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This is slightly off topic but I wasn't sure where else to post it since the college board does not seem to get much traffic.

I recently ran numbers at a college savings website and its calculator indicated that my emergency fund (or any non-retirement account) would significantly reduce the amount of financial aid my children could receive via FAFSA. Although I do not consider my emergency fund fair game for college spending, apparently FAFSA does. Is there a strategy when applying for aid that indicates to FAFSA that my cash fund is "off limits" and should not be counted in their calculations?

I am not trying to con the system or anything, but I do not consider my e-fund as possible funds for anything other than emergencies...so I am not sure why anyone else gets to consider that money fair game either (hence a long discussion with my mortgage company the first time I tried to buy a house and did not want to list my cash account, I actually won that battle...they just lent me less money, no big deal).

I guess I could slowly over the years fund a Roth and consider that my e-fund, but I'd rather have the cash handy (not even sure how long it would take to withdraw money from the Roth).

Ideas?
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Money is fungible, so it's all the same to them. They don't really care what you have it earmarked for.
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Consider if people could do what you thought of and earmark funds as "not for college use". Most people would earmark 100% of their funds that way and then change their minds whenever they wanted.

Also doing so puts the government into the position of having to judge each person's financial decisions as truthful and worthy of exclusion. Much to much work and loss of the little privacy we have.
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I am not trying to con the system or anything, but I do not consider my e-fund as possible funds for anything other than emergencies..

maybe you think that you aren't, trying to "get away with something" - but really, you are.
You are asking to exclude your assets from consideration.
If it were possible for anyone to say Oh, yes, that $50k, that is not money we are going to sepnd for anything other than Granny's hip replacement, or emergency or whatever...

then EVERYONE would have a "special fund" and there would be a higher requirement for financial aid.
Not that I am condoning this, but if you want to "hide it" from FAFSA, or have it not considered, withdraw it in cash/bonds/doubloons, put it in a safe place, and lie on the form - because it does ask about "other cash and assets" not listed.

Otherwise it technically IS available for college funds.
Just because you wont use it for that does not mean it is eliminated from consideration.

The only other possibility is to do what someone on the CC board has done (joelcorley or joelxwil - i think) - and just refuse to disclose ANY financial information.
This does not mean your kids get financial aid, it means the FAFSA has to then guess for you- and maybe there will be aid and maybe there won't.

peace & the rules
t
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Consider if people could do what you thought of and earmark funds as "not for college use".

But people already do this....when they put stuff in retirement accounts. This still gets included on the form but it does not get "counted" like a regular cash account because it has been "earkmarked" for something else (in this case, retirement). My question really is are there any other accounts like this that I can utilize for my e-fund?

Worse case, I guess I can use my contributions to a Roth as my e-fund, and draw down my cash account. By the time my kids go this strategy should not effect my retirement savings.
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My question really is are there any other accounts like this that I can utilize for my e-fund?

Try the stuff under the mattress fund.
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Consider if people could do what you thought of and earmark funds as "not for college use".

But people already do this....when they put stuff in retirement accounts. This still gets included on the form but it does not get "counted" like a regular cash account because it has been "earkmarked" for something else (in this case, retirement). My question really is are there any other accounts like this that I can utilize for my e-fund?

Worse case, I guess I can use my contributions to a Roth as my e-fund, and draw down my cash account. By the time my kids go this strategy should not effect my retirement savings.



The first thing to realize is law, especially tax law is arbitrary. Example, reduced capital gains rate is arbitrary, unlike the US which only taxes realized capital gains, there are countries which tax unrealized capital gains as well. People can come up with any number of reasons reduced tax rates exist for capital gains, but it all comes down to "someone thinks it is a good idea" and they managed to convince a bunch of people to go along. I'm not here to debate capital gains tax rates, I'm just to take advantage of them.

Given that tax law is arbitrary:

1) There are legal restrictions on IRAs which makes placing money into them more of a commitment than placing money in a savings account

2) The government wants to encourage retirement savings and not generic savings so retirement savings are treated special.

3) Divorce your wife and let her have custody. Non-custodial parent's income disclosed to FAFSA
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One other possibility that can be used is to pay down your mortgage after you have opened a line of credit in the same amount as your e-fund.The risk is that your LOC limit can be adjusted down by the bank before you use it.

Correct me if I am wrong, but from what I remember the FAFSA counts parental assets at a 6% contribution limit. so a 50K e-fund would equate to a 3k difference in annual funding, is that right? A combo approach may be even better, perhaps fund a Roth and pay down mortgage debt. It was our experience that unless parental income was below 45K,
there really was no need based aid anyway.

Hope this helps

JK
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from what I remember the FAFSA counts parental assets at a 6% contribution limit

Huh, that is not what the calculator indicated...this is good news though, I will research some more and go straight to FAFSA and stop messing around with calculators. Thanks.
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I want to caution you it may or may not be accurate. 3 years since I filled one out, and the memory is somewhat hazy, but that is what I remember.

JK
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On strategy is to use all funds available on your mortgage. Home equity is not considered in the FAFSA, although some schools do consider it. This is why I currently place paying of a home above saving for college.

If you did have an emergency and had a far bit of equity in your home, you could get second or line of credit to cover the emergency.


Another way is to make prepayments, note this is not the same as prepaying principle, in that it does not save you interest as much interest, but it does move your due date for the next payment out. Thus for small hiccups you just stop paying the mortgage for a few months and use those funds to meet the emergency.

However, I am not sure that I will do either as the first option assumes that you can get a second mortgage if you need it and the second really only works if the biggest emergency you might have is equivalent to 1-2 of your mortgage payments.


As for gaming thee system. The system is what it is, following the rules laid out is hardly cheating. Giving your aunt Sally a bag of $100 to hold for you and never reporting it on the other hand....
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If you think your situation is wild, get this one.....it happened to a SIL of mine.

SIL divorced while her youngest daughter was in middle school, then remarried while daughter was in high school. In completing FAFSA, they had to fill out financial info on mother, father, and step-father
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that isn't wild.
the FAFSA requests information from all potential income sources- so income sources from the custodial HOUSEHOLD (just as some other federal programs are qualified by household income) and from the other parent if there are assets to be considered.

peace & not surprising
t



has filled out those forms Sooooo many times
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If you think your situation is wild, get this one.....it happened to a SIL of mine.

SIL divorced while her youngest daughter was in middle school, then remarried while daughter was in high school. In completing FAFSA, they had to fill out financial info on mother, father, and step-father


Huh? Are you suggesting that the father shouldn't be expected to provide some financial support because the mother got remarried?
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