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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8156  
Subject: 07-08 EFC formula Date: 2/10/2007 11:05 PM
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To see how FAFSA is calculated, it is useful to click on http://studentaid.ed.gov/students/attachments/siteresources/0708EFCFormulaGuide.pdf.

Or in a given year, you can google "EFC formula 2007", if it is for the upcoming year.

You can't do too much about income, but you can about assets: the key table for parents is table A-5 on page 19 of the link.

For example, if you, the oldest parent, are 54 (as in moi), you get an asset protection allowance of $54,300. If you have CURRENT (ie, non-retirement) assets higher than this, you should consider taking steps to reduce them, such as by:

*Paying off credit cards and other debts (their balances are not in the formula)
*Making charitable contributions
*Paying off tax bills
*Making IRA and pension contributions
*Making planned big ticket purchases
*Putting money in a variable annuity

As far as junior is concerned, it helps to have a low bank balance at FAFSA time. Such things get assessed pretty heavily. On the other hand, junior should be counselled that payments from the savings now reduce indebtedness on graduation. Only if junior would qualify for a subsidized loan or a Pell grant, would taking steps to reduce a bank account make sense (such as by making an IRA contribution).

And if junior has money coming from parents, such as for their contribution toward the current EFC, they should wait until after filing FAFSA.

Finally, I note that FAFSA measures assets as of the date of filing, not December 31 of the year before. Therefore, you can make financial moves before filing FAFSA.
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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6913 of 8156
Subject: Re: 07-08 EFC formula Date: 2/11/2007 7:33 PM
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*Paying off credit cards and other debts (their balances are not in the formula)
*Making charitable contributions
*Paying off tax bills
*Making IRA and pension contributions
*Making planned big ticket purchases
*Putting money in a variable annuity



Can you explain to me why the variable annuity makes sense? That seems to be the thing that everyone is touting, but to me, it just looks like I'm supposed to give away all my assets so that my kids can get more financial aid, the vast majority of which would be in the form of loans. I don't understand why that's better than me continuing to invest my assets and just writing a check to pay for their college.

I'd end up with full control of my assets and the ability to spend the whenever I want with no restrictions, and the kids would end up without a ton of debt to get their education.

I have yet to figure out why these annuities are good for me and not just good for the person selling, but I'm probably just missing something.

Can you elaborate at all?

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Author: 38Packard Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6914 of 8156
Subject: Re: 07-08 EFC formula Date: 2/11/2007 8:38 PM
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I just completed our first FASFA for 2007-2008. Pretty depressing, even though I have done just about everything to shield the assets. I think it has more to do with our annual income than anything.

Our EFC is so high, we'll probably not get anything, but certainly do not have enough savings to pay for most of the colleges on our D's list. She'll be having to take out some serious loans, which we will help her with as we can, but she will still carry a pretty heavy burden. That is unless she gets some merit scholarship money for her accomplishments in High School....

Hoping...
'38Packard

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6915 of 8156
Subject: Re: 07-08 EFC formula Date: 2/13/2007 10:11 PM
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I have yet to figure out why these annuities are good for me and not just good for the person selling, but I'm probably just missing something.

Thanks for the response, 2gifts. Here are few thoughts:

First, I'm not here to dictate morality. Basically, you have to make your own decisions based on what you believe is right in your family's circumstances. Your milage will vary, in other words.

My own priorities are first, care of parents (not a problem in my case), then care for our retirement, then helping junior with college. This is because junior has a longer lifespan in which to accumulate his own retirement, as well as being your heir. It would be better, if you can get a subsidized loan or a Pell grant, to take those, invest the funds you retain, then pay back a chunk if you wish, 6 months after graduation. Finally, junior will act more responsibly in college, if he or she puts some of his or her own skin into the project.

As to annuities, the only other option you have (after eliminating debts, and maxing out 401ks and IRAs) might have something to do with a non-qualifying traditional IRA. But I have no knowledge of this. You will note that the variable annuity option was at the end of my list--I don't like it all that well, myself. At least, at 59.5 yo, I can withdraw it all, and that's not far away. Check with discount brokerages or maybe Vanguard for pricing.

The kid's own contribution to EFC is separate from the parents. It is based on the kid's own income and savings--that will be clear from reading the link in the OP. That is what Uncle Sam is telling him or her to pony up (via the college's financial plan for junior). Uncle Sam also tells DW and me what to pony up, and we do so happily, so long as junior is making progress.

DS#1 is in his third semester of grad school with one to go. He has managed his money very well, and plans to join the Army on graduation. Since he saved the family by getting and keeping a scholarship as an undergrad, I plan to give him some skin of my own before writing the FAFSA for DS#2, who's played the prodigal a bit, but has shown some signs of growing up.

And finally, if your kid is going to a prestige school, Ivy League, Rice, St. Johns are examples, then you will fill out a special financial statement that takes more of your assets into account than the FAFSA.

Good luck with yours,

Kat



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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6916 of 8156
Subject: Re: 07-08 EFC formula Date: 2/13/2007 10:23 PM
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Our EFC is so high, we'll probably not get anything, but certainly do not have enough savings to pay for most of the colleges on our D's list. She'll be having to take out some serious loans, which we will help her with as we can, but she will still carry a pretty heavy burden. That is unless she gets some merit scholarship money for her accomplishments in High School....

Sorry about that, though if DS has picked out an expensive school that will incur loans despite your income contribution, that's really her lookout. Which school is she considering? The only big bucks schools I would consider backing junior's going to are St. Johns and Hillsdale, IMHO.

I'm rather on the opposite end of the pay scale, not having paid income tax in years. And yes, they're carrying some rather heavy loans.

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6917 of 8156
Subject: Re: 07-08 EFC formula Date: 2/14/2007 9:49 AM
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She'll be having to take out some serious loans, which we will help her with as we can, but she will still carry a pretty heavy burden.

Before she chooses to do this, you may want to have a discussion about how this will impact her after college. I recommend using this calculator : http://www.coloradomentor.org/FinAid/Steps/slope.asp . It can help her understand how much she's considering borrowing vs how much she may hope to earn in her profession.

A college choice may not be much different than choosing housing or transportation. You may not be able to afford what you want.

rad

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6918 of 8156
Subject: Re: 07-08 EFC formula Date: 2/14/2007 9:52 AM
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The only big bucks schools I would consider backing junior's going to are St. Johns and Hillsdale, IMHO.

EFC from FAFSA is irrelevant at Hillsdale. They don't participate in the Federal financial aid programs.

rad


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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6928 of 8156
Subject: Re: 07-08 EFC formula Date: 2/15/2007 9:37 AM
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EFC from FAFSA is irrelevant at Hillsdale. They don't participate in the Federal financial aid programs.

Of course. That's partly why I recommend it. However, I assume they do some sort of a financial assessment of incoming students, and have a sliding tuition scale. But I'm interested. How do they do the financial aid thing?

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6931 of 8156
Subject: Re: 07-08 EFC formula Date: 2/15/2007 11:22 AM
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Of course. That's partly why I recommend it. However, I assume they do some sort of a financial assessment of incoming students, and have a sliding tuition scale. But I'm interested. How do they do the financial aid thing?

For any college, information is available on their website. Here's Hillsdale's :
http://www.hillsdale.edu/admissions/finaid.asp

Throw the college name in google to find the home page for the college website.

rad

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Author: MotleyGeo One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6936 of 8156
Subject: Re: 07-08 EFC formula Date: 2/18/2007 7:29 PM
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Hi All - I have two in college and what I learned through all this is the financial aid from the school comes down to if they want your child or if they don't want your child. My number is too high to get federal aid but despite this my oldest got scholarships and grants from a private school that brought tuition down from $35k/year to the higher end of our local State universities without funding. In other words - something in reach.

IMHO, the non-federal aid you get has nothing to do with need. I recommend your kids to consider the best schools for their major (if they know it) and go for it. All that can happen is they say NO and you're out some registration fees or its too much money and you say NO.

George



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