Managing retirement date and income for college financial aid

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anonforbogleheads
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Managing retirement date and income for college financial aid

Post by anonforbogleheads » Fri Oct 23, 2015 9:17 am

Without going into too much detail, we have 3 children, the oldest of whom will be applying for college in 5 years.

That is also around when, with conservative estimates on income and mkt performance, we could envision becoming FI (based on our own spending ex-education expense) and maybe even fully exiting the workforce (i.e. quitting our W-2 jobs).

Any advice for timing retirement dates and managing income and asset allocation (i.e. maximizing tax-deferred accounts and paying off house completely as retirement accounts and home equity typically do not count towards ability to pay) in the hopes of maximizing financial aid awards (from the schools themselves)? Our kids would be mainly applying to highly selective private institutions who have a need-blind admissions policy, where aid is given based on need (i.e. parental ability to pay) and not merit.

anonforbogleheads
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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Fri Oct 23, 2015 10:29 am

I guess a more specific question would be, how far back do they ask for income history in determining need-based aid?

If one or both of us (currently dual income) were to quit our jobs and/or do a part-time gig, would it be sufficient to do that for the full calendar year before the fall our oldest child would apply to college (i.e. lowering income for FY 2019 for application in fall of 2020 for admission in fall 2021) to maximize aid?

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Re: Managing retirement date and income for college financial aid

Post by Jack FFR1846 » Fri Oct 23, 2015 10:42 am

If you are talking a CSS type school, then everything you earn or own is "available" to liquidate to pay for college. Primary residence, retirement accounts, any insurance products with cash value, trusts, utmas. CSS exposes them all, so moving deck chairs won't help. Do pay off all loans and mortgage.
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Work backwards

Post by daveatca » Fri Oct 23, 2015 11:10 am

(i.e. lowering income for FY 2019 for application in fall of 2020 for admission in fall 2021) to maximize aid?
Yes, best tactics. But, see below.
If you are talking a CSS type school, then everything you earn or own is "available" to liquidate to pay for college. ... Do pay off all loans and mortgage.
True, they will try to take all your money. And, guaranteed, they will take 100% of the kids' money.
I disagree. I think you should have the highest mortgage possible and the lowest value for your house. When we applied I used the tax assessor value for our house which was about 1/3 the mortgage amount.
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Re: Managing retirement date and income for college financial aid

Post by centrifuge41 » Fri Oct 23, 2015 11:12 am

For FAFSA schools, you should definitely pay down your (first/primary) house, and max out IRA/401k!

It's the income reduction that's the main driver for getting more aid. Retiring just before the reportable-income period sounds good to me!

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Re: Managing retirement date and income for college financial aid

Post by TomatoTomahto » Fri Oct 23, 2015 11:32 am

Deleted. Subsequent posts made me feel that fraudulent actions were being contemplated; I have no interest in being involved.
Last edited by TomatoTomahto on Fri Oct 23, 2015 11:36 am, edited 1 time in total.

btenny
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Re: Managing retirement date and income for college financial aid

Post by btenny » Fri Oct 23, 2015 12:47 pm

Fifteen years ago my daughter was admitted to Southern California 6 months after I retired. Our income was low. My was wife working part time. I filled out complete FAFSA which back then included assets so I had to show them my bank accounts and retirement funds etc. They told me we had to pay full price. No discounts and no cost lowering due to scholarships or low income, etc.. She had good grades and was offered good discount deals at other schools.

But if your kid is super super smart like one of my nieces they can get full ride music/academic scholarships at the same school right now. The key is super grades and test scores.

So your results may vary depending on the school.

Good Luck..

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Re: Managing retirement date and income for college financial aid

Post by Beth* » Fri Oct 23, 2015 1:00 pm

anonforbogleheads wrote: Our kids would be mainly applying to highly selective private institutions who have a need-blind admissions policy, where aid is given based on need (i.e. parental ability to pay) and not merit.
You stated your oldest child will be applying to college in five years, so presumably your oldest child is in 7th grade right now. Please don't put the pressure on your children and yourselves of deciding now that your children are all going to go to highly selective private institutions with a need-blind admissions policy. You have no way of knowing that will be the right fit for your children given their current young ages.

I know you didn't ask for advice regarding this goal, but as a parent myself it tears me up to see someone making this statement. Please allow your children to be individuals and figure out what is best for them as they mature, rather than holding them to some pre-set life plan. There are lots of paths to an independent adult life that do not go through selective private colleges. Please do not make your children feel like failures if that path turns out not to be the right one for them.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Fri Oct 23, 2015 1:31 pm

Beth* wrote:
anonforbogleheads wrote: Our kids would be mainly applying to highly selective private institutions who have a need-blind admissions policy, where aid is given based on need (i.e. parental ability to pay) and not merit.
You stated your oldest child will be applying to college in five years, so presumably your oldest child is in 7th grade right now. Please don't put the pressure on your children and yourselves of deciding now that your children are all going to go to highly selective private institutions with a need-blind admissions policy. You have no way of knowing that will be the right fit for your children given their current young ages.

I know you didn't ask for advice regarding this goal, but as a parent myself it tears me up to see someone making this statement. Please allow your children to be individuals and figure out what is best for them as they mature, rather than holding them to some pre-set life plan. There are lots of paths to an independent adult life that do not go through selective private colleges. Please do not make your children feel like failures if that path turns out not to be the right one for them.
Yeah I agree - although certain schools run in our family for multiple generations and so the kids are familiar with them and have casually mentioned that they would like to continue the 'legacy'.

Ultimately if they choose to go to a less expensive school (or don't get in for that matter) then our financial question becomes easier to answer anyway.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Fri Oct 23, 2015 1:35 pm

btenny wrote:Fifteen years ago my daughter was admitted to Southern California 6 months after I retired. Our income was low. My was wife working part time. I filled out complete FAFSA which back then included assets so I had to show them my bank accounts and retirement funds etc. They told me we had to pay full price. No discounts and no cost lowering due to scholarships or low income, etc.. She had good grades and was offered good discount deals at other schools.

But if your kid is super super smart like one of my nieces they can get full ride music/academic scholarships at the same school right now. The key is super grades and test scores.

So your results may vary depending on the school.

Good Luck..
That's good to keep in mind. We aren't relying on getting aid, but the reality is if we can time our income or move around assets to help the situation we would definitely do so.

It might help that we have 3 kids who are in private school now (although we plan to send them all to the public high school which has an excellent reputation and fantastic resources), as it seems the schools do give consideration for the additional cost of siblings, etc.

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Re: Managing retirement date and income for college financial aid

Post by LadyGeek » Fri Oct 23, 2015 4:56 pm

Discussions of dishonest behavior or bypassing the law are totally unacceptable.

I removed a comment which suggested to put funds into accounts that are not traceable to the owner applying for aid. There was also a suggestion to gift money elswhere, then expect it back later. I removed a number of replies, continuity is lost.


Please help the OP answer this question:
anonforbogleheads wrote:Any advice for timing retirement dates and managing income and asset allocation (i.e. maximizing tax-deferred accounts and paying off house completely as retirement accounts and home equity typically do not count towards ability to pay) in the hopes of maximizing financial aid awards (from the schools themselves)? Our kids would be mainly applying to highly selective private institutions who have a need-blind admissions policy, where aid is given based on need (i.e. parental ability to pay) and not merit.
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Re: Managing retirement date and income for college financial aid

Post by rec7 » Fri Oct 23, 2015 4:58 pm

For most people aid is very hard to get unless you are very low income.
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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Fri Oct 23, 2015 5:13 pm

rec7 wrote:For most people aid is very hard to get unless you are very low income.
I used to think that as well, but then I read on the websites of certain schools where they tout that ">70% of our students receive some form of aid" and ">20% of our students' families pay nothing".

I believe that certain universities have raised the sticker price of tuition to astronomical levels knowing full well that very few people can actually afford that price, so they give out lots of aid to offset the high cost while charging full freight to those who can afford it easily.

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Re: Managing retirement date and income for college financial aid

Post by Grt2bOutdoors » Fri Oct 23, 2015 5:58 pm

anonforbogleheads wrote:
rec7 wrote:For most people aid is very hard to get unless you are very low income.
I used to think that as well, but then I read on the websites of certain schools where they tout that ">70% of our students receive some form of aid" and ">20% of our students' families pay nothing".

I believe that certain universities have raised the sticker price of tuition to astronomical levels knowing full well that very few people can actually afford that price, so they give out lots of aid to offset the high cost while charging full freight to those who can afford it easily.
Define "aid". Aid is the new three letter word for a loan. The term "aid" should not be giving you a warm, comfy, cozy feeling. The term you should focus on is the word "grant" or "merit", those two words mean one thing to me: "reduced or free". Anything short of that is "debt". Rejiggering one's assets/income to receive aid is not going to alleviate you or your kids burden, you will pay one way or the other. My suggestion is to attend the best school that provides the best fit for your child, academically and keep an eye on the price tag. Apply to "need-blind" schools or ones that are known to offer substantial merit aid, it will make a huge difference in your pocket book.

Define "charging full freight to those who can afford it easily". I live in a HCOL area, if my home is paid off but my COL is higher than the FAFSA/CSS formulas permit, does that mean I have excess monies available to pay that high tuition bill? How about if my retirement plan caps the amount I can legally contribute to the plan, but I have saved in taxable to make up the difference - does that now become fair game to easily pay that tuition bill? I guess I can use a variable annuity to shelter the assets, but then instead of paying the tuition bill, my family is now offered "aid" - aid is a loan/debt.

Do not fall for the "I want to attend Pop-u-lar State or Party U because all of my friends are going there or because that's where the "in" crowd goes, I'll worry how to pay for it after I graduate or you can just sign this piece of paper Dad or Mom". So many think price equals value, both low and high, that is the furthest from the truth.
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Re: Managing retirement date and income for college financial aid

Post by MikeWillRetire » Fri Oct 23, 2015 7:54 pm

Read your post from the perspective of a lower class blue collar worker who is applying for financial aid for his kids. Something is wrong.

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Re: Managing retirement date and income for college financial aid

Post by Grt2bOutdoors » Fri Oct 23, 2015 8:35 pm

MikeWillRetire wrote:Read your post from the perspective of a lower class blue collar worker who is applying for financial aid for his kids. Something is wrong.
My post or that of the OP?
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Re: Managing retirement date and income for college financial aid

Post by Beth* » Fri Oct 23, 2015 10:58 pm

anonforbogleheads wrote:
Beth* wrote:
anonforbogleheads wrote: Our kids would be mainly applying to highly selective private institutions who have a need-blind admissions policy, where aid is given based on need (i.e. parental ability to pay) and not merit.
You stated your oldest child will be applying to college in five years, so presumably your oldest child is in 7th grade right now. Please don't put the pressure on your children and yourselves of deciding now that your children are all going to go to highly selective private institutions with a need-blind admissions policy. You have no way of knowing that will be the right fit for your children given their current young ages.

I know you didn't ask for advice regarding this goal, but as a parent myself it tears me up to see someone making this statement. Please allow your children to be individuals and figure out what is best for them as they mature, rather than holding them to some pre-set life plan. There are lots of paths to an independent adult life that do not go through selective private colleges. Please do not make your children feel like failures if that path turns out not to be the right one for them.
Yeah I agree - although certain schools run in our family for multiple generations and so the kids are familiar with them and have casually mentioned that they would like to continue the 'legacy'.

Ultimately if they choose to go to a less expensive school (or don't get in for that matter) then our financial question becomes easier to answer anyway.
Please don't set your kids up for disappointment and don't under-estimate the possibility of them not getting in. I have friends who both went to Yale. Their kids are very smart but neither of them got into Yale and the kids were extremely disappointed. They had been going to Yale reunions and hearing about Yale for their entire lives. There are a lot more legacy students with 4.x GPAs in high school and top test scores and impressive extra-curricular activities than the most selective schools can take. In my opinion, it is extremely important to convey to children that there are many good colleges at which they could be happy and not let them fixate on one, especially on one with a very low acceptance rate.

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Re: Managing retirement date and income for college financial aid

Post by TomatoTomahto » Fri Oct 23, 2015 11:26 pm

http://www.thecrimson.com/article/2011/ ... -legacies/
ccording to a New York Times story on the event, Brenzel said that Yale rejected 80 percent of its legacy applicants. Brenzel reported that Yale legacies comprise less than 10 percent of the class, according to Kahlenberg.

Brenzel also said that there is a positive correlation between alumni donations and legacy admissions. According to Brenzel, Yale fundraising suffers when fewer legacies are accepted. Still, he said, this year Yale rejected more children of top donors than it accepted.

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Re: Managing retirement date and income for college financial aid

Post by celia » Sat Oct 24, 2015 5:27 am

anonforbogleheads wrote:
btenny wrote:Fifteen years ago my daughter was admitted to Southern California 6 months after I retired. Our income was low. My was wife working part time. I filled out complete FAFSA which back then included assets so I had to show them my bank accounts and retirement funds etc. They told me we had to pay full price. No discounts and no cost lowering due to scholarships or low income, etc.. She had good grades and was offered good discount deals at other schools.

But if your kid is super super smart like one of my nieces they can get full ride music/academic scholarships at the same school right now. The key is super grades and test scores.

So your results may vary depending on the school.

Good Luck..
That's good to keep in mind. We aren't relying on getting aid, but the reality is if we can time our income or move around assets to help the situation we would definitely do so.

It might help that we have 3 kids who are in private school now (although we plan to send them all to the public high school which has an excellent reputation and fantastic resources), as it seems the schools do give consideration for the additional cost of siblings, etc.
Our situation was pretty much like btenny's, except the numbers were taken from the most recent tax return and we didn't have to show retirement accounts or house value. [You need to do your taxes as soon as you get all the W-2s and 1099s, so you can fill out the aid forms as soon as you can in February. This is all happening during the student's senior year, so income through December of the senior year is what is looked at.] Although DH retired that December and all his unused sick and vacation pay was paid out in December and reported on the tax return, we had to file using those numbers. We were unable to file an appeal until we received the financial aid award showing very little was granted. But then we appealed using an estimate of what the future year numbers would be. Note that the results of the re-calculated award arrived close to when the student has to commit to a college. But the appeal made it doable for us. (I always filed for financial aid while the students filed for admission. I think teenagers who have never filed a tax return should not be made responsible for filling out forms they don't understand with numbers they are not privy to. In my opinion, that's is the parents' job.)

The following year, when applying for financial aid again with the next year's numbers, they adjusted the freshman award so we had to pay back some of the aid so it would have come out the same as if the correct numbers (instead of estimated) had been available. Note that the timing is important. If you file late, the money may be gone. But you can't file until your return is done. If you use estimates, they will re-calculate it when you have exact numbers.

We found that none of the public colleges gave us anything. That is what I was expecting, as the cost of attending is lower, their endowment is much, much smaller, and there are many more students competing for those few dollars.

If your kid is super super smart, that won't make any difference in the most competitive schools, since that is what is needed to just get admitted. But I know the National Merit Finalists are often offered free tuition and room and board from lower-ranking schools. Often, these are schools you've never heard of or even applied to. It is just a surprise to get a letter from them asking you to attend for free. (They are trying to improve the quality of the student body this way.) They get the student's information from the College Board (SAT).

anonforbogleheads, We had kids in private high school. They don't care about that at all. That is your choice. But if you have more than one kid in college at the same time, the family contribution stays the same and is split between the college(s) each kids attends. So, for college aid, at least, it helps if the kids are close in age.
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Re: Managing retirement date and income for college financial aid

Post by celia » Sat Oct 24, 2015 5:41 am

MikeWillRetire wrote:Read your post from the perspective of a lower class blue collar worker who is applying for financial aid for his kids. Something is wrong.
I see nothing wrong with changing things when you can. This is like taking advantage of the tax laws to lower your taxes. How many people would put money into a tIRA if it didn't lower their taxes? How about bunching deductions every other year? Or depreciating a rental?

The blue collar workers on this board probably read these posts and can take advantage of things that will benefit them. I have more sympathy for the well-paid employee who sacrificed and saved and saved so she could pay for college while her co-worker who made the same money spent it each year, yet qualified for college aid. Is that fair?
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Re: Managing retirement date and income for college financial aid

Post by just frank » Sat Oct 24, 2015 6:10 am

Grt2bOutdoors wrote:
anonforbogleheads wrote:
rec7 wrote:For most people aid is very hard to get unless you are very low income.
I used to think that as well, but then I read on the websites of certain schools where they tout that ">70% of our students receive some form of aid" and ">20% of our students' families pay nothing".

I believe that certain universities have raised the sticker price of tuition to astronomical levels knowing full well that very few people can actually afford that price, so they give out lots of aid to offset the high cost while charging full freight to those who can afford it easily.
Define "aid". Aid is the new three letter word for a loan. The term "aid" should not be giving you a warm, comfy, cozy feeling. The term you should focus on is the word "grant" or "merit", those two words mean one thing to me: "reduced or free". Anything short of that is "debt". Rejiggering one's assets/income to receive aid is not going to alleviate you or your kids burden, you will pay one way or the other. My suggestion is to attend the best school that provides the best fit for your child, academically and keep an eye on the price tag. Apply to "need-blind" schools or ones that are known to offer substantial merit aid, it will make a huge difference in your pocket book.

Define "charging full freight to those who can afford it easily". I live in a HCOL area, if my home is paid off but my COL is higher than the FAFSA/CSS formulas permit, does that mean I have excess monies available to pay that high tuition bill? How about if my retirement plan caps the amount I can legally contribute to the plan, but I have saved in taxable to make up the difference - does that now become fair game to easily pay that tuition bill? I guess I can use a variable annuity to shelter the assets, but then instead of paying the tuition bill, my family is now offered "aid" - aid is a loan/debt.
Sorry, the OP is correct here, and there are such schools....the Ivies. The Ivies are all now 'need blind admissions' and most do not participate in student loan programs for undergrads at all. This is largely for brand maintenance (they don't want a cadre of loan saddled alumni squawking to media, not donating in the future, etc) a war of attrition between the wealthy Ivies (Harvard, Yale and Princeton) against the rest, and possible because UG tuition is actually a small part of the operating budget of the wealthy three.

Make no mistake...they will still **soak the parents** by a painful amount, i.e. a good chunk of your net worth. The maximum % worth bite, I believe is right in the Boglehead zone, low six figure incomes and corresponding net worth. More than that and the full tuition is 'easy', less than that and the discounts kick in. Everyone **can** afford to send their kid to an Ivy, without any loans, so long as their kid can get in.

Note: The above is NOT true of the 'small liberal arts colleges'...their full-freight tuition is still above that of the Ivies, but they don't have enough cash to go to a need-blind, no loan position.

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Re: Managing retirement date and income for college financial aid

Post by Jack FFR1846 » Sat Oct 24, 2015 6:43 am

I want to add that it is really difficult to know what a particular school, other than high media saturation schools like Harvard...are going to offer for aid in advance. Merit aid will greatly vary by school. If your child goes to a B level school and has excellent grades, they may receive a good merit aid package. My son fell in this with $11k a year for 4 years offsetting $44k total cost at a B level school. We learned something when he excelled there but did so dispite a non-serious student body, more interested in smoking weed daily than studying...he transferred to an excellent, more selective and more expensive college. Most colleges give zero merit aid to transfers. Also, because they attract higher performing students, the bar for 1st year merit aid is much higher. Interestingly, they aren't taken in by many AP courses where they are graded on a 5 point level instead of 4 point.....so a student can easily graduate high school with a 4.0 but never have received an A. They rearrange from actual course grades first.

My son also was accepted into a prestigious Boston college and offered 2 separate college based scholarships for a total of $13k. So there is money available, but you don't know until you are very far into the process.

We attended a college planning seminar years before our son was of college aid. As the presenter was going through the "need" and "expected family contribution" calculations and tables, he asked a question about the income allowed before contributions would start. It is exactly at the US government poverty level. This is for FAFSA.

The best plan is to figure out what college will likely cost for your kids. Save what you plan to pay for them and then expect to pay that for them. If you do get any aid or scholarships, that's great, but I would not think that saving $50k for 4 years of college and expect that grants and merit aid is going to cover the rest.
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Re: Managing retirement date and income for college financial aid

Post by TomatoTomahto » Sat Oct 24, 2015 9:38 am

It's incomplete, as any one article would be, but it's a good summary:
http://www.nytimes.com/2015/10/24/your- ... .html?_r=0

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Re: Managing retirement date and income for college financial aid

Post by MikeWillRetire » Sat Oct 24, 2015 9:51 am

celia wrote:
MikeWillRetire wrote:Read your post from the perspective of a lower class blue collar worker who is applying for financial aid for his kids. Something is wrong.
I see nothing wrong with changing things when you can. This is like taking advantage of the tax laws to lower your taxes. How many people would put money into a tIRA if it didn't lower their taxes? How about bunching deductions every other year? Or depreciating a rental?

The blue collar workers on this board probably read these posts and can take advantage of things that will benefit them. I have more sympathy for the well-paid employee who sacrificed and saved and saved so she could pay for college while her co-worker who made the same money spent it each year, yet qualified for college aid. Is that fair?
I just don't believe financial aid was meant for someone who could afford to put his children in private elementary school, who can afford to pay off his home early (in a neighborhood nice enough to have a great public high school), and still has enough wealth in retirement accounts to be able to retire by the time his kids enter college. He retires and "looks" like he needs financial aid.

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Re: Managing retirement date and income for college financial aid

Post by TomatoTomahto » Sat Oct 24, 2015 10:08 am

MikeWillRetire wrote:I just don't believe financial aid was meant for someone who could afford to put his children in private elementary school, who can afford to pay off his home early (in a neighborhood nice enough to have a great public high school), and still has enough wealth in retirement accounts to be able to retire by the time his kids enter college. He retires and "looks" like he needs financial aid.
I don't disagree with you, and while some will sneak under the radar, there are more instances of parents being discovered and (occasionally) prosecuted, especially for trying to claim in-state tuition fraudulently (http://onlineathens.com/breaking-news/2 ... ga-tuition).

Making the operative tax return for FAFSA an earlier one makes it tougher, and more schools are asking for additional information (sometimes including CSS).

Full disclosure: I am full pay for some of my kids' private middle school, high school, and college. Some went public. Some BHs think I'm an idiot for feeling this way, but it is one of the checks I am pleased to write.

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Re: Managing retirement date and income for college financial aid

Post by livesoft » Sat Oct 24, 2015 10:39 am

I semi-retired before my oldest started college and was retired when I had two kids in college. Our family taxable income was in the 5-figure range when we filled out a FAFSA. My child was attending one of those universities mentioned often on this forum with a cost-of-attendance above $50,000 annually.

Here are things we did:
Paid off house.
No debt.
Reduced income as much as possible for the tax return submitted with CSS/Financial Aid PROFILE.
Maximized tax-advantaged accounts (IRAs, 401(k), 403(b)) which presumably are not reported on FAFSA.

And the result was …
We received no financial aid from any of the universities that we submitted forms to.

I would not worry too much about folks who want to get the most financial aid when they are financially independent and even perhaps retired. Nowadays, I think financial aid folks are on the look-out for folks who can afford to pay for college and will reduce any aid given to them. Folks who might be relying on getting financial aid will need a Plan B for when they do not get any financial aid.

My experience tells me that one should probably work on making the most money possible, so that one does not need financial aid. If one expects to be financially independent by the time the family needs money for college, then that suggests that the family is good at making or acquiring money and that they are better at getting money from other non-financial aid sources to pay for college.
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Re: Managing retirement date and income for college financial aid

Post by celia » Sat Oct 24, 2015 9:58 pm

livesoft wrote:Here are things we did:
Paid off house.
No debt.
Reduced income as much as possible for the tax return submitted with CSS/Financial Aid PROFILE.
Maximized tax-advantaged accounts (IRAs, 401(k), 403(b)) which presumably are not reported on FAFSA.

And the result was …
We received no financial aid from any of the universities that we submitted forms to.
livesoft, The "problem", I think, is that you only had 2 kids. :) In my experience, I have seen it is easier to get aid as time goes on. It is hard for the first kid but gets easier for each succeeding kid. Part of that is that you've already paid for the older ones AND you are now getting older. I figure parents' age figures into it somehow and they can see your age on the tax return.

Our youngest was 10 years younger than the oldest and I was very experienced at filling out the forms by that time. It is one thing to be sending a kid to college when you are 45 and will have time to catch up on retirement later. It is very different when you are 60 and hope to still be working by the time the kid graduates. It appears to me that the financial aid system takes this into account.
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Nuvoletta
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Re: Managing retirement date and income for college financial aid

Post by Nuvoletta » Sun Oct 25, 2015 9:54 am

celia wrote:The blue collar workers on this board probably read these posts and can take advantage of things that will benefit them. I have more sympathy for the well-paid employee who sacrificed and saved and saved so she could pay for college while her co-worker who made the same money spent it each year, yet qualified for college aid. Is that fair?
This is the part that stings a little bit when reading these discussions. I get that I would still rather be a) able to save and b) smart enough to save, but yes, the system does seems to award less-than-stellar financial behaviors (like getting more house and spending more).

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teen persuasion
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Re: Managing retirement date and income for college financial aid

Post by teen persuasion » Sun Oct 25, 2015 2:37 pm

You can step thru the EFC calculations yourself with this document (begin at page 9): http://ifap.ed.gov/efcformulaguide/atta ... Attach.pdf

There have been a few changes made or upcoming. The most recent change is in the Asset Protection chart - the amounts "protected" have been shrinking for years, but this most recent year's decrease is alarming. When my oldest child began college in 2008, the Asset Protection allowance was in the high $40k range for us. Now it is less than $20k, and this amount is linked to age (rising for older parents).

The upcoming change that was announced just last month will affect future years. As a previous poster mentioned, currently you fill out the FAFSA beginning Jan 1 of the year your student will attend in the fall, using info from your previous year's tax return. Due to the time constraints of filing taxes and then reporting that info on the FAFSA, it was decided to move the FAFSA application process back to October, nearly a year before the term the student will attend. The tax year referenced will be the previous-previous year. For example, my 4th child is a HS senior and will go to college in fall 2016. Following current rules, he will fill out the FAFSA in the spring of 2016 with our 2015 tax info. When the new rules kick in the next year, he will fill out his 2nd year FAFSA in Oct 2016 again with our 2015 tax info. This is the only year that will be used twice due to the changeover. So for us, our 2015 taxes will influence 2 years of Financial Aid. Thus, going forward, parents must begin any tax strategies 2 years before their child begins college. It also means that halfway thru college (if 4 years) tax strategies become meaningless for aid calculations, opening up new possibilities for creative payment strategies.

Look at the descriptions in the document above referencing the Simplified EFC formulas and Auto EFC = 0 formulas. If your AGI is under $50k and you meet at least one other criteria the Simplified EFC formulas allow you to skip the asset tests (IOW, only income is reported). The Auto EFC = 0 threshold is lower, $25k or less AGI. In the past this was higher ($32k), but was retroactively reduced to $23k which has only slowly been adjusted upward for inflation.

The EFC formula starts with your AGI, and then adds back various untaxed income and benefits such as pre-tax retirement contributions. This is reduced by taxes paid, a working allowance, and an income allowance based on family size and number in college. Note that the income allowance number decreases for every additional student in college. The result, plus 12% of your non-retirement assets (after reduction by that minimal asset protection amount) is your Adjusted Available Income. This is multiplied by a factor ranging from 22% (low end) to a marginal 47% (high end).

One strategy that is problematic for FAFSA calculations is Roth laddering. The amount converted is added to your income on your tax return, increasing your AGI. Then any withdrawals from the Roth account must be added as untaxed income, again increasing your Available Income.

You may wish to search for "paper FAFSA" to see what inputs are expected for the calculations. You may also wish to search "EFC formulas 20xx - 20xx) replacing xx with the relevant academic years, for past year's charts, to see the trends over time.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Sun Oct 25, 2015 4:45 pm

TomatoTomahto wrote:http://www.thecrimson.com/article/2011/ ... -legacies/
ccording to a New York Times story on the event, Brenzel said that Yale rejected 80 percent of its legacy applicants. Brenzel reported that Yale legacies comprise less than 10 percent of the class, according to Kahlenberg.

Brenzel also said that there is a positive correlation between alumni donations and legacy admissions. According to Brenzel, Yale fundraising suffers when fewer legacies are accepted. Still, he said, this year Yale rejected more children of top donors than it accepted.
The very first sentence of the article you linked to says that Harvard's acceptance rate for legacies is more than 4x the regular admissions rate

Btw, most legacies to schools which value the 'hook' apply early, and see acceptance rates closer to 30-40%.

To Beth*'s point about being disappointed, I thought this line from the article was also telling:
Because of the family background of legacies, he said, students are more likely to be aware if they are unlikely to be accepted.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Sun Oct 25, 2015 5:09 pm

celia wrote:
anonforbogleheads wrote:
btenny wrote:Fifteen years ago my daughter was admitted to Southern California 6 months after I retired. Our income was low. My was wife working part time. I filled out complete FAFSA which back then included assets so I had to show them my bank accounts and retirement funds etc. They told me we had to pay full price. No discounts and no cost lowering due to scholarships or low income, etc.. She had good grades and was offered good discount deals at other schools.

But if your kid is super super smart like one of my nieces they can get full ride music/academic scholarships at the same school right now. The key is super grades and test scores.

So your results may vary depending on the school.

Good Luck..
That's good to keep in mind. We aren't relying on getting aid, but the reality is if we can time our income or move around assets to help the situation we would definitely do so.

It might help that we have 3 kids who are in private school now (although we plan to send them all to the public high school which has an excellent reputation and fantastic resources), as it seems the schools do give consideration for the additional cost of siblings, etc.
Our situation was pretty much like btenny's, except the numbers were taken from the most recent tax return and we didn't have to show retirement accounts or house value. [You need to do your taxes as soon as you get all the W-2s and 1099s, so you can fill out the aid forms as soon as you can in February. This is all happening during the student's senior year, so income through December of the senior year is what is looked at.] Although DH retired that December and all his unused sick and vacation pay was paid out in December and reported on the tax return, we had to file using those numbers. We were unable to file an appeal until we received the financial aid award showing very little was granted. But then we appealed using an estimate of what the future year numbers would be. Note that the results of the re-calculated award arrived close to when the student has to commit to a college. But the appeal made it doable for us. (I always filed for financial aid while the students filed for admission. I think teenagers who have never filed a tax return should not be made responsible for filling out forms they don't understand with numbers they are not privy to. In my opinion, that's is the parents' job.)

The following year, when applying for financial aid again with the next year's numbers, they adjusted the freshman award so we had to pay back some of the aid so it would have come out the same as if the correct numbers (instead of estimated) had been available. Note that the timing is important. If you file late, the money may be gone. But you can't file until your return is done. If you use estimates, they will re-calculate it when you have exact numbers.

We found that none of the public colleges gave us anything. That is what I was expecting, as the cost of attending is lower, their endowment is much, much smaller, and there are many more students competing for those few dollars.

If your kid is super super smart, that won't make any difference in the most competitive schools, since that is what is needed to just get admitted. But I know the National Merit Finalists are often offered free tuition and room and board from lower-ranking schools. Often, these are schools you've never heard of or even applied to. It is just a surprise to get a letter from them asking you to attend for free. (They are trying to improve the quality of the student body this way.) They get the student's information from the College Board (SAT).

anonforbogleheads, We had kids in private high school. They don't care about that at all. That is your choice. But if you have more than one kid in college at the same time, the family contribution stays the same and is split between the college(s) each kids attends. So, for college aid, at least, it helps if the kids are close in age.
Celia,

Thanks for your reply - yes when I mentioned that the schools give additional consideration for the extra cost of siblings, I meant as they overlap in college.

I know this seems like a bit of a point of contention among some, but to be 'fair', we are talking about schools that have massive endowments where they could theoretically have free tuition for almost all undergraduate students - it's just that they decide who is 'worthy' to receive financial aid based on their own calculations, which often don't include home equity but overweight parental income/investments and student assets while giving strong consideration for family size.

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Re: Managing retirement date and income for college financial aid

Post by Grt2bOutdoors » Sun Oct 25, 2015 5:24 pm

anonforbogleheads wrote:
I know this seems like a bit of a point of contention among some, but to be 'fair', we are talking about schools that have massive endowments where they could theoretically have free tuition for almost all undergraduate students - it's just that they decide who is 'worthy' to receive financial aid based on their own calculations, which often don't include home equity but overweight parental income/investments and student assets while giving strong consideration for family size.
That being the case, then you should be aware there is no "fair" in the college tuition game, the best option you have is your freedom of choice, someone can ask you for $260,000, there is no requirement that you pay it. That is the price of admission to those schools, the price you pay for a sheepskin that says blank University. It would be different if there was no financial disclosure requirement, then you would be in an advantageous position, but that is not the case. Short of you liquidating your assets and holding them in cold hard cash, you are going to find your options to be limited.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Sun Oct 25, 2015 6:04 pm

Grt2bOutdoors wrote:
anonforbogleheads wrote:
I know this seems like a bit of a point of contention among some, but to be 'fair', we are talking about schools that have massive endowments where they could theoretically have free tuition for almost all undergraduate students - it's just that they decide who is 'worthy' to receive financial aid based on their own calculations, which often don't include home equity but overweight parental income/investments and student assets while giving strong consideration for family size.
That being the case, then you should be aware there is no "fair" in the college tuition game, the best option you have is your freedom of choice, someone can ask you for $260,000, there is no requirement that you pay it. That is the price of admission to those schools, the price you pay for a sheepskin that says blank University. It would be different if there was no financial disclosure requirement, then you would be in an advantageous position, but that is not the case. Short of you liquidating your assets and holding them in cold hard cash, you are going to find your options to be limited.
Completely agree with your comment about options being limited, which is the purpose of this thread.

I think some of the take-aways are that we will look to dramatically decrease income in the year before and during application, pay down all loans/mortgages/credit lines to $0, and stay away from funding assets in the kids' name (i.e. 529). The benefit of being FI is one has the ability to earn and generate income when it is most advantageous to do so. I don't see much difference between limiting taxable income to stay below a specific tax bracket for a Roth conversion vs structuring income and assets to qualify for more financial aid from a private institution that can afford to offer ALL applicants free tuition or significant aid.

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Re: Managing retirement date and income for college financial aid

Post by livesoft » Sun Oct 25, 2015 7:04 pm

Here is a recent decent article from Ron Lieber of the NYTimes on the subject of this thread that makes for interesting reading:
http://www.nytimes.com/2015/10/24/your- ... e-now.html
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Re: Managing retirement date and income for college financial aid

Post by Grt2bOutdoors » Sun Oct 25, 2015 7:34 pm

livesoft wrote:Here is a recent decent article from Ron Lieber of the NYTimes on the subject of this thread that makes for interesting reading:
http://www.nytimes.com/2015/10/24/your- ... e-now.html
The comments make for even more interesting reading.
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Re: Managing retirement date and income for college financial aid

Post by TomatoTomahto » Sun Oct 25, 2015 9:27 pm

anonforbogleheads wrote: The very first sentence of the article you linked to says that Harvard's acceptance rate for legacies is more than 4x the regular admissions rate
As you may recall, Beth* referred specifically to Yale in the post I was responding to, so my link was to indicate that things there are changing. It was not my intention to discuss Harvard.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Mon Oct 26, 2015 8:40 am

TomatoTomahto wrote:
anonforbogleheads wrote: The very first sentence of the article you linked to says that Harvard's acceptance rate for legacies is more than 4x the regular admissions rate
As you may recall, Beth* referred specifically to Yale in the post I was responding to, so my link was to indicate that things there are changing. It was not my intention to discuss Harvard.
Thank you for clarifying that you were responding specifically to her post, since there's no mention of it.

Regardless, based on this recent article (http://dailyprincetonian.com/news/2015/ ... dmissions/) Yale's acceptance rate of 20-25% legacy students is still 3-4x their overall acceptance rate of 6.3% (per their website), so the point is the same.

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Re: Managing retirement date and income for college financial aid

Post by MathWizard » Mon Oct 26, 2015 8:57 am

Op,

I have a niece who attended private liberal arts colleges (not Ivies). It seemed there that students did
get aid, but the expenses were much higher than at the public universities so that the net costs after
aid was about the same as for out-of-state students at the state universities. (In-state, where my kids went,
was about 25% less.)

The in-state schools offered merit scholarships, but for need-based aid, all they got was loans. The asset portion of
the parent's contribution to the Estimate of Family Contribution (EFC) was 0, and parental income was less than $100K.
(We still have one child in college so this is with present day numbers.)

I would not let the (college cost) tail wag the dog.
Last edited by MathWizard on Mon Oct 26, 2015 9:32 am, edited 1 time in total.

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Re: Managing retirement date and income for college financial aid

Post by TomatoTomahto » Mon Oct 26, 2015 9:06 am

From your article:
In this time period, Yale has admitted between 8 and 13 percent legacy students, Harvard between 12 and 16, Dartmouth between 8 and 14 and Cornell between 14 and 17.
...
Harvard’s legacy acceptance rate has wavered around 30 percent, Yale’s between 20 and 25 percent, and Brown does not keep track of the data. Cornell, Penn, Dartmouth and Columbia University did not release this data.
I'm not a data maven, but perhaps this indicates that legacies throw fewer "wing and a prayer" applications at these Ivies, thus resulting in the seemingly disparate data that we've each glommed onto different parts of.

My son, who is a sophomore at Yale now, expressed it succinctly when he was a high school senior, "Dad, I know you hate hooks, but maybe you'll feel differently about it when your grandchildren are Yale legacies." For the record, I'm opposed to all hooks that are not based on demonstrated grit in the face of considerable adversity.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Mon Oct 26, 2015 9:19 am

TomatoTomahto wrote:From your article:
In this time period, Yale has admitted between 8 and 13 percent legacy students, Harvard between 12 and 16, Dartmouth between 8 and 14 and Cornell between 14 and 17.
...
Harvard’s legacy acceptance rate has wavered around 30 percent, Yale’s between 20 and 25 percent, and Brown does not keep track of the data. Cornell, Penn, Dartmouth and Columbia University did not release this data.
I'm not a data maven, but perhaps this indicates that legacies throw fewer "wing and a prayer" applications at these Ivies, thus resulting in the seemingly disparate data that we've each glommed onto different parts of.

My son, who is a sophomore at Yale now, expressed it succinctly when he was a high school senior, "Dad, I know you hate hooks, but maybe you'll feel differently about it when your grandchildren are Yale legacies." For the record, I'm opposed to all hooks that are not based on demonstrated grit in the face of considerable adversity.
Having heard from (in at least one case, first hand) admissions officers from several of the schools mentioned above, legacy status is indeed a 'hook', and can carry as much weight as an exceptional standardized test score or demonstrated outstanding performance in an extra-curricular activity, especially if coupled with consistent and signficant donations to the school by the alumnus.

Of course such giving would probably make applying for need-based aid from such venerable institutions a bit challenging.

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Re: Managing retirement date and income for college financial aid

Post by cherijoh » Mon Oct 26, 2015 9:48 am

For those of you who haven't made the connection, this is the same poster who recently launched the thread "HELOC draw period ending - HELP!". I'm not sure why he is posting again, since he disputed about 95% of the replies which he received to that thread. I would suggest reviewing the other thread before putting any more time into this one.

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Re: Managing retirement date and income for college financial aid

Post by Big Dog » Mon Oct 26, 2015 9:52 am

FAFSA has moved up the date to prior-prior year, so your income for the purposes of federal aid will be the calendar year that your D is a junior. CSS Profile, however, still uses prior year income, so that it would be senior year. Note, however, that the feds just changed to prior-prior year and CSS Profile is mulling it over. Of course, a lot more can change in 5 years.
I think you should have the highest mortgage possible and the lowest value for your house.
Incidentally, while this would help for FAFSA, this really does not matter for private schools. If you have the cash to payoff the mortgage == asset; if you have no cash but no mortgage == home equity asset. Both are considered assets, and subject to the asset calc (~6%) available for college use.

Also note, its only ~6% for fafsa.
Last edited by Big Dog on Mon Oct 26, 2015 10:01 am, edited 1 time in total.

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Re: Managing retirement date and income for college financial aid

Post by go_mets » Mon Oct 26, 2015 9:59 am

cherijoh wrote:For those of you who haven't made the connection, this is the same poster who recently launched the thread "HELOC draw period ending - HELP!". I'm not sure why he is posting again, since he disputed about 95% of the replies which he received to that thread. I would suggest reviewing the other thread before putting any more time into this one.
Typical human behavior exhibited by the OP. I have noticed it in this thread as well.

People post and then want to hear what they want to hear back or they start challenging your posts.
It is usually pointless to "argue" when the OP's mind is made up.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Mon Oct 26, 2015 10:23 am

go_mets wrote:
cherijoh wrote:For those of you who haven't made the connection, this is the same poster who recently launched the thread "HELOC draw period ending - HELP!". I'm not sure why he is posting again, since he disputed about 95% of the replies which he received to that thread. I would suggest reviewing the other thread before putting any more time into this one.
Typical human behavior exhibited by the OP. I have noticed it in this thread as well.

People post and then want to hear what they want to hear back or they start challenging your posts.
It is usually pointless to "argue" when the OP's mind is made up.
Not sure what the purpose of your post was, but at least you have the Mets going for you, which is nice.

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Re: Managing retirement date and income for college financial aid

Post by go_mets » Mon Oct 26, 2015 10:28 am

anonforbogleheads wrote:
go_mets wrote:
cherijoh wrote:For those of you who haven't made the connection, this is the same poster who recently launched the thread "HELOC draw period ending - HELP!". I'm not sure why he is posting again, since he disputed about 95% of the replies which he received to that thread. I would suggest reviewing the other thread before putting any more time into this one.
Typical human behavior exhibited by the OP. I have noticed it in this thread as well.

People post and then want to hear what they want to hear back or they start challenging your posts.
It is usually pointless to "argue" when the OP's mind is made up.
Not sure what the purpose of your post was, but at least you have the Mets going for you, which is nice.
Simply agreeing with cherijoh.

Though you claim you are asking for advice, you don't seem to want to take any and then challenge people when they post something you don't want to hear. Example when you challenged TomatoTomahto in this morning's post about whether he was talking about Yale vs Harvard.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Mon Oct 26, 2015 10:36 am

go_mets wrote:
anonforbogleheads wrote:
go_mets wrote:
cherijoh wrote:For those of you who haven't made the connection, this is the same poster who recently launched the thread "HELOC draw period ending - HELP!". I'm not sure why he is posting again, since he disputed about 95% of the replies which he received to that thread. I would suggest reviewing the other thread before putting any more time into this one.
Typical human behavior exhibited by the OP. I have noticed it in this thread as well.

People post and then want to hear what they want to hear back or they start challenging your posts.
It is usually pointless to "argue" when the OP's mind is made up.
Not sure what the purpose of your post was, but at least you have the Mets going for you, which is nice.
Simply agreeing with cherijoh.

Though you claim you are asking for advice, you don't seem to want to take any and then challenge people when they post something you don't want to hear. Example when you challenged TomatoTomahto in this morning's post about whether he was talking about Yale vs Harvard.
Where did I challenge him about whether he was talking about Yale vs Harvard? I pointed out that, whether Y or H, the stats are the same, making my initial reply to his post valid.

I have agreed with and accepted some of the advice given in this post - perhaps you should read it a little more carefully...but if that is not enough for you PM me and I can detail for you exactly what makes sense and what doesn't.

Lastly, if you want to cheerlead someone else's comment feel free to do so, but at least make sure your own comments are valid and logical.

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Re: Managing retirement date and income for college financial aid

Post by go_mets » Mon Oct 26, 2015 10:43 am

anonforbogleheads wrote:I pointed out that, whether Y or H, the stats are the same, making my initial reply to his post valid.
And the reason for this is to what?
To prove that your reasoning for what you want to do regarding college financial aid "makes sense"?
If so, then what is the purpose of your initial post.
You have already decided. This whole thread is a waste of everybody's time.
anonforbogleheads wrote: Lastly, if you want to cheerlead someone else's comment feel free to do so, but at least make sure your own comments are valid and logical.
I don't see how my "cheerlead" of cherijoh's post was not "logical"?
I don't see how my "cheerlead" of cherijoh's post was not "valid"?

I am sorry you don't like reading my opinion on this matter. But that does not my opinion invalid or illogical.
anonforbogleheads wrote: I have agreed with and accepted some of the advice given in this post - perhaps you should read it a little more carefully...but if that is not enough for you PM me and I can detail for you exactly what makes sense and what doesn't.
.
Huh? Why would I want to PM you?

Everything should be discussed in this thread.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Mon Oct 26, 2015 10:47 am

go_mets wrote:
anonforbogleheads wrote: Lastly, if you want to cheerlead someone else's comment feel free to do so, but at least make sure your own comments are valid and logical.
I don't see how my "cheerlead" of cherijoh's post was not "logical"?
I don't see how my "cheerlead" of cherijoh's post was not "valid"?

I am sorry you don't like reading my opinion on this matter. But that does not my opinion invalid or illogical.
anonforbogleheads wrote: I have agreed with and accepted some of the advice given in this post - perhaps you should read it a little more carefully...but if that is not enough for you PM me and I can detail for you exactly what makes sense and what doesn't.
.
Huh? Why would I want to PM you?

Everything should be discussed in this thread.
Go Mets!

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Re: Managing retirement date and income for college financial aid

Post by PatrickA5 » Mon Oct 26, 2015 11:13 am

anonforbogleheads wrote:
rec7 wrote:For most people aid is very hard to get unless you are very low income.
I used to think that as well, but then I read on the websites of certain schools where they tout that ">70% of our students receive some form of aid" and ">20% of our students' families pay nothing".

I believe that certain universities have raised the sticker price of tuition to astronomical levels knowing full well that very few people can actually afford that price, so they give out lots of aid to offset the high cost while charging full freight to those who can afford it easily.
At the high cost private university in my town, everybody that gets in will get "merit" grants. They don't give any "need" based aid. I equate it to MSRP on a car. Nobody pays it. Even with the nice $13K per year scholarship, the total cost would still be more than double of what our large state schools cost. My son will be starting college next Fall, so we'll have to make a decision - but leaning towards the state school - or maybe even the FREE community college route.

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Re: Managing retirement date and income for college financial aid

Post by anonforbogleheads » Mon Oct 26, 2015 12:03 pm

Playing around with some of the online calculators of a few of the better known Ivy League universities, it seems like most of them don't take into account primary residence value or retirement accounts, and don't seem to differentiate between salary/wages vs interest/dividend income. The latter was very surprising to me.

Harvard's calculator definitely penalizes student assets (529s, etc) vs parental taxable assets. $100k in the former vs the latter decreases aid by $5k or more (per year). Additionally, it seems like parental assets (taxable accounts) of $200k is the cutoff point at which they seem to decrease aid, again by the 5% threshold (i.e. $210k results in $500/yr less aid than $200k).

https://college.harvard.edu/financial-a ... calculator

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