two parent family with the oldest parent age 50, $48,700 of financial assets were protected and not assessed. </p>
<p>does anyone know if this level of asset protection is also a function of income - in addition to age of parent, and whether there are two parents?</p>
<p>what is the assumed income for this $48k protection?</p>
<p>is this protection in the Federal or in the institutional methodology? or both?</p>
<p>Joe, the “Paying for College Without Going Broke” book answers your questions and a million other good questions. It’s time for you to stop sipping and start drinking.</p>
<p>Joe:</p>
<p>It’s a function of older parent’s age, and whether it’s a one or two parent family. No other factors.</p>
<p>I’d second what DT said-- get Paying for College Without Going Broke. It explains it all, and discusses many strategies for optimizing aid. I’m on my third edition (2008)-- seems I pull it from the shelf almost monthly throughout the year as some financial issue or other comes up. About $15 on Amazon and it will be on your doorstep in about 5 days.</p>
<p>Adding- the current asset protection allowance for the hypothetical family mentioned above (older parent 50, two parent family) is $51,800. These get adjusted annually- and the book has the current table. Most families applying for aid don’t have reportable assets above this amount, which is why the EFC is largely a function of parental income (with student assets, if any, playing a significant role).</p>
<p>The above is for Federal (FAFSA) Methodology. Institutional Methodology uses a different, less generous algorithm for protecting some assets, including an Emergency Reserve Allowance and a couple other asset allowances. The book details them all.</p>
<p>I will get the book. thanks. In a manner similar to asset protection, does FA ‘protect’ income also to some degree? </p>
<p>I have read on CC that FA does not consider monthly consumer debt as impairing income, but does it ‘see’ the monthly mortgage? </p>
<p>eg:</p>
<p>Owner
$1000 a month income
$300 goes to credit cards
700 net income</p>
<p>$1000 considered for FA</p>
<p>Renter
$1000 a month income
$300 goes to mortgage
700 net income</p>
<p>$700 considered for FA ???</p>
<p>Both formulas work from Adjusted Gross Income, then add back untaxed income, and make some other deductions and adjustments. There is an income protection allowance under both methodologies- it’s pretty small, though, about $23K for a family of 4 with one in college (FM) and 27K for the same family under the IM. Students also get an income protection allowance under the FM of around $3500.</p>
<p>Credit card debt and expenditures aren’t considered under either formula. Mortgage payments or rent payments are similarly ignored by the formulas. Basically income and assets, with a (very) few expenses that can can be deducted from total income to reduce AGI, and thereby reduce EFC.</p>
<p>Joe - FAFSA does not ask and does not care about your expenses. They ask for you adjusted gross income, federal tax paid and give you and allownce for State taxes based on the State you live in. How you spend your remining income - rent, credit cards, mortgage is considered a personal choice and is not asked for by FAFSA.</p>
<p>There is an amount of income protection - it is based on number of family members and number of students in college. You can find the table in the EFC formula where the asset protection tables are listed.</p>