<p>I submitted a parent contribution appeal to UC Berkeley. My mom was hospitalized in 2010 and my sister was hospitalized this year and we are still paying off these bills (about $9000 total, but insurance is covering some).
I also wrote about how my family's equity line is basically all used up toward our mortgage, and how my sister is also a college student.</p>
<p>Lo and behold, I got back an e-mail from Berkeley's fin-aid saying that my dad didn't report money that he had voluntarily contributed to his retirement account.
They ended up taking away more than half of my grant. They also ignored everything else I had written in my letter about my family situation.</p>
<p>I talked to my dad and he said that the money he had contributed to his retirement account was listed as part of his income in 2010. Was there another line on the FAFSA where he was supposed to report this contribution?</p>
<p>Also, is a school allowed to take away my grant in the middle of the year? I mean... before I SIR-ed to Berkeley I was expecting to receive a certain amount of money, and by them taking away more than half of it, it's like a bait & switch...</p>
<p>Last of all, why in the world would they take away money when I am appealing for MORE?! I'm near broke and might need to withdraw at the end of this year! Help!!!!!</p>
<p>There is a line on FAFSA that requires you to report any money contributed to a retirement account. The income reported on FAFSA is the AGI, which excludes IRA and 401K contributions (they are what is called a “for AGI” deduction meaning they are deducted from gross income before calculating the AGI). FAFSA does not allow income to be reduced by contributions to retirement accounts so requires these contributions to be reported separately so they can be added back to the AGI. If they were not correctly reported, then your aid was based on incorrect information, so they are perfectly within their rights to adjust it accordingly.</p>
<p>As far as an adjustment for medical expenses, this is at the schools discretion. Of course, any expenses covered by insurance will not be eligible for an adjustment. Expenses not covered by insurance would have to be supported by documentation and exceed the amount for medical expenses already included in income protection allowances in FAFSA (this will vary depending on your family size). </p>
<p>When an adjustment for medical expenses is approved, the school can reduce the income reported on FAFSA and a new EFC is produced. It is not a $ for $ change. We had an adjustment for medical expenses my daughter’s 1st year of college. As far as I can recall, our medical expenses were around $12,000 and our EFC went down around 2000.</p>
<p>It sounds as if either your medical expenses did not qualify for a reduction in EFC, and/or you unreported retirement contributions were high enough that they more than offset the medical expenses and caused your EFC to increase.</p>
No, it’s not a bait and switch. The data you provided was inaccurate and your aid was based on that. Once they realized that required income (retirement contributions) had not been reported, they were quite within their rights to adjust the aid to reflect this. </p>
<p>All schools will take the retirement contributions into account when awarding aid.</p>
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No, the AGI excludes retirement contributions (unless they are to a ROTH), so they would not have been included in the AGI reported on FAFSA. That is why FAFSA asks for the information in a separate question.</p>
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<p>These items are untaxed income and are added back to income by FAFSA.</p>
<p>The only thing you can do is try and verify the numbers and clarify the tax situation with your dad’s contribution to his retirement account. One can hope the numbers fall back into place in the case of an error.</p>
<p>This might mean gathering copies of all the relevant paperwork (tax returns, etc) and visiting the FA office in person to politely, calmly, inquire for clarification.</p>
<p>However, for mid-year grant cancellations because of false FAFSA information–there is no helping that. These grants are taxpayer monies given to qualified recipients. If you file your taxes with false (even if unintentional) numbers and got too much money back from the IRS, you can bet they will ask for the money back. Same with college grant monies from the government. It would be nice if once awarded a grant that it was “guaranteed” even if mistakes were discovered later, but for basically all government college grants, they can be rescinded mid-year. I may even recall a case of a student being given a bill for monies already dispersed and spent. Same for college sponsored grants. They have limited funds and formulas for which students have “need”–and the colleges will readjust when new information comes in.</p>
<p>As for a 9K medical expense making a big difference in a FA package, I don’t think it generally would make that big of an impact. In other words, I am not surprised that a UC is unable to gift you more grant monies for that particular expense. Even at a very flush private college the response would be minimal and unlikely to replace even a half or a quarter of that income loss. The colleges have limited funds and have to draw the line somewhere, as hard as that might be for some students.</p>
<p>I suggest you plan as if the grant money isn’t coming back. Can you get a part-time job? Can a parent contribute more? Perhaps you may want to see if you can take out an Unsub loan or if your parent can take out a Parent-Plus loan. </p>
<p>Can you reduce expenses? Living off campus is cheaper than the dorms, for example.</p>
<p>If you really can’t make it, then you may have to consider some radical choices, such as a year at a CCC and try to re-transfer back into UC Berkeley. It would save you an entire year’s worth of costs. Etc.</p>
Did you provided documentation supporting medical costs uncovered by insurance? They won’t make an adjustment based on just a letter. You would need to provide proof, medical bills your family had to pay for that were not covered by insurance.</p>
It does not sound like a tax error. It sounds like a mistake in filling out FAFSA. 401k and (non Roth) IRA contributions are already *excluded *from income in the AGI, which is what is reported on FAFSA. FAFSA requires them to be added back to income, hence they should be reported in question 92 on FAFSA as untaxed income.</p>
<p>Okay, so supposedly what happened was that my dad reported the retirement money as part of his Adjusted Gross Income, but he did not include it in the Untaxed Income.
The financial aid officer then recalculated my grant by keeping my dad’s AGI the same, and by changing the Untaxed Income. If we then deducted the retirement money from his AGI, it should all add up then, correct?</p>
No. You have to report the AGI as it appears on your tax return. I think you are misunderstanding. The retirement contributions are *already deductions *to AGI. They have already reduced the AGI. The AGI is what is reported on FAFSA. The contributions are then also reported on question 92 on FAFSA and are added back to the AGI. Unless your dad did his taxes completely wrong, it sounds like the FA officer did it correctly.</p>
<p>For instance - if your Dad’s gross income was $50,000 and he contributed $5000 to a retirement account, the $5000 would be *deducted *from gross income on his tax return and his AGI would be $45,000 (50,000-5,000) on his tax return. The $45,000 would be reported on FAFSA as AGI. The $5000 would have to be reported as untaxed income on question 92 on FAFSA. It would then be added back to the AGI, bringing income back up to $50,000 (45,000+5,000). for the EFC calculation.</p>
<p>In short, FAFSA does not allow income to be reduced by contributions to retirement accounts.</p>
<p>Okay, I’m looking at my dad’s documents and it seems as if his AGI includes the money he contributed to his retirement fund. I don’t see anywhere on his 1040 form that indicates this money has been deducted from his gross income and accounted for in his AGI.</p>
<p>I think that the retirement contribution money never shows up in the AGI (or the 1040) to start with. It is not part of the amount that goes into AGI from the W-2 form (considered a “pre-tex” contribution – I don’t have a W-2 right in front of me, but essentially that money doesn’t get added into the AGI and then subtracted out again – that pre-tax contribution never goes into the AGI). So it isn’t ever included in line where the W-2 info is included in adding up the AGI.</p>
<p>If he did a regular 1040, the gross income is reported on line 7. Other income is reported on lines 8-21. All income is totaled up on line 22 - total income. </p>
<p>Contributions to IRAs are reported on lines 28 and 32. Lines 23 - 35 (which includes lines 28 and 32) are deductions from income. Lines 23-35 are totaled up on line 36. Line 35 is deducted from line 22. The result is line 37, the AGI. </p>
<p>Therefore retirement account contributions have been deducted from the AGI. </p>
<p>Line 28 and 32 items must be reported in question 92 of FAFSA. They are added back to the AGI.</p>
<p>(if he did a 1040A then:
the gross income is reported on line 7. Other income is reported on lines 8-14. All income is totaled up on line 15 - total income. </p>
<p>Contributions to retirement accounts are reported on line 17. Lines 16-19 (which includes line 17) are deductions from income. Lines 16-19 are totaled up on line 20. Line 20 is deducted from line 15. The result is line 21, the AGI. </p>
<p>Therefore retirement account contributions have been deducted from the AGI. </p>
<p>Line 17 must be reported in question 92 of FAFSA. It is added back to the AGI.)</p>
<p>On line 32 of my dad’s 1040 form it reads $0.
However, on his paystub (I think it’s the W2)… in box 12a, there is a letter D followed by the amount of money he contributed to his retirement fund.
Should this X amount of money have been written in on line 32 of 1040?</p>
<p>Actually the data I gave you is more relevant to private IRA contributions. As intparent said, contributions to company retirement plans are already excluded from the gross income reported on the tax return so are already excluded from the AGI (good catch by intparent - I always forget 401ks are handled differently to IRAs as we have not had one in a few years). But the information in box D of the W2 should be reported on FAFSA as untaxed income. It is then added back to the AGI to give the income used to calculate the EFC. </p>
<p>Even though the income is excluded from the W2 income, FAFSA does require it, and it is added to the AGI to calculate EFC</p>
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<p>The net effect is - the amounts in box 12a that are marked D should have been reported on FAFSA. The FA officer has it right. </p>
<p>It was obviously a genuine mistake on your part when you initially filed FAFSA and was not caught by the FA officer at that time (I assume you were not selected for verification? It should have been caught then if you were). When you submitted paperwork asking for a special circumstances adjustment, they than had to take a closer look at all your paperwork and the error was then discovered. having discovered the error, they are required to correct it.</p>
<p>This is not something the school is doing differently to any other school. It is the way the FAFSA formula is designed. Although balances in retirement accounts do not have to be reported, current year contributions are added back to income. it will be the same at any school.</p>
<p>Did you provide sufficient documentation supporting un reimbursed medical expenses? If not, then do that now. maybe it will offset the retirement contributions a bit.</p>
<p>The amount reported on the W2 in box 12d is actually NOT part of your dad’s income. This money was contributed to the 401K pretax. That is why it is on the W2 separate from the income earned … the actual income earned was $5000 more, but the IRS allows money to be put into a 401K and excluded from the income reported on the tax return. It is for this reason that it has to be reported on the FAFSA as untaxed income. I know it seems unfair, but the financial aid regulations assume that this money could have been contributed for college costs & they consider using it for retirement to be a choice.</p>
<p>As for the medical bills, there is an allowance built into the FAFSA EFC formula that includes an amount for medical. Medical bills can only be considered if they are more than the medical protection allowance. If you do have bills in excess of the allowance, only the excess amount can be considered, and then it is removed from the AGI … it doesn’t actually reduce the EFC directly. Also, the bills have to be paid in the current year, and they have to actually have been billed (pending bills cannot be considered, nor can bills paid last year that set your family back). All of this is per regulations.</p>
<p>I understand how awful it is to have this happen. Unfortunately, once you requested a special circumstances review, the aid officer had to make the changes. They probably also added back the Making Work Pay credit (few people realize they are supposed to add this to untaxed income, but the aid officer has to do it if she sees it on the tax return). No aid officer likes to do what was done to you … but they have no choice.</p>
<p>Okay, after reading over all the replies I understand now. My dad and I made an honest mistake while filling out the FAFSA. We didn’t mean to omit this information.</p>
<p>Now about the medical bills— I did some research and it seems that IPA is $26,680 (I have 5 people in my family, 2 in college, including me).
So 11% of that, for medical expenses, is a little more than $2668.
Does this mean that if my family’s medical expenses in 2010 (or is it 2011? I’m so confused) are greater than ~$2668, we can qualify for an adjustment? </p>
<p>Also- what qualifies as medical expenses? Eye doctor appts? Co-pays? Prescriptions? Orthodontic treatment?</p>
<p>Thanks so much for your help, especially swimcatmom’s!</p>
<p>When we did one, they told us to include everything - dental, medical, prescription (our prescription costs are very high), copays, dental, even our insurance premiums, and they would go through it and decide what was eligible or not. We could not include costs that were already paid for by our insurance, and they have to be expenses not already excluded from the AGI (for instance some self employed people may have already been able to deduct some medical insurance costs before the AGI).</p>
<p>Your medical bills are $9000 total…but you say that insurance is covering some. The only medical bills considered in a special circumstances situation are expenses that are NOT covered by insurance.</p>
<p>You mention that your home equity is being used for your mortgage? What does that mean? If this is your primary residence, the mortgage AND the home equity loan are not even mentioned on your FAFSA. They are not relevant to the financial aid formula.</p>
<p>If you filled out your FAFSA correctly, the school already KNEW that your sister was a college student…this was not new information.</p>
<p>Re: the retirement contribution…if this was pretax retirement contributions, your dad would have to indicate those as Swimcatsmom noted above. They were NOT included in your dad’s income…but they were income for the year. They are added back in on the FAFSA form…put the right number (as Swimcatsmom noted above) on the FAFSA in the spot noted.</p>
<p>If you have information that shows significant unreimbursed medical expenses from 2010 (which is the year that your FAFSA is based on for this school year), then by all means present it to the financial aid office. Any expenses being paid in 2011 MIGHT be considered next year when you file your request for a special circumstances consideration.</p>