I’m trying to figure out the optimal time to submit the financial aid forms. I believe there are two factors causing my uncertainty:
If I file after Jan 1, I can lower my assets by a decent amount (say $30K) by paying some items early in the year. One example of this would be to withdraw college tuition money from 529 plans. I think that should certainly weigh heavy in this decision.
My son’s college says if I submit the financial aid documents before Jan 1, they call it the “preferred January 1, 2017 deadline”, I will be notified by Feb 1 of the financial aid award. Getting this info by Feb 1 does not really mean anything to me. However, I have heard others say that filing early can potentially get you a bigger award because they have a bigger pool of money to distribute funds. Maybe the “preferred” date has a relationship to size of awards. I don’t really believe that, but I’m open to opinions.
I personally am more inclined to file after Jan 1 but as close to Jan 1 as I can. That way I can lower my assets a bit but still be relatively early in the process to insure they still have sufficient funds. I’ve always been dubious that colleges will run out of money any time before their final deadline (March 1 in this case). After the deadline, I can certainly see a lower award.
Thoughts? Any other considerations to filing before Jan 1?
IMO unless you are very needy and might qualify for some limited grants like SEOG filing early won’t really make a difference. Are you relying much on the school’s FA?
Limited financial aid funds included federal work study, SEOG and Perkins Loans. These are for lower income applicants. All have limited funding per campus. But really…it doesn’t sound like you are low income. Would you be eligible for these anyway? Need based aid is largely based on income.
In my situation, I will receive some need based aid from my son’s school. Partly because I have another older child in college. Partly because the school is good on financial aid. I don’t expect to receive anything that’s based on very low incomes.
If your kid’s school guarantees to meet full need for all accepted students, the date of your application won’t matter at all. If the school does not meet full need for all, YMMV. It is possible that earlier applicants will get more aid than others. But in your situation, you would have $30,000 additional assets, which would add $1600 or so to your family contribution on the fafsa. For Profile…it’s anyone’s bet.
Is that $1600 going to make a difference in your kid’s ability to attend this college?
I would say with 2 kids in college next year things will be a financially tighter, but no, it would not make a difference in his ability to attend this college. To be honest, the real impact would come if I ran out of money for my youngest child. If that happens, I’ll figure something out. As far as I’m concerned, I’m just trying to make the most prudent decisions at this point.
I haven’t thought everything through. I’ve been thinking about the 529 a bit. For example, I don’t think there’s anything stopping you from withdrawing all the 529 money you plan to use for the whole year on Jan 1. I can pay my older child’s Spring semester (may even be able to that in Dec) right away. Money for the Fall 2017 will eventually be used for her tuition, but money is fungible. Once it’s in my account, I can pay bills with it or whatever.
529 distributions must be made during the same tax year for which the expenses they are meant to cover are paid. For instance, taking the money from the 529 in December for the student’s upcoming spring semester but waiting until the following month (January of the next year) to pay the college for that semester would be a mistake.
I didn’t mean to imply that. If I want to pay Spring 2017 now, I believe I can withdraw the money now and pay it in Dec. Alternatively, I can withdraw the money Jan 1 and pay it in Jan. The part that I think is ok, but I’ve never heard discussed is to withdraw money Jan 1 that you will pay in Aug 2017 for Fall 2017. Also, what can you do with that money in the interim?
@BelknapPoint I read your reply and edited this post.
To the OP…
Do you have other assets you can use to prepay something? Savings that can be used to pay bills, for example?
I’m just not sure what you hope to gain here. Like I said, need based aid is primarily based on income. And remember, it’s your income from 2015 that will be used for the 2017-2018 FAFSA and Profile.
Not saying that you implied anything; just telling you the same-tax-year rule in case you weren’t already familiar with it.
Absolutely.
Yes again.
Yes, this is fine.
Good question. Wherever you put it, it will probably still be a reportable asset for financial aid purposes, and any earnings on it will probably be subject to income tax (which would not be the case if you just left it in the 529 until you needed it to pay the qualified expenses).
^ I assume the last point is talking about earnings from Jan 1 till I use it. Sure, if I invest it. How about prepaying your mortgage with it? That way you actually gain on the interest.
Thumper - you’re probably right. I think my comments in this conversation are really me just thinking out loud. I tend to think of alot of things but conclude that ultimately it’s not worth the hassle.
Is your child’s school a school that also uses the Profile? If so, does the college use primary home equity in their formula to compute need based aid? I’d so…how much? If so…you might not gain much by paying off part of the mortgage as your equity would be more.
Sure, you could do that, but you would obviously need to have replacement funds when August rolls around and it’s time to pay the fall tuition. Is prepaying part of the mortgage worth the 529 earnings you would give up? Only you can answer that question, based on your mortgage details and 529 investment strategy.
Thumper - it is a full need school, although sometimes I think they play games with that.
BelknaPoint - I guess you could do that multiple ways. One way is to prepay the mortgage. The other way would be to make a year’s worth of regular payments in advance and then take the money you would’ve used for the mortgage payment to pay the school. Or…maybe prepay some other bill for the year. I’m just saying there are certainly things you can do with the money before filing the financial aid forms. Another option is just put the money into your checking account making almost nothing.
Again, just making the point here. I tend to favor simplicity in my actions.
There are lots of things you can do with liquid assets before filing financial aid forms: pay off (or down) a mortgage, pay off a car loan, pre-pay major expenses that are unavoidable such as property taxes, etc. But taking money out of a 529 before you need to use it for qualified expenses probably won’t do you much good, unless the circumstances line up just right. For instance, let’s say your property taxes are due in April and October and you want to make both payments in March before filing FAFSA but you don’t have that much sitting in checking or savings then, but will be receiving a big bonus/commission/whatever in July. Take the property tax payments from the 529 and make the payments in March, then file FAFSA with X thousands less in reportable assets, and after the bonus/commission/whatever is available in July, use it to pay fall semester expenses.
Why would you do that? Money in your checking account will count just the same in the financial aid analysis as money in the 529 account.