This doesn't sound right.

Paying for College
1

<p>I've spent the day studying income tax reports with my parents in order to figure out what my family's EFC would be according to the collegeboard's Financial aid calculator, but the figures i'm coming up with don't seem to be quite right.</p>

<p>I'd just like to run this by some of you and see if this sounds correct...</p>

<p>Parents' combined AGI: $23k
Parents' assets: $50k
Home Equity: $80k</p>

<p>Parents' EFC: $4,000? Hmm..</p>

<p>Both of my parents are retired, so they will have a fractional income from now on. After medical expenses and taxes were deducted this year, their income was only about $13k, or $6500 per person per year to live off of. Requiring a $4k parental contribution on top of that seems a little excessive according to the IM calculator. Could it be flawed?</p>

2

<p>My first impression was that seemed a little low! but once you broke out the income stream I can understand the concern. The calculators wont take into account all things and wont really break out actual income to 13k like that. You will need to talk to your aid advisor and acknowledge the situation. I dont think you will get much lower than that to be honest, the assets and house value alone make me think 4k isnt bad. But believe me I understand not getting the aid you thinik you deserve. So have a talk with your actual advisor, and dont rely to heavily on these calculators.</p>

<p>Tim</p>

<p><a href="http://www.college-investor.com%5B/url%5D"&gt;www.college-investor.com&lt;/a>
Managing Director</p>

3

<p>7% of $50K = $3500. If they really have $50K in assets, it sounds about right.</p>

4

<p>The calculators do not take into account medical expenses. So add those back into your parents' finances, and the calculations will make a lot more sense.</p>

5

<p>If your family qualifies for the simplified needs test, which it may well, your assets won't be counted against you, and your EFC may well be lower:</p>

<p><a href="http://finaid.org/educators/needs.phtml%5B/url%5D"&gt;http://finaid.org/educators/needs.phtml&lt;/a&gt;&lt;/p>

6

<p>First, I’m only talking about FAFSA and federal financial aid (Pell grants, Stafford loans, work study, etc). FAFSA is a computer program. As calculated by FAFSA, an EFC is a sum of a percentage of four factors-parents income, student’s income, parent’s assets, and student’s assets minus the standardized deductions FAFSA allows. FAFSA doesn’t take medical expenses into its calculation. (Chedva above is right, add the medical expenses back in) When determining federal financial aid, aid officers rely on the EFC as calculated by FAFSA. There are two exceptions to the FAFSA calculation (the automatic zero EFC, and the simplified needs test). </p>

<p>Under the simplified needs test, if the parent’s AGI (as reported an a federal tax return) is under 50K and the parents use a short form (1040A or 1040EZ), then two of the factors (parents assets and student assets) will not be used when your EFC is calculated by FAFSA. FAFSA will automatically exclude all family assets if you meet the simplified needs test. Since your parents AGI is under 50K, the 50K in parental assets will be automatically excluded (home equity is excluded under FAFSA). </p>

<p>Under the automatic zero, if the parent’s AGI (as reported an a federal tax return) is under 20K (this amount was just recently increased) and the parents use a short form (1040A or 1040EZ, or don’t file), then the EFC will be automatically set to 0. </p>

<p>The elephant in the room (as to federal financial aid purposes only) is your parents AGI. At 23K, your parents are close. Is there anyway they could reduce their AGI as reported on federal tax return to under 20K? I understand that under their circumstances 3K is a lot of money, but the trade off could be a lot more federal financial aid. If that isn’t possible, once you get an aid offer, you could try to explain your parent’s situation to an aid officer.</p>

<p>On other hand, if you go to a school that also requires the PROFILE, there is no simplified needs test or automatic zero. The 50K in assets and their home equity could be exposed depending on the school. The PROFILE does, I think, take into account some medical expense. Again, once you get an aid offer, you could try to explain your parent’s situation to an aid officer. Good luck.</p>

7

<p>The FAFSA calculator listed my parents' portion of the EFC to be $500, which is more than okay. The PROFILE calculator, on the other hand, lists the parents' portion of the EFC to be roughly $4,000. This is after all medical expenses were accounted for on the calculator.</p>

<p>I just found it odd that it was so high. The typical income of a family in which both parents are on minimum wage isn't much lower than my parents' retired AGI is now (granted, it was a bad year for medical expenses, but still...)</p>

<p>How lenient does the average college's financial aid staff tend to be? How likely is it that they would make an exception in my parents' case given that they are retired, even though the parents' EFC comes to $4,000? </p>

<p>It just seems strange that the EFC would be that high. Based on the information entered in the calculator, i'm not sure what they would expect the parents to do. Mortgage the house to pay for college? It's not as if it's a mansion: a one-story house built in the 1980s with a garage, kitchen, and bedrooms. It seems silly that they would even include the house in the calculation. I'd think the parents' EFC would be how much they could afford to spare for college, not how much they can borrow in loans to pay for it.</p>

8

<p>They expect the parents either to re-mortgage the house (regardless of "mansion" or not, it has an equity value) or to take a home equity line of credit. The Profile is very up front about counting all assets.</p>

<p>Even though your parents are retired, they still have an income, and that income amount is considered.</p>

<p>
[quote]
I'd think the parents' EFC would be how much they could afford to spare for college,

[/quote]
</p>

<p>The problem with this approach is that virtually everyone believes they can "afford" very little (or at least less than the EFC). And then what you're basically doing is asking some other set of parents to pay for your education and their own kids' education. It doesn't really work that way.</p>

9

<p>
[quote]
The problem with this approach is that virtually everyone believes they can "afford" very little (or at least less than the EFC). And then what you're basically doing is asking some other set of parents to pay for your education and their own kids' education. It doesn't really work that way.

[/quote]
</p>

<p>Did they not try to put money aside for college? Are they able to return to work to help pay for college expenses? Are they disabled? Or just retired? DId they take early retirement, or retire at the ususal age, but started a family later? </p>

<p>My folks were bored in retirement and went back to work. They are still working and are both 72. They have health issues, but my mom was counting the days after her last hospital discharge so that she could return to work!!. </p>

<p>If they are retired and over 65, they really did have a lifetime of working to plan for your college education. Maybe they felt that they would leave that expense to you to take on.</p>

10

<p>Sometimes people are unable to plan for their child's future schooling, sunnyflorida- and we also do not know if mo24's parents started a family a bit later than most.
I am 32 and my dad is 73 (and I am the oldest of 4, so think about it), he did not think of planning for his children's schooling when he was in his 20's and 30's and an unmarried childless fellow.
I give mo24 credit for trying to be a nice honest person and thinking about things now. And, when everything is in full effect- I would not rule out speaking with the head of the fin aid department about how your parents are retired, because you never know. I do agree with the poster who wrote about the profile, I would try to stay away from schools which demand that if you can.</p>

11

<p>However
students can earn roughly $3,000 summers to go toward educational expenses- Some students do take time off to earn money- go into the service or other programs that can pay toward educational expenses.
It just depends how bad you want it.
$4,000, considering they own their own home, isn't bad., also most families with low income, don't have 50K in assets, although I don't think they are going to expect them to contribute even half of that, I assume it is a retirement fund?
We also didn't have a lot of luck getting medical expenses subtracted from available income. Schools will vary though- so it helps to not apply ED and have something to compare.
I didnt' find the calculator to be flawed however, although others have had mixed results, we found it to be pretty close, ( maybe even a little conservative) in what the FAFSA found for EFC</p>