Moving $200,000 out of cash to improve chances for college financial aid?

[Anonymous]

We currently have $200,000 in cash and stocks, and only $160,000 in two 529s for our kids who are starting college this year and next ($80,000 each.) We originally kept the $200,000 as an emergency fund, but now we realize that amount of cash is really hurting our changes for financial aid. (I know this because I've played around with the net price calculator for the expensive SLAC that my younger kid is interested in.)

I'm trying to figure out how to reduce our cash holdings. My options are:

1-Put all the money into retirement accounts and pay college only out of cashflow, but that puts us in a very tight spot with college payments if our income suddenly drops or if college ends up costing more than anticipated.
2-Put all the money into the 529s, and then use the cashflow we were planning to use for college to boost our retirement savings (so it doesn't end up accumulating as cash.)


I guess my question is, is there a downside to simply dumping $200,000 of cash into the 529 plans in a single year, before the first kid starts college? Will it trigger some kind of tax spike or raise a red flag for the colleges?

[Anonymous]

I don’t think it will matter. You have to be pretty low income to get FA these days. Otherwise you’re looking at loans, and do you really want that.

[Anonymous]

Anonymous wrote:We currently have $200,000 in cash and stocks, and only $160,000 in two 529s for our kids who are starting college this year and next ($80,000 each.) We originally kept the $200,000 as an emergency fund, but now we realize that amount of cash is really hurting our changes for financial aid. (I know this because I've played around with the net price calculator for the expensive SLAC that my younger kid is interested in.)

I'm trying to figure out how to reduce our cash holdings. My options are:

1-Put all the money into retirement accounts and pay college only out of cashflow, but that puts us in a very tight spot with college payments if our income suddenly drops or if college ends up costing more than anticipated.
2-Put all the money into the 529s, and then use the cashflow we were planning to use for college to boost our retirement savings (so it doesn't end up accumulating as cash.)


I guess my question is, is there a downside to simply dumping $200,000 of cash into the 529 plans in a single year, before the first kid starts college? Will it trigger some kind of tax spike or raise a red flag for the colleges?

Not sure if what you plan is feasible because there will be tax implications for selling stock and you can only superfund the 529 up to $90K in one year.

[Anonymous]

What is your income?

[Anonymous]

You can’t just make a $200,000 contribution to a retirement account.

You have 20,000 available per year per kid. How much can you pay from cash flow per year per kid and how much do you want to pay from savings?

Let your kids know the dollar amount available so they can apply accordingly. They can chase merit at certain schools that will get the oryx’s down.


How much of your cash is the NPC applying to tuition each year.

Seems risky to eliminate an emergency fund in the hopes of getting financial aid if you have a high income.

[Anonymous]

I hate to break this to you, but you have $180k per child in college savings. As it should be. Act accordingly.

[Anonymous]

Some schools don’t count primary residence. You could pay down your mortgage principal. That may help.

[Anonymous]

If you really want to do this, you can look into funding a Whole Life life insurance policy with somebody like Northwestern Mutual.

You have to pay the cost of insurance and we set some up back before we had children, but it now pays a ton of dividends to us (far in excess of any premiums).

Life insurance is never counted. The other thing you can do is pay down your mortgage, although I think most colleges look at home equity in their calculations (though there are some that don't).

Some ideas.

[Anonymous]

pay down mortgage. and max out retirement.

[Anonymous]

What is your HHI?

I assume on the NPC, you played with putting the cash into retirement, your house, and 529.

[Anonymous]

Our HHI is $300k. I know you all say that doesn't qualify us for aid, but that's not what the NPC says. According to the NPC we can get some aid by eliminating our cash.

[Anonymous]

Anonymous wrote:I don’t think it will matter. You have to be pretty low income to get FA these days. Otherwise you’re looking at loans, and do you really want that.

"Low-income" as in making under $200,000 per year—you know, the 88th percentile of household income in this country. I see you're very in-tune with the average American.

[Anonymous]

[quote=Anonymous]You can’t just make a $200,000 contribution to a retirement account.

You have 20,000 available per year per kid. How much can you pay from cash flow per year per kid and how much do you want to pay from savings?

Let your kids know the dollar amount available so they can apply accordingly. They can chase merit at certain schools that will get the oryx’s down.


How much of your cash is the NPC applying to tuition each year.

Seems risky to eliminate an emergency fund in the hopes of getting financial aid if you have a high income.
This. If you want to shield assets, you should probably speak to a CPA rather than seek advice from an anonymous online forum.

[Anonymous]

Anonymous wrote:Our HHI is $300k. I know you all say that doesn't qualify us for aid, but that's not what the NPC says. According to the NPC we can get some aid by eliminating our cash.

I'm confused that you think you can hide money at that income and get aid? You make plenty of money and probably have tons of investments and an expensive house. You need to save more. You can easily pay for college. If you eliminate cash, how will you pay for college?

[Anonymous]

people with 300K HHI should have money saved for college, just like you do.

these "oh poor me" posts from people with top % incomes are ridiculous.