My oldest son started college this fall. We enlisted a financial advisor through my work place to help lead us through the FAFSA jungle and provide some direction. My son recieved some financial aid from the college ($17k tuition with a $4k grant and a $2.6kloan. I currently have about $13000.00 in saving bonds (about half of them are eligible for the education benefit program. My son has $5000.00 in his own checking account. I know these funds won't go far, but they are a help. My plan is to go after as much aid as possible after my son's mid term grades come in (hopefully they will be good. Transfer his money into my account to minimize any decrease in aid due to his job (too bad kids get penalized for working through college). I'm not sure how fast to burn or in what order to use the savings bonds,but I may as well use them as needed. I also expect my daughter to start college next year. I believe the expected family contribution will be about the same if both are in college at the same time. My question is: Am I doing the right thing in the right order?Thanks
<<I currently have about $13000.00 in saving bonds (about half of them are eligible for the education benefit program >>If you qualify to use the Hope and/or Lifetime Learning credits, you may want to check to see if you can use these credits and the savings bond deal the same year.Just a comment, if your income qualifies you for the savings bond deal and your son is a reasonably good student, your aid package looks somewhat low to me.(with the understanding that I have very few details). Have you run your numbers through the EFC calculator at www.finaid.org ?<<My plan is to go after as much aid as possible after my son's mid term grades come in (hopefully they will be good. >>Merit aid ? Aid is usually awarded in a school year package and rarely does more aid become available mid-year.JackiThe transfering money to your account is not something I would do. If there is a 1099 generated by the account, the finaid office may ask where that money went. Also, frankly in terms of disclosing his assets, what would you answer on the FAFSA next year ?
My plan is to go after as much aid as possible after my son's mid term grades come in Recovering Fool made a good point about aid packages not being changed "mid-stream". I also heard stories, when I was in college, of aid being decreased significantly in following years, even though parents & students contribution amounts didn't really change. Might have just been my higher education institution's financial aid (they used that term loosely) office, but I have a feeling it happens at other colleges/universities. Basically they would give large amount of aid freshman year and it would decrease each year.As to the in-college-job-penalty, I suppose it is partially true. I believe FinAid administrators believe that all funds earned should be spent on college, so that is why they use his income for the expected contribution amount. My wife and I both worked through college, and my advice is: If he can live without working during semesters (summer is fine) he should. Many students (myself somewhat included) spend their income on things not entirely neccessary for their education, and that is when having a job is a "penalty". If, however, he is working to pay for books/tuition/room&board, maybe he should look into a on-campus job. Possibly be able to get a work scholarship so that he wouldn't lose $$ to taxes.College financial aid was extremely frustrating for me, so I am bitter. :) Might just have been my experience (hopefully), but I have a feeling others have same problems. My parents were unable to save for my college, but they did try and help me a little. I found out that even though I had a B+ average in engineering, I couldn't get scholarships - and definitely not for lack of trying. Your son might have better luck however. Their are supposedly a multitude of unclaimed scholarships each year (can find books in library with them), so maybe he can try applying for those. Those are, from what I remembered, not based entirely on need.Best of luck to you and your children! Make sure you tell them each time you write a check out that they can support you when you get older and they have those high-paying jobs! :) just kiddingHave a great day!LaMar
I found out that even though I had a B+ average in engineering, I couldn't get scholarships - and definitely not for lack of trying. I can say that this has probably changed. The aid pendulum is swinging toward more merit-based aid. Definitely check on state merit-based scholarships. More states are starting these programs each year. Be sure your child takes the PSAT because it's the qualifying test for the National Merit Scholarship program. While there will be an increase in college students overall, many colleges are looking harder for the good students. Because of accountability measures, it's in the best interest of a college to find students who look like they will be successful in college.While colleges used to front load aid, I'm not sure this is still true.Jacki
Recovering Fool -- I need your help here.LaMar wrote,Possibly be able to get a work scholarship so that he wouldn't lose $$ to taxesMy son qualifies for a small amount of Federal Work/study money in his financial plan. Since we live in Mn. and he goes to school in Indiana, I thought it would be too much of a hassle to fill out Ind. income tax forms as well as the Mn. state forms (he makes very good money in the summer) for the small amount of money he would make by working on campus under the Federal Work/Study program. Does what LaMar wrote mean that he wouldn't have to pay income taxes on this money?Thanks for any info you can give me. Judy
My son qualifies for a small amount of Federal Work/study money in his financial plan. Since we live in Mn. and he goes to school in Indiana, I thought it would be too much of a hassle to fill out Ind. income tax forms as well as the Mn. state forms (he makes very good money in the summer) for the small amount of money he would make by working on campus under the Federal Work/Study program. Does what LaMar wrote mean that he wouldn't have to pay income taxes on this money?This is probably one for the tax board. State tax laws are a whole other ball of wax but in most states, the form to get back your tax money is fairly simple. The other issue is that by declining work-study, you have basically declined part of the aid package. Since your son went to school without the work-study, it may leave the impression that you didn't need that part of the award. If your son had an award of say 100 hours per term(about 10 hours a week) @ say, $6 an hour, that wouldn't have given him spending money during the school year ? getting on soapbox Does your son think $600 is a small sum of money ? Have you calculated teh saving in interest on a reduction of %600 in the amount of loans? off soapbox:) I'll also head off to see if I can find more information about taxing of work-study money.Jacki
Jacki -- thanks, I'll check with the tax board. You are right in that the extra money would help pay for transportation back home (if nothing else)!! His schedule is so goofy and he is in so many extra-curricular activities (jazz band, comedy troupe, probe leader for new freshmen) plus he does struggle to get good grades, we decided it would be better for him to leave working to just summers and holiday breaks. He works hard at 2 jobs over the summer in order to make his ends meet. I'm not sure how long his "work-free" years at school will last and I sure don't want to lose that work/study option in his financial plan, so we may have to re-think all of this. Thanks for the info!! Judy
Judy 114 wrote: My son qualifies for a small amount of Federal Work/study money in his financial plan. I'm not sure how FWS affects income tax. But I do know it has a positive affect on your future financial aid. FWS earnings are not considered income for Financial Aid purposes, so it does not count against you when they calculate your Expected Family Contribution (EFC) for your financial aid for next year.
Thanks NellieD and Jacki -- I believe the consensus from the tax strategies board and the info you gave me is that it is taxed. You brought up a point, Nellie, that I had not considered. Thanks for your input. Judy
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