FAFSA Rules [Free Application for Federal Student Aid]

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FAFSA Rules [Free Application for Federal Student Aid]

Postby Jerilynn » Wed Jan 16, 2013 12:41 pm

Went to a seminar at my son's HS the other day. I was shocked :shock: , really shocked :shock: when I found out that in the case of a divorced couple, ONLY the custodial parent has to supply $$$ information.
I didn't believe the woman, so I looked it up and dad gum it, she was correct.
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Re: FAFSA Rules

Postby jasonlitka » Wed Jan 16, 2013 1:27 pm

Heh. So the kid is ready to apply for college, parents get divorced, lower-income parent gets custody but they continue to live together, parents get remarried after college is done. Sounds like a plan to me.
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Re: FAFSA Rules

Postby Jerilynn » Wed Jan 16, 2013 8:03 pm

jasonlitka wrote:Heh. So the kid is ready to apply for college, parents get divorced, lower-income parent gets custody but they continue to live together, parents get remarried after college is done. Sounds like a plan to me.


that would be considered 'gaming the system', I wouldn't recommend it. ;)
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Re: FAFSA Rules

Postby FordBiggs » Wed Jan 16, 2013 11:42 pm

Jerilynn wrote:
jasonlitka wrote:Heh. So the kid is ready to apply for college, parents get divorced, lower-income parent gets custody but they continue to live together, parents get remarried after college is done. Sounds like a plan to me.


that would be considered 'gaming the system', I wouldn't recommend it. ;)

Still very interesting plan though :wink: this kind of reminds me about the thread where (because of the newly passed tax laws that only affect single filers earning $400,000 and married joint filers earning $450,000) it's a lot cheaper for couples to get divorced if both are earning around $300,000 each. If I remember correctly, they can save a about $27,000 per year by getting divorced.

Ah the sanctity of marriage :beer
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Re: FAFSA Rules

Postby jasonlitka » Thu Jan 17, 2013 12:02 pm

It could make a big difference to a lot of families. I don't have any children, so I'd be at least 18 years out on this scam (by which time they will have plugged this loop hole), but I make considerably more than my wife. If we only had to declare her income the picture would be completely different.
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Re: FAFSA Rules

Postby ThatGuy » Thu Jan 17, 2013 2:17 pm

If it's a community property state, do you really save anything with the divorce?
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Re: FAFSA Rules

Postby texasdiver » Thu Jan 17, 2013 2:53 pm

Remember, the FAFSA is only one piece of the puzzle in terms of qualifying for financial aid. Colleges can and do use their own formulas and may ask for additional information not included on FAFSA. Just because the non-custodial spouse's information isn't on the FAFSA doesn't mean the college isn't going to ask to see his or her tax returns and won't base aid on it as well.
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Re: FAFSA Rules

Postby Bruce » Thu Jan 17, 2013 4:09 pm

First year I have had to deal with this rather bewildering process as well.

Found this website to have a lot of useful info on the topic.

http://www.thecollegesolution.com

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Re: FAFSA Rules

Postby grabiner » Fri Jan 18, 2013 1:14 am

Jerilynn wrote:Went to a seminar at my son's HS the other day. I was shocked :shock: , really shocked :shock: when I found out that in the case of a divorced couple, ONLY the custodial parent has to supply $$$ information.
I didn't believe the woman, so I looked it up and dad gum it, she was correct.


However, the student doesn't necessarily get the full benefit of using only one parent's income. If the non-custodial parent pays child support, the child support is counted as parental income for FAFSA purposes even though it is not taxable.
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Re: FAFSA Rules

Postby Jerilynn » Fri Jan 18, 2013 11:50 pm

grabiner wrote:
Jerilynn wrote:Went to a seminar at my son's HS the other day. I was shocked :shock: , really shocked :shock: when I found out that in the case of a divorced couple, ONLY the custodial parent has to supply $$$ information.
I didn't believe the woman, so I looked it up and dad gum it, she was correct.


However, the student doesn't necessarily get the full benefit of using only one parent's income. If the non-custodial parent pays child support, the child support is counted as parental income for FAFSA purposes even though it is not taxable.


Seems fair.
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby freebeer » Sat Jan 19, 2013 12:07 am

Divorce as a strategy or silver lining to increase college financial aid eligibility is a complicated topic. I recommend this site: http://www.finaid.org/fafsa/maximize.phtml . But there's lots of other resources out there... Google is your friend...
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby DualIncomeNoDebt » Sat Jan 19, 2013 12:16 am

I am thankful I don't have to deal with any of this. It sucks you into the dark vortex of aid, banks, loans, "need," fees, expenses, promissory notes, disclosure statements. It's everything I work really hard to avoid. I mostly hate banks, bankers, and bank lending products. When I see bankers or big-firm financial "advisors," I run in the other direction.
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby Jerilynn » Tue Jan 22, 2013 2:10 am

Thanks for the info.

The good news is that my son is a finalist for a full-ride scholarship to a nearby university for engineering. If he gets that (and the chances are good), I won't need to worry about all this FAFSA nonsense. Keeping my fingers crossed.
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby interplanetjanet » Tue Jan 22, 2013 5:26 am

Jerilynn wrote:Went to a seminar at my son's HS the other day. I was shocked :shock: , really shocked :shock: when I found out that in the case of a divorced couple, ONLY the custodial parent has to supply $$$ information.
I didn't believe the woman, so I looked it up and dad gum it, she was correct.

It is correct, but it's also important to understand what the FAFSA uses to consider "custodial". It has nothing to do with whatever language is in the divorce decree or who claims the child on their taxes, it's a simple matter of which parent had the child for more time during the previous year. If the custodial parent remarries, then the new stepparents' information is also required.

This is a subject that is rather near and dear to my heart. I divorced several years ago and my children split their time roughly 50/50 between both households. Depending on which parent is considered custodial, they will either get more aid or less - so there is considerable incentive to make certain that they spend an extra night or two in the right household to benefit them.

Is this gaming the system? It's really hard for me to say. It is only really an option because custody is so evenly split, and I have a good relationship with my ex.

jasonlitka wrote:Heh. So the kid is ready to apply for college, parents get divorced, lower-income parent gets custody but they continue to live together, parents get remarried after college is done. Sounds like a plan to me.

That won't work. If the parents are still living together then the FAFSA will require both of their information.
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby TomatoTomahto » Tue Jan 22, 2013 7:50 am

The ethical lessons that we teach our kids don't end in early childhood; you can teach a high school senior an inadvertent lesson also. I don't think anyone here is seriously considering divorce in order to increase financial aid, but that's another factor to consider.

We're bumping into the whole scam of legacy admissions, developmental admissions, sports admissions, ethnic group admissions, etc. Sometimes it seems that a high performing student is what colleges are interested in only if the school has a few spare slots to fill after the other considerations. I guess that making an additional mess of financial aid is par for the course.
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby Taz » Tue Jan 22, 2013 2:01 pm

freebeer wrote:Divorce as a strategy or silver lining to increase college financial aid eligibility is a complicated topic. I recommend this site: http://www.finaid.org/fafsa/maximize.phtml . But there's lots of other resources out there... Google is your friend...


I think we'll pass on the divorce. I did like this suggestion: "When you have children, space them closer together."

Oh, well to paraphrase the e-Trade baby, "Saving for retirement is frowned upon" if you hope for financial aid!
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby MathWizard » Tue Jan 22, 2013 5:51 pm

Taz wrote:
freebeer wrote:Divorce as a strategy or silver lining to increase college financial aid eligibility is a complicated topic. I recommend this site: http://www.finaid.org/fafsa/maximize.phtml . But there's lots of other resources out there... Google is your friend...


I think we'll pass on the divorce. I did like this suggestion: "When you have children, space them closer together."

Oh, well to paraphrase the e-Trade baby, "Saving for retirement is frowned upon" if you hope for financial aid!


Retirement accounts balances (401K, IRAs) are not counted in the FAFSA.

The amount that is tax deferred during the base year does get added back in to income, but the balance
is not added into parental assets.

I've been filling out the FAFSA for the last 4 years, with 4 or 5 more yet to go until my youngest is out.
(The youngest is a HS senior who will be going into Mech. Engineering. The dept. says to plan on 5 years
since one or two 6-month internships are now expected prior to graduation in Engineering.)
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby Taz » Tue Jan 22, 2013 7:31 pm

MathWizard wrote:
Taz wrote:
freebeer wrote:Divorce as a strategy or silver lining to increase college financial aid eligibility is a complicated topic. I recommend this site: http://www.finaid.org/fafsa/maximize.phtml . But there's lots of other resources out there... Google is your friend...


I think we'll pass on the divorce. I did like this suggestion: "When you have children, space them closer together."

Oh, well to paraphrase the e-Trade baby, "Saving for retirement is frowned upon" if you hope for financial aid!


Retirement accounts balances (401K, IRAs) are not counted in the FAFSA.

The amount that is tax deferred during the base year does get added back in to income, but the balance
is not added into parental assets.

I've been filling out the FAFSA for the last 4 years, with 4 or 5 more yet to go until my youngest is out.
(The youngest is a HS senior who will be going into Mech. Engineering. The dept. says to plan on 5 years
since one or two 6-month internships are now expected prior to graduation in Engineering.)


MathWizard - I guess my reply was more tongue in cheek. Essentially, we would have to put our tax-advantaged retirement savings on hold and dip into the taxable pot for the next seven years if we went for a private school; less so if for an out-of-state public school. My oldest wants to major in nuclear engineering & the youngest aerospace so more like 8 I guess..

We do have pre-paid FL university plans and two years of room & board saved in 529 plans for both kids. In state is set & the FL pre-paid will dole out at the in-state rate which helps so out of state/private is where we have to make the big decision. Still waiting on a scholarship.

{edited because of incoherency!}
Last edited by Taz on Thu Jan 24, 2013 7:49 am, edited 1 time in total.
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby Jerilynn » Wed Jan 23, 2013 2:11 am

interplanetjanet wrote:
Is this gaming the system? It's really hard for me to say. It is only really an option because custody is so evenly split, and I have a good relationship with my ex.



I don't think it's gaming the system, Janet. You are simply following the rules and doing everything you are legally entitled to do to maximize your benefits.

It's the same idea as taking a mileage deduction for business use of a car on one's schedule C.
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Re: FAFSA Rules [Free Application for Federal Student Aid]

Postby MathWizard » Wed Jan 23, 2013 12:41 pm

Taz wrote: MathWizard - I guess my reply was more tongue in cheek. Essentially, we would have to put our tax-advantaged retirement savings on hold and dip into the taxable pot for the next seven years if we went for a private school; less so if for an out-of-state public school. My oldest wants to major in nuclear engineering & the youngest aerospace so more like 8 I guess..

We do have pre-paid FL university plans and two years of room & board saved in 529 plans for both kids. FL pre-paid will dole out can be can be rate from the prepaid can be In state will be easy; out of state/private is where we have to make the big decision. Still waiting on a scholarship.


It sounds like you have things well in hand. We're able to pay out-of-pocket for half the cost of the
state school.

I was lucky financially that I live in a city with a good University, and that my boys wanted to go
there. (They would not apply anywhere else.)

If either had gone to a private school, we might have had to either take out loans or dip into
the ROTH. Top tier private engineering colleges are expensive!!

My youngest is also waiting on a large scholarship, we're keeping our fingers crossed. He is planning on
grad school, so if he gets this, we'll put money towards grad school.
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