<p>I'm applying for college this fall and I have a few questions about financial aid. Here's my background:</p>
<p>Our family lives in an apartment and I'm the only child. My dad makes a fair amount of money; I won't say how much, but I will say that his income this last year exceeded about 200K. My mother is unemployed. My parents don't exactly have a retirement account, but they keep all of their saved money in a savings account and thus, it would be considered liquid.</p>
<p>1) My dad will probably also be unemployed by October. Will this affect our EFC?
2) If I get accepted to X college and I explain that my parent's savings account is indeed their retirement (because they have no retirement account), will this affect our EFC?</p>
<p>I'm just really confused right now, so any help would be appreciated!</p>
It might, eventually. FA is based on income from the prior year - so 2012 income is what will count for the 2013-2014 school year. The 2012 income will likely be too high for you the receive financial aid. But if the unemployment becomes a long term thing, schools *may *be willing to make an adjustment to reflect this.
No. FAFSA is based on Federal rules. Retirement accounts are protected assets. Other savings are not protected, even if you plan to use them for retirement.</p>
<p>Yes, if your father is retired and his income is lower it will impact your FA situation. But remember he will still have o report any income he has - retirement income, interest income, sales of investments etc.</p>
<p>Appeals are done direct to the college. But for FAFSA they can only grant appeals within federal guidelines. Treating non retirement assets as retiremint assets is not something a school is likely (or able for federal aid) to make adjustments for.</p>
<p>Assets generally have a much lower impact on the EFC than income, unless the assets are very high.</p>
<p>Is your dad retiring? If so, any income he gets from ANY sources will be required to be reported on the FAFSA…except for certain untaxed disability income. </p>
<p>You don’t say how much your parents have in regular savings, but if this is substantial a portion of that…about 5.6% will be an expected contribution. If your dad has ALL of his retirement money in non-retirement accounts, this could be substantial.</p>
<p>FAFSA only schools do NOT meet the full need of all accepted students. The schools that DO meet full need take a much deeper look at family finances via the Profile or a school form. This could also include a portion of your primary home equity…so if your family home is fully paid for and has significant equity, this too could add to your family contribution.</p>
<p>Just being “retired” in and of itself MAY not have much affect on your family contribution depending on many other factors.</p>
<p>Only assets in qualified retirement accounts get that exemption. So, no, any designation that your family makes between retirement assets and regular assets isn’t going to fly. FAFSA does ask for the age of the oldest in the family, and that is supposed to give some sort of consideration for retirement.</p>
<p>Once it is confirmed that your father is unemployed, you should let the college financial aid office know. This is a professional judgement thing that each officer can use in deciding how it should be treated.</p>
<p>thumper1, so if I’m applying to schools that meet the full need of accepted students, do I not need to submit the FAFSA to them? Or did I just completely misunderstand you…? Also, we live in an apartment, so we have no assets in the form of houses. The only assets that our family has lies within my parent’s savings accounts.</p>
<p>cptofthehouse, would it even make a difference if we could show that we have absolutely $0 in my parent’s retirement account? Just curious.</p>
<p>You will need to file the FAFSA and any other financial aid forms the schools require. Some use the CSS/Profile, some have their own forms.
I don’t know why your parents have chosen not to save for retirement in protected accounts…? I think it’s too late now. If they just figure that 5.6% of the savings will be needed each year for education, they will see that over all it won’t be like they lose all their retirement money or anything. They will just be sorry they didn’t protect that money in the correct vehicles (401k, etc)</p>
<p>You may need to delay enrolling in school for a year or two to allow time for the family’s income to settle. Right now, your EFC will be too high since your dad earned a LOT in 2011 …and he’ll have earned a LOT in 2012. Even if your dad stops working in October, he’ll still have earned a LOT for the 10 months in 2012.</p>
<p>However, as long as your parents leave their savings in unprotected accts, that will be a problem. </p>
<p>But, it depends on how much they have in savings. About the first $50k is protected. And then after that, about 5.6% is used towards EFC. So, if they have a LOT saved…like $250k+, then your EFC will be high.</p>
<p>One thing they might consider is buying an inexpensive home for cash. They wouldn’t have to pay rent anymore, and FAFSA won’t count that asset.</p>
<p>If your parents have all of their intended retirement money sitting in a regular savings account, and if that amount is significant, they may want to consider investing some of it in an annuity. This investment is definitely not for everyone, but it would permit them to “hide” as much as they need/want to from the FAFSA process. The financial officers at their bank or credit union should be able to help them learn a bit more about annuities.</p>
<p>If he’s leaving a 200k+ job, can we presume he has enough to cover his “retirement?” If he doesn’t, if this isn’t voluntary, if something suggests the family will be in jeopardy and he may never be employed again, that’s one thing. You contact the school, explain, provide whatever documentation- and see what happens. But, when someone has earned at 200k+, there’s an expectation parents will have considered college costs when making spending decisions, over the past few years or more. An expectation that they didn’t fritter it away. The colleges will look at the recent income history (2012, 2011) and run their calculations. This especially hits hard the families where one parents has a rare stroke of luck and the income jumps in the past year or two, then drops back down.</p>
<p>They will also look at any interest income on the current savings, as well. And Profile schools can ask about other assets (boats, cars, whatever) and certain discretionary spending choices (vacations, private hs tuition, etc,) to assess your financial position.</p>
<p>OTOH, if he has plenty socked away, is prepared to leave his job and live close to the way he did before, then he’s presumably got a small fortune. What are we missing here? </p>
<p>Yes it’s complicated. You might want to go to one of the finaid calculators and run a few scenarios through. Maybe the NPC calculators for colleges you have in mind.</p>
<p>Nor do I, but it is rather shocking to realize that, if I did, the return on it at current interest rates would be a measly $15,000 a year! I guess I would just have to cope somehow.</p>