College Financial Aid assistance

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Buster65
Posts: 234
Joined: Tue Jun 19, 2012 4:13 pm

College Financial Aid assistance

Post by Buster65 »

I have one son in college and another on his way. Both will be in private colleges that cost $58K-$60K per year. I have the funds to send my kids to college without loans. I own my home outright, I earn a solid living (mid to high six figures) and I have significant savings both in retirement and taxable accounts. My question is my neighbor handed me a business card from a "planner" who helps you shift assets around so that you can qualify for financial aid. Should I be seeking this persons advice? I don't fill out any financial aid forms because I assumed since I have the funds to pay for college I should. Am I making a mistake because perhaps I'm missing out on grants or cheap loan money? Please advise.
MathWizard
Posts: 6560
Joined: Tue Jul 26, 2011 1:35 pm

Re: College Financial Aid assistance

Post by MathWizard »

I also have one son in college, another going this fall.

Don't use a for-fee planner. That is just a scam.

Always fill out the FAFSA, particularly for private schools. Some financial aid
may be available, and they generally use the FAFSA to decide on the need portion.
Also, when you have two in college, your contribution as measured by the FAFSA
is halved, 1/2 to each of your children.

Instead of paying a planner, use free resources.
Some strategies for the FAFSA are at:

http://www.finaid.org/fafsa/maximize.phtml

Generally the biggest has to do with assets, since a person generally has little control over
income other than selling stocks. (I did that in the junior HS year of my oldest to take the
Capital Gains before the base year for his freshman year, so the FAFSA did not have that
one-time spike in income.)

Don't get your hopes up, my first son got some scholarhips, but the only need based aid was
subsidized loans. I don't know about this coming year when I have 2 in school though.
I always fill out the FAFSA though.
Rubiosa
Posts: 269
Joined: Mon May 19, 2008 9:58 am

Re: College Financial Aid assistance

Post by Rubiosa »

You are entirely right. Stay away from "planners" and especially stay away from the financial aid office. Lenders pay universities top commissions to direct students to their "services."
NYBoglehead
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Re: College Financial Aid assistance

Post by NYBoglehead »

Not sure what state you're in and what the tax benefits are. I know in NY you can deduct up to $10k in 529 contributions for MFJ couples each year. Even if you had the cash on hand, you can contribute $10k to the 529 and pay the school from the 529 the following day (using a MMF to prevent change in value while doing this). If you are in the 6.45% bracket, that'll trim $645 of your state income tax liability for that year.
livesoft
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Joined: Thu Mar 01, 2007 7:00 pm

Re: College Financial Aid assistance

Post by livesoft »

I think it would be kinda fun to have the OP (archman65) go ahead to try to do this and report back to us how it all played out. That way, we wouldn't be guessing about this at all.

My impression was that these outfits hide all assets inside life insurance policies and variable annuities, such that the costs eventually amount to more than any of the aid that one would get. For example, suppose one gets $100K in financial aid, but it costs one $200K in lost gains, taxes, and fees. But it would be nice to know how these things really work.
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Bobbybell
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Re: College Financial Aid assistance

Post by Bobbybell »

It's mainly about understanding what is a counted asset and what is an uncounted asset. It often makes sense to turn counted assets into uncounted ones. It doesn't have to cost an arm and a leg and sometimes it won't cost a penny.

An easy example would be taking money and paying off a debt. The person's net worth will remain the same, but their EFC could drop.

Another easy example is changing child #2's 529 plan into an UTMA 529 plan. By doing that, it will no longer be a counted asset for Child #1.
sesq
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Joined: Wed Jan 30, 2013 8:24 am

Re: College Financial Aid assistance

Post by sesq »

From what I have read about FASFA is that you can shift your assets into non counted assets (retirement, annuities, etc), but if you are earning a serious income you will be disqualified from getting aid based on you income. So mucking about with your assets would be pointless.
livesoft
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Re: College Financial Aid assistance

Post by livesoft »

Also if one has too many counted assets and quits their job, so that they have no income, then they are not going to get any financial aid either.
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ThatGuy
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Re: College Financial Aid assistance

Post by ThatGuy »

livesoft wrote:Also if one has too many counted assets and quits their job, so that they have no income, then they are not going to get any financial aid either.
Ah, but you can always file an appeal with your university and explain that the breadwinner lost their job. The finaid office will then recalculate your aid based on the new, lower income. However, things like PEL grants will already be gone so you're just likely to get more loans as 'aid'.
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livesoft
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Re: College Financial Aid assistance

Post by livesoft »

ThatGuy wrote:
livesoft wrote:Also if one has too many counted assets and quits their job, so that they have no income, then they are not going to get any financial aid either.
Ah, but you can always file an appeal with your university and explain that the breadwinner lost their job. The finaid office will then recalculate your aid based on the new, lower income. However, things like PEL grants will already be gone so you're just likely to get more loans as 'aid'.
But if the breadwinner retired, what should they tell the financial aid office?
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ThatGuy
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Re: College Financial Aid assistance

Post by ThatGuy »

"My contract came to an end."
Work is the curse of the drinking class - Oscar Wilde
dhodson
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Re: College Financial Aid assistance

Post by dhodson »

my opinion is that most of the time these planners are just insurance sales people.

as mentioned above, hiding assets typically only works if you dont have any income and you can hide or have non count the rest of your assets as well. Thats rarely the situation for anyone with significant assets. It also assumes that when you apply the "loopholes" will still be in place.

if you have a high income and believe you will still have a high income when college comes around then these "plans" are a double negative since you wont get a financial break and you will have lost a ton of money by using insurance as your investment vehicle. Even worse is if someone gets you into a situation where the insurance policy still requires premiums since then you have pretty much doubled the amount of money you need to spend per year (the tuition and this heavy policy).

Certainly max out your retirement accounts since they also dont count currently and you dont have to purchase a poor investment within them.

Life unfortunately isnt fair and savers can get punished. Switching the 529 can be useful but again only if you wont have substantial income at the time college comes around. In my opinion (and im not a financial professional), if you have a higher income then just go with the 529s and at least you get the tax free withdrawls for qualified expenses.
Editron
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Joined: Tue Mar 26, 2013 9:03 pm

Re: College Financial Aid assistance

Post by Editron »

As a former starving college student, I'd like to suggest that those with mid- to high six-figure incomes leave the pot of financial aid for those who really need it. By all means, fill out the forms and move your money in any way you like, but gaming a system designed to help kids whose parents make $40,000 a year (or less) seems unsportsmanlike. Paying full freight for a private-school education stings, but that's one of the privileges of great financial success.
scouter
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Re: College Financial Aid assistance

Post by scouter »

Editron wrote:As a former starving college student, I'd like to suggest that those with mid- to high six-figure incomes leave the pot of financial aid for those who really need it. By all means, fill out the forms and move your money in any way you like, but gaming a system designed to help kids whose parents make $40,000 a year (or less) seems unsportsmanlike. Paying full freight for a private-school education stings, but that's one of the privileges of great financial success.

I understand your point. But as parents who diligently saved for our kids' college educations, foregoing many vacations, newer cars, a boat, a 2nd home, etc., it was pretty frustrating to see some of their friends getting financial aid, when we knew their parents had spent all their money on those things. We felt we were being punished for being responsible, and they were being bailed out for being irresponsible.

Fortunately, our kids both received merit scholarships, which allowed them a better choice of schools that we could afford.
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