<p>Word to the wise: if you do need FA and you sell after your D is admitted to school, the proceeds will bite you during her second year of school, etc.
See if you can find Paying for College Without Going Broke at the library to set up your strategies. Then buy one your D’s senior year and keep it with you for filling out FA forms.</p>
<p>Financial aid is an annual process so delaying until the (tax) year in which she’ll be entering college will really only postpone the effect on her awards until sophomore year (assuming you have a gain that will be included in your AGI). Assets, whether liquid or not, are reported every year unless they are specifically excluded (ie. qualified retirement plans, primary residence). </p>
<p>I have no idea what your situation is but a potentially “better” strategy, if your student is not a junior yet (or would be willing to take a gap year), might be to sell the property this year, as it will be the last tax year that won’t be reported for FA, and invest the proceeds in protected accounts, leaving only what the asset protection allowance will cover in reportable assets. Of course, everyone’s situation is different and you should always do whatever makes the most sense in the overall picture. For example, if your EFC is going to be too high to qualify for need-based aid due to high earnings, it’s a waste of time/energy to worry about it when you could be focusing on merit aid strategies. Good luck!</p>
<p>The FAFSA is only one system of figuring EFC of course. The CSS Profile is used by almost all the top schools and it asks a lot more detailed questions and considers home equity an asset among other things.</p>
<p>The comment earlier about how people with businesses can somewhat control the appearance of their annual income - which is a BIG factor - is one of the areas where I’d like to see more scrutiny. We know someone at Stanford on a full ride whose family is rich - they just have everything owned by their businesses and family farm… home, cars, minimal salary paid etc. Not sure how that could be fixed, but it’s annoying - because again, those of us paying are subsidizing them. (LOL - not that we’ll be paying for Stanford of course).</p>
<p>Agreed, Profile schools may consider home equity…they have the info because parents are willing to provide it and schools are free to do whatever they like when it comes to institutional aid, including preferential packaging. But that doesn’t mean that folks have to be a slave to their EFC. Just as people have choices in how to structure their savings/assets/income, many families have the choice of pursuing merit aid at other schools. Parents have to make their decisions and guide their students with the understanding that schools award institutional aid based on their own priorities, not necessarily based on what’s “fair”. </p>
<p>Except in cases of outright fraud, I think comparing awards to what another student got is pointless. First, it’s rare that anyone really knows the details of another student’s aid application unless they have the family’s tax and asset info and are working with the student to file the apps. Awards are often based on more than what’s apparent on the FAFSA/Profile. So, unless you know what the school is looking for in terms of a student body, how both applicants fit into the applicant pool, and whether there are any extenuating circumstances that have been communicated to the school, it can be difficult to know whether the student is getting awarded based on finances or some other criteria. Finally, when one knows the “sticker price” for their own student going in, it’s not as if they’re being expected to pay more than that because another family received a discount. The top schools are awarding aid from endowments, not from current revenues. </p>
<p>My view is that if a family chooses to fall in love with a school that doesn’t love them back (financially), then that’s a choice…nothing more, nothing less. Imo, it’s a poor choice if it risks the parent’s financial future, but at least they know the deal going in. It’s possible that a lot of the crabbing about what people perceive that others are getting at their expense is the result of buyer’s remorse.</p>
<p>“My view is that if a family chooses to fall in love with a school that doesn’t love them back (financially), then that’s a choice…nothing more, nothing less. Imo, it’s a poor choice if it risks the parent’s financial future, but at least they know the deal going in. It’s possible that a lot of the crabbing about what people perceive that others are getting at their expense is the result of buyer’s remorse.”</p>
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<p>Sk8rmom, although we agree on much in this thread…here is where we diverge. My ‘crabbing’, if you will, is NOT the result of buyer’s remorse. Although I think the cost of college in general is too danged high, I am famously happy with the choices my D’s made. Their undergrad work at OOS flagship schools that allowed them to realize their potential has laid the foundation for their graduate work & then–hopefully–a solid job to be able to fend for themselves & make their mark in society.</p>
<p>Do I think it’s been worth the $25-35K times 4 times 2? Hope so, we’ll see I guess. It was worth the gamble at that price. But I dissuaded both of them from going after the truly high-end privates, the ones you say they would ‘fall in love with and the schools wouldn’t love them back’ because the nut would’ve been way too high based on the sliding scale correlation of income/tuition price, in the $40-50K range per year for sure. And the invasive aspects of the CSS Profile (last filled out in 2005 but I remember it well!) that targets home equity (retirement savings too?–can’t remember) would have probably made hoping for any need-based aid at those schools a moot point.</p>
<p>I’ve done enough research on this to realize that it’s a system with definite loopholes, definitely skewed against savers, and depending on how much one wants to skirt the law and/or game the system, I don’t doubt in the least that progress can be made in that respect. I mean, it’s only NOW that they’re trying to link up FAFSA & the IRS, and from the threads on this forum, they haven’t got that down either. </p>
<p>It’s like what’s been happening in Greece, where doctors report minimal income. Why? Because tax fraud is not enforced, and they can get away with it.</p>
<p>The merit aid route is the way to go-if your child will qualify for it.</p>
<p>If not, and you make enough or have saved enough to be considered by the college as able to pay whatever they determine you should be able to pay-then that’s your bill.</p>
<p>The best thing to do is have your child find a safety school that they can do well at.</p>
<p>jnm, I definitely didn’t mean to say that you, or anyone in particular, was experiencing buyer’s remorse. There are lots of other reasons to complain about the cost of college and sounds like you did say no, and very early on, to the schools that you knew to be too costly for your family. I only meant that sometimes people are talking about what they feel others have cheated them out of, even if they don’t know the full story, simply because they feel financially stressed, or “unloved”, to begin with. </p>
<p>I’ve never advocated, or practiced, any form of fraud and assume that those who craft laws and procedures exercise a reasonable amount of care. In other words, I don’t assume that, just because something works to the advantage of another parent/taxpayer, it’s a loophole in the system. Researching tax and financial planning issues to avoid paying more than is truly necessary isn’t illegal or immoral and the same information and tools are available to everyone, although not all will choose to use them . Exercising diligence is both commendable and a duty that parents have to safeguard their family against financial ruin and reminds me of the famous analogy used by Justice Brandeis to explain the difference between tax evasion and tax avoidance:</p>
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<p>Recently, there was an update to an older thread on the FA board by a parent who negotiated - yes, negotiated - his way into a preferential package at one or more of the Ivies. Although there wasn’t financial need, he didn’t simply accept the initial offers and kept at it until he was satisfied. Fortunately, he has a very bright son with other talents/factors, but I thought that his update was a good reminder to all of us that the art of negotiation can be a valid and powerful tool when used correctly and that, ultimately, the decision of how much to pay for college still rests in our hands. With that in mind, I’ll continue to watch for the free bridge.</p>
<p>Cool, sk8rmom, we’re on the same page. </p>
<p>I did experience a little bit of that ‘negotiation’ thing with D2 and her #2 choice school. It was a mid-level private, fairly highly regarded, and she had already received a merit half-ride. I kept up with the EMails saying, well, we really need you to do better if possible, they would do it, and I’d ask for more & they’d give it, until it got to the point where I could tell that despite the killer merit aid it was not that great a fit for D2, her heart really wasn’t into attending, and I thought it unfair to keep stringing the school along. Her heart was at UW-Madison, and while it was at the top range of my financial pain threshold, that’s where she ended up & has never looked back.</p>
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<p>My impression is that CC represents a pretty affluent swath of the
US. It’s not everyone but only half go to college and those of means
have the motivation, desire and understanding of how to do college
with their kids.</p>
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<p>I filled out a FAFSA for our son’s first year. EFC was way over COA
for the most expensive privates out there, almost twice. I haven’t
bother to fill out anymore FAFSAs. My income isn’t that great but we
have a lot of savings.</p>
<p>BTW, by any objective measurement, we have no need for aid. It would
have been nice (who doesn’t like a discount?) and son did win a bunch
of small merit scholarships (which will be paid back).</p>
<p>Yea, I filled out a FAid application for the kids when they were in HS & our income was lower. It came up with a sky-high EFC, more than tuition for both kids. I tried a FAFSA calculator when S was a HS SR & again it was higher that COA by a lot. He matriculated at a good U which gave him 1/2 tuition plus and it worked out well for him. D followed him as a transfer & we didn’t bother trying to check FAFSA. It would have been nice to have gotten anything off the full freight she was paying, but we’re just happy it looks like she’ll be graduating in a field she loves after 3.5 years there. I guess the .5 year could be seen as a “scholarship.” ;)</p>
<p>"The government has a good thing going right now with Parent PLUS loans at 7.9% when they can borrow at basically zero interest. Heckuva return on their money lent out. "</p>
<p>The govt. said they wanted to get banks out of the business of making a profit on college loans, but with these outgareous interest rates, they savings are not passed on to the students and their families. The Department of Education has become little more than a national bank and the difference between market rates and these inflated rates for school loans is nothing more than a massive education tax on the middle-class.</p>
<p>Glido, couldn’t have said it any better myself… :)</p>
<p>Let me posit this now–IF there is going to be an eventual change in this interest rate spread between market & PLUS rates, which party/election would give us the better chance of this happening? I’m traditionally conservative but I cannot say with any certainty whatsoever that the GOP would do anything more than the Dems.</p>
<p>Maybe none of the above is the correct answer.</p>
<p>Maybe I am wrong but I don’t remember the FAFSA accounting for geographical considerations. A family living, and surviving, in say NYC, would typically have a higher income than a family living in rural Oklahoma, for example. Say that NYC family has an income of $150K, but expenses are HIGH in NYC so there is no “extra” money vs a family in rural OK making $40K with low expenses. Could you even live in NYC on $40K/year with a family of 4? On paper the OK family looks “poor” to the FAFSA, but they might have a $500/month house payment, etc. vs the $6500/month apartment rent in NYC. They OK family would qualify for next to no EFC where as the NYC family would be expected to pay full costs or close to full costs. Is this correct?</p>
<p>It really is like a tax – isn’t it weird that the interest rates are high and the debt is non-dischargeable at the same time? Non-dischargeability is an extraordinary advantage for a lender to have. Usually high rates exist to offset a high risk of default. These lenders get the best of both worlds, which means the families get the worst of both worlds.</p>
<p>I wonder what sort of downward pressure the market would exert on college costs, if the prices weren’t undergirded by excessive amounts of debt. The debt is taken on, in many cases, by families who are unrealistically frightened of what may become of their kid if they don’t, or feel strongly about keeping up with the Joneses, and are maybe not financially sophisticated enough to see what kind of a pickle they’re putting themselves in.</p>
<p>“The rate is high” is relative. Student loan rates are still under what they were when I went to college.</p>
<p>I don’t think the typical American is that financially sophisticated. It doesn’t take much sophistication though to live within your means-something many people are unwilling to do. Please understand I am not talking about unexpected situations wiping you out-I am talking about funding current needs through use of easy credit.</p>
<p>The main point of the article was how parents are taking on more and more college debt and won’t have enough money to pay it back and/or fund their retirement.</p>
<p>People get all riled up about college costs for good reason-do you think the average American understands how much it will cost to fund their own retirement? </p>
<p>In a perfect world everyone could go wherever they wanted but as we know this is far from a perfect world.</p>
<p>We needed to take finances into account as most families do. My son chose one of his most affordable options and is doing just fine. My daughter will do the same. It can get very emotional making this decision but in the end I think he learned a lot about making good choices and how debt can be a good or bad thing-it all depends on how it is used. He chose the option that left him the least debt-after we went through the costs. He was fortunate that both his parents understand these issues-many kids don’t get this kind of information. </p>
<p>This is a very frightening situation.</p>
<p>Steve MA, yes, but prime rate is at historic lows. I would bet that student loan rates were not as far above prime, proportionately, if they were nondischargeable.</p>
<p>fieldsports–I am no expert on interest rates but when I was in college the guaranteed student loans were at 8%, other loans like the SELF and PLUS loans were more like 10-12%. Mortgage rates were at 15+%. Currently mortgage rates are artificially low. We were also earning 5-6% on our passbook savings accounts back then. Even back then, non-repayment of student loans stayed on your credit report for a very long time. I know several financing companies that would not loan money to people that did not pay back student loans, period. The market itself took care of the “payback” issue. Not all companies did that, but enough did.</p>
<p>There is a vast difference between staying on your credit record and non-dischargeability.</p>
<p>Kayf-I realize that but it did have a major effect on your ability to borrow money…home loan, car loans, etc.</p>