<p>(5.6%/yr)<em>(4yrs)</em>(2 or more kids) can be a pretty big bite for parents trying to save for retirement and put kids through school.</p>
<p>37% to be exact, leaving 63% of your assets for your retirement. Of course that assumes that the CSS doesn’t take a bigger bite.</p>
<p>I read with interest the above stream. I am preparing for the next school year (2011-12) and am considering sheltering some of our liquid assets in a tax-deferred annuity through Fidelity (not a life insurance plan). I am the dad of the student who will be starting his first year at a rather expensive LAC and for this year I will be paying the full amount. I used a Quick EFC calculator on FinAid.org and it seems that as I lower the liquid asset amount the EFC also goes down. I understand that FASFA does not consider annuities in their calculation but Profile does.</p>
<p>I would appreciate any thoughts, comments about this type of shelter and if, in others experience, it made a difference for EFC. I would also like to know if there are any other types of shelters that not only would affect FASFA but also the CSS. Thanks in advance.</p>
<p>^^^For a FAFSA school, your EFC will go down by 5.6% of the amount of the annuity, assuming you will still be over the asset protection limit. </p>
<p>For a CSS school, it will have no effect.</p>
<p>The other thing to remember is that EFC is the <em>minimum</em> you will pay; lowering your EFC does not guarantee that the school will give you free money to make up the difference, unless your kid is at one of the handful of schools that need all need without loans. Odds are any aid you get will be loans, or you’ll be gapped. Take this into consideration before you tie your money up in an annuity.</p>
<p>A single-premium whole life policy will lower your CSS Profile EFC, but again you may be tying up your money with no guarantee of any financial aid but loans.</p>
<p>Thanks for your comments. I would not mind loans as long as they are interest free while my son is in college. Would having the assets in an annuity, increase the chances of getting this type of loan?</p>
<p>You can always get unsubsized Stafford loans, even if you have no financial need, in amounts from $5500-$7500/year depending on what year your child is in. They are interest-deferred - you don’t pay interest while the kid is in school, but it accumulates.</p>
<p>If you have financial need <em>as determined by the school</em> you can get up to $3500/year in subsidized Stafford loans. These accrue no interest until graduation.</p>
<p>Is your kid’s school a CSS school? If so I think the best you can get is unsubsidized Stafford loans.</p>
<p>Yes, we received the unsubsidized loan with interest rates around 8-9% which is not really attractive to us. I was hoping that I could shelter these assets and see if I could get the subsidized loans. But I did not know the max is $3500 per year. Are there any others through the Feds that are subsidized? Yes, the school is a CSS one.</p>
<p>
Not that I am aware of. I thought the unsubsidized rate was 6.8%, though.</p>
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Then any annuity you buy will most likely be counted as an asset, and will not reduce your EFC. You should check with the school to be 100% sure.</p>
<p>Thanks very much. This has been helpful. I will check again on the interest rate. And will check with the school about annuities.</p>
<p>Interesting response I received from the college, I will share with you. The Director of Financial Student Services said that if it is a “retirement” annuity, it is not considered as an asset and would not figure in to the EFC. I asked how does one know if an annuity is considered “retirement” or not. She said if it has the restrictions (cannot withdraw before 59 1/2 years of age without incurring a penalty fee, surrender fees) then it would be considered a “retirement” annuity. I think I will check with CSS about this as well.</p>
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<p>There’s a Perkins loan for low-income families, which is also subsidized, but that’s even more limited than the subsidized loans. </p>
<p>Unless the college itself has generous financial aid for low-income families, or your state has its own grant program, there really isn’t that much money out there even for people with low EFCs. There are very few subsidized loans available federally.</p>
<p>Bear in mind that with PROFILE colleges, they can count whatever assets they want. Some schools do take your 401K into consideration. So before you jump into stashing assets away so they don’t count for financial aid, do some research as to what colleges would just not look at those assets. If your income is such that you aren’t going to get much from PROFILE schools and you are looking at sheltering funds from FAFSA, I can tell you that unless your income is very low, your student is not going to be getting any government grants. Just possibly loan subsidies and really not on that much. Don’t make stashing your money away such a direct goal that you lose sight of other asset management opportunities. Financial aid can be very fickle and even if you don’t have the funds, EFCs which are based primarily on income can still be high.</p>
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<p>That pretty well defines all annuities. I’m not sure that director really has a handle on what is an annuity.</p>
<p>From Fool.com</p>
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<p>Thank you all for your responses. I checked with CSS and they told me that they do not consider “annuities” in calculating EFC. However, they said that the college has access to all the information and they essentially can make a decision on EFC with or without considering “annuities”. The message I take from this is that it is up to the individual college and perhaps there is much variability among the ones that do and ones that don’t. In my case, I wonder if I can trust what the Director is saying since they look at all sources on the CSS.</p>
<p>Cptofthehouse, with regard to income (apart from investments, etc.) from job (s), what is considered high income, or high enough income to eliminate from consideration of a subsidized loan, or others?</p>
<p>Also, spoke with a Fidelity adviser also about their tax-deferred annuities. With theirs, if you are already 59 1/2 or older, no surrender fees, no penalty fees, and one can move the funds in and out of their annuity holdings which are many without incurring any fees. If some is withdrawn for college or whatever, only the gains on the principal are taxed at the same level as one’s income tax % (which by the way for us is more than the current capital gains taxes). So I think they are telling me the same as Scotta.</p>
<p>Hi</p>
<p>we are an older couple - over 60 with a child in HS. our AGI is less than 50k - only my wife works and i am on social security. But we have substantial retirement assets - over 2million in various retirement accounts.</p>
<p>My questions have to do with the CSS profile. My daughter is a smart kid and wants to go to an elite school. While the Fafsa doesn’t even consider retirement assets, i understand the CSS profile includes retirement assets. does not potentially lower their calculation of need?</p>
<p>I also have seen postings in this thread that indicate that some people try to shelter non-retirement savings with taxed deferred insurance annuities. Does that strategy work?</p>
<p>thanks</p>
<p>No one can really say how a CSS Profile school will treat your retirement assets, because they don’t give out that information. They may decide you have overfunded your retirement and adjust your need accordingly.</p>
<p>Same with annuities.</p>
<p>You have a <em>lot</em> of money saved up, don’t be surprised if you are full-pay at every Profile school. If you are unwilling to tap your retirement accounts to pay for school, your best strategy is for your daughter to apply to some schools that are financial safeties (low in cost or will provide substantial merit aid), in addition to the elites. Make sure she has some choices.</p>
<p>Scottaa. is absolutely right. Yes, in theory, it can work. But it works only in very special, narrow cases, and you don’t know if you are going to be in that situation until after you have tied up all of your money in those vehicles with all of the disadvantages of doing so. The reason you and many of us do not have our money in these things in the first place is because they are not such great deals and have disadvantages. Why do you think these things are not popular and out there in the mainstream? It’s not like they are some secret thing. </p>
<p>So you put your money in something that is not a first, second , third or even a consideration except for the fact that you want to shield if from the colleges. Well, if you kid gets into a school that guarantees to meet 100% of need, then you don’t have to report that amount that you have squirreled away in these products. But some of these schools just might ask about those products anyways. They can ask about anything they please. They usually don’t, but there can be exceptions. For example, BC takes 401K type plans into account. Also even a smaller number of schools give 100% of their financial packages in grants, so your kid could get stuck with a bunch of loans. And now you may not have access to that money to pay them or anything else that comes up in that time period.</p>
<p>Most are not going to meet full need anyways and if they do, a lot of the need will be made up of self help such as loans and work study. So you are taking a gamble.</p>
<p>this board has been helpful as to understanding what is involved with college financial aid. But it appears that the elite schools ( high tuition, very select with their own funds) make up their own rules as to how they calculate need. It appears that Princeton doesn’t even bother with the CSS profile! So folks like us with low AGI and high Retirement assets are in really good shape there- as well as with other non profile schools. </p>
<p>Does anybody have the scoop on how the elite ( ivy, patriot league, elite colleges) typically
consider retirement assets - none, a lower percentage than 5.6 etc, etc. I recognize there will be substantial variance but it seems unfair for a school to consider retirement funds the same way they view liquid assets</p>
<p>From what folks have said already, it seems even financial aid officers are clear</p>
<p>thanks</p>
<p>It’s true that Princeton doesn’t use the CSS Profile but that does NOT mean it relies on FAFSA alone; Princeton simply substitutes its own financial forms and requires much of the same info to be reported as the Profile does.</p>
<p>The balance in your retirement funds is asked for on the Profile…not sure if Princeton asks that on its own form (which I understand has very similar questions to the Profile). </p>
<p>No one is really sure how this balance in your retirement accounts is used. It is well thought that the balances are looked at carefully to see if a these accounts have very large amounts invested in them which possibly are being used to divert funds that could be used to fund college costs…but no one really knows for sure.</p>
<p>I guess the simple explanation…if you had an annual family income of $25,000 a year, but had millions of dollars in retirement funds, someone might question this.</p>