<p>My daughter started her first year of college last year. By the end of her second semester, she was feeling mentally drained from the academic atmosphere. She felt unprepared for college and also felt she needs some time to mature before spending thousands of dollars on something she’s yet to find meaning in. </p>
<p>This past summer, she finalized her plans to take a break from college this semester. She’s hoping this break would somehow help her gain some momentum and meaning for her to do better when she does go back (she has a subpar GPA after two semesters). </p>
<p>This fall is her first semester off. Today, she’s thinking of extending her break to a full year (possibly even two years) to work and pay off existing debt and to think about her career choices. Knowing her, I totally support her decision and have no doubt about what she wants to do.</p>
<p>What does worry us is her financial aid for when she is ready to go back to college. Her first year of college was financed through <em>need-based</em> scholarships and grants; we fear that she might not be eligible for such aid when she returns because of the amount of income she’ll earn after working for one or two years. Currently, she plans on using majority of her earnings to pay off debt and we're second guessing this plan because of her questionable financial aid eligibility for when she does return. </p>
<p>We are completely clueless about financial aid for students who take a break and were wondering if someone has any tips and suggestions for her situation. Our goal is to properly prepare for her return to college after her break from a financial standpoint. If she's unable to afford going back because she has to pay more out of pocket (money she might not have because of debt payments), it might mean no college and degree for her for a while until she saves up.</p>
<p>What can she do to maximize the same financial aid “benefits” for when she does return to college? If it’s unlikely to do the above, what can she do to prepare for an increase of “out of pocket” funding for her education? (Things like saving a certain amount per pay check for use to pay for tuition or other college expenses [how much?], limiting income, etc) Would she be in a better position to save all her money instead of paying off debt?</p>
<p>Your daughter needs to ask at her school. She will be applying for a leave of absence, right? Her school should be able to answer questions about her financial aid when she returns. </p>
<p>One thing…any money in HER name on the date filing her financial aid application will be assessed at a 20% towards EFC. In addition, her income over. $6000 for the year will impact her EFC. </p>
<p>Still, in my opinion, there is nothing wrong with her spending some of the money she earned on her college costs.</p>
<p>If she earns more than $6k per year, then she needs to give you some money for you to save to put towards her later increased EFC. Money saved in HER name will hurt her EFC even more…so if she gives the money to you to save in YOUR name for YOU to pay her costs, then her savings won’t hurt the EFC as much. </p>
<p>The issue would be the double-hit. The hit from earnings above $6k…and the savings in the child’s name to pay for the increase in EFC…so, save it in your name.</p>
<p>Also, she needs to check with her school as to whether they will still give her the same aid pkg after 1 or TWO ears. TWO years may be an issue unless there is some serious health issue. Even with the adjustment for her bigger income, the school may not give as much to a student who has been gone for two years (or even one year).</p>
<p>Likely, she will mature this semester while working and be ready to go back in the spring or next fall. </p>
<p>There is talk in the senate about increasing the income protection allowance for students. Here are some details: (who knows if/when this bill would be passed though). Just something to be on the lookout for in the future. </p>
<p>“Legislation introduced on Friday by Sen. Tammy Baldwin (D-WI), co-sponsored by Sen. Tim Kaine (D-VA), would increase the income protection allowances (IPAs) for students in Federal Methodology (FM).
The Working Student Act (S. 2796) would increase the IPAs for the 2015-16 award year to:
$8,451 for dependent students (2015-16 IPA currently set at $6,310)”</p>
<p>^^
That is all fine, but who knows when it will pass.</p>
<p>And I wish they would have ASSET protection for students. A student should be able to have about 2000 in savings w/o any affect to EFC. By not allowing that it just encourages wasteful spending and work-arounds.</p>
<p>@mom2collegekids I’m with you on that one. Another financial aid counselor at a university I used to work at told me that if a student’s savings was going to be spent that year on other expenses, simply to not report it. I am sure that is technically illegal but it is just as easy for a student to cash out those accounts regardless to prevent from not having to report. </p>
<p>I just think it is nuts because many college kids have cars, etc, and they SHOULD be encouraged to have some savings for emergencies…car repair, what-have-you. Yet, we have a silly system that discourages that. Instead it encourages these kids to take the money and buy new clothes or whatever …the day before they file FAFSA. Nutty.</p>
<p>Sorry for the late reply, I had some technical difficulties last week. We’re still hoping to get an idea for what we should do; here’s a reply to your questions and comments. </p>
<p>She did apply for a leave of absence but they are only able to grant her a one semester leave (she’ll need to apply for readmission if she stays out of school for more than one semester). Her reason for leave isn’t because of a serious medical issue, she just feels that she needs some time away from the academic atmosphere for a while.</p>
<p>We’ve actually asked the school about financial aid for when she returns. The best answer they could give us was “it depends on funding available for that year” (public state university). Very frustrating and totally crushed our hopes for estimating how much she should save, etc.</p>
<p>She is working full time and will no doubt make more than $6,000 per year; her expected salary per year at her current job will be between $27,000 and $30,000. She’s also contemplating on a part time job so it might be a little more than that. My husband and I make a little less than $70,000/month and have an older son in college too. </p>
<p>With the above expected salary for a year (or two) max, how can we calculate the EFC for when she returns? We are a family of five (youngest won’t be attending college for a few more years). I don’t know how EFC calculations are made but I’m wondering if her earnings and our earnings will be added together and will be calculated as if we’re a family making $100,000. </p>
<p>Okay, so our first step would be to have her transfer her earnings under my name. Out of her yearly salary, can someone tell us a safe amount that might be able to go towards paying off her current debt and an amount that she should be saving (under my name) to cover any gaps?</p>
Mom2 – I’m curious in learning why the above is the case (other than the obvious increase in ability to pay because of working). Does their rationale for “less financial aid for students who take a year or two off” extend to more than just having more money from working (as in my daughter’s case)? </p>
<p>
I don’t know, as of right now she’s pretty set on a year of leave. Seeing how much it will hurt aid now, I hope I’ll be able to coax her back in to school before that.</p>
<p>Thank you for sharing that, kgos16. I do agree with the both of you regarding comments about the current system discouraging savings etc for students. We wouldn’t be in this position if it weren’t for these restrictions! </p>
<p>My daughter was hoping to purchase a car with her earnings to bring with her to college but it’s sounding less and less reasonable if she’ll need to save most of her earnings to cover gaps. </p>
<p>With an income like that, need-based aid will never happen.</p>
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<p>Which would constitute fraud. Have her put savings in her name in a 529 account that she owns, and it will be legally considered a parent asset for FAFSA purposes. Plus, she gets the benefit of tax free growth to use towards qualified education expenses.</p>
<p>MiddKid86- Err, getting late here, but I think you know what I meant; $70K/YEAR.
LOL, we all can only dream of making that much per month. </p>
<p>She isn’t able to “gift” the money to me so I can pay her expenses (as mom2 suggested above - <strong><em>please correct me if I interpreted it wrong</em></strong>)? </p>
<p>Unfamiliar with such account. Will do some google-ing and get back to this page with some questions. </p>
<p>If she takes time off to work and earns good money, why do you object to her using it to pay for college? Her FA package for this year was just that, for THIS year based on the financial situation of your family this year. If your family, and she’s part of your family, makes 30% more next year, the FA award is going to be calculated based on those figures. Yes, you can do some tax and FA planning, but the income is there.</p>
<p>She’s making life choices. Work or school, and she’s chosen work as being best for her now. I don’t think it is fraud to move the money to the parents’ accounts, especially since she’s an adult working and living in the household, but she’s still going to have earned that money, and it is still going to be income on the FAFSA</p>
<p>If the purpose of “move the money to the parents’ accounts” is to present a better picture for FA consideration, than it’s likely to be considered a fraudulent transaction.</p>