College aid: Do retirement fund and equity in primary residence count?

[Anonymous]

Do colleges count equity in your primary residence and retirement funds in financial aid calculations? I have heard conflicting things. Does it depend on the college?

[Anonymous]

The single biggest factor, dwarfing all others, in determining a student's financial need is the family's income.

Money in 401k and other qualified retirement accounts is not counted when calculating families' expected financial contribution.

http://blog.rollinsfinancial.com/2011/02/q-series-which-assets-affect-financial.html

Regarding home equity, the FAFSA does not count home equity or the value of your principal residence at all. Schools that use the CSS Profile form DO count home equity, but typically equity is capped at 2 to 3 times income, so people who make relatively low incomes but have a lot of equity in their homes aren't unduly penalized.

http://www.forbes.com/sites/troyonink/2014/02/14/h...lity-on-fafsa-and-css-profile/

Colleges that use CSS Profile:

https://profileonline.collegeboard.org/prf/PXRemot...motePartInstitutionServlet.srv

More info:

http://www.thecollegesolution.com/assets-you-dont-need-to-report-on-the-fafsa/

http://www.thecollegesolution.com/answering-a-dads-financial-aid-question/

http://www.thecollegesolution.com/8-financial-aid-mistakes-to-avoid/

http://www.thecollegesolution.com/is-the-money-in-your-college-account-a-ticking-money-bomb/

[Anonymous]

Sorry, the Forbes link above doesn't work. Try this:

http://www.forbes.com/sites/troyonink/2014/02/14/how-assets-hurt-college-aid-eligibility-on-fafsa-and-css-profile/

[Anonymous]

PP, thanks much for these links.
My oldest is 10 years away from college. I am thinking about stashing a lot of savings in retirement accounts instead of starting a 529, and also putting some savings into house renovations. Seems like that will "shield" these assets when it comes time to apply for financial aid. Our household income is only about $110k (at the moment) so we should get some aid anyway. But I figure if we start 529s, that will just decrease how much aid we get. Does this make sense?

[Anonymous]

Anonymous wrote:PP, thanks much for these links.
My oldest is 10 years away from college. I am thinking about stashing a lot of savings in retirement accounts instead of starting a 529, and also putting some savings into house renovations. Seems like that will "shield" these assets when it comes time to apply for financial aid. Our household income is only about $110k (at the moment) so we should get some aid anyway. But I figure if we start 529s, that will just decrease how much aid we get. Does this make sense?

Everything I have ever seen says you should save for retirement first, so yes, I think your plan is wise. If you want to maintain flexibility, put as much as you can into a Roth IRA (or any other retirement vehicle that lets you withdraw money for education penalty free).

I will reiterate the fact that the biggest factor in determining financial aid is income, NOT savings, even 529 savings. Run the simple net price calculator on Harvard's website to see. A family of 4 with a HHI of $110k and zero non-retirement assets, with one student in college, has an expected family contribution of $14,500 (at Harvard; likely higher at other colleges). That same family with "cash and non-retirement investments" of $100k has the same expected family contribution. Even as HHI rises, parents' savings and investments don't move the needle that much.

[Anonymous]

From what I understand, there is a way for higher income families to stash dollars into un-tappable accounts for the sole purpose of getting aid.

We all know that in DC, a family of 3 or 4 with an HHI of $200K is NOT close to being wealthy. But FAFSA doesn't see it that way.

[Anonymous]

I highly distrust 529s, but save enough for the state income tax savings. Anyway, I do believe they count against you, but like a PP said, not as much as yearly income. I may quit my job and work at a grocery store while the kids are in school...just kidding, or am I?

[Anonymous]

Aid has to be paid back so I'm not seeing the benefit of reducing HHI. Maybe I'm missing something?

[Anonymous]

Anonymous wrote:Aid has to be paid back so I'm not seeing the benefit of reducing HHI. Maybe I'm missing something?

Financial aid is a grant, not a loan.

[Anonymous]

Financial aid is a grant, not a loan.

Not in college, it's not. Your FA "package" is likely to include a combination of need-based grants, loans (subsidized and not), and merit scholarships.

[Anonymous]

Anonymous wrote:

Financial aid is a grant, not a loan.

Not in college, it's not. Your FA "package" is likely to include a combination of need-based grants, loans (subsidized and not), and merit scholarships.

At Harvard and MIT (and Ivies) less than $48K is full scholarship. No loans.

As opposed to when I went there 10 years ago, parents made $100K and took out loans for almost the whole amount.

[Anonymous]

This is a little different but the financial guy at my bank told my that unless you fully fund a 529 you shouldn't do it. It counts as an asset. So if you save as little as $50,000 you could end up not qualifying for FA. And as we all know $50,000 will barely make a dent. I had never heard of this or thought of this. I'm going to talk to my actual financial planner to confirm if this is true. The guy at my bank said I should open a SEP IRA (I'm self-employed). It does not count as an asset and you can pull from it, tax free, for educational purposes.

[Anonymous]

Anonymous wrote:This is a little different but the financial guy at my bank told my that unless you fully fund a 529 you shouldn't do it. It counts as an asset. So if you save as little as $50,000 you could end up not qualifying for FA. And as we all know $50,000 will barely make a dent. I had never heard of this or thought of this. I'm going to talk to my actual financial planner to confirm if this is true. The guy at my bank said I should open a SEP IRA (I'm self-employed). It does not count as an asset and you can pull from it, tax free, for educational purposes.

Well of course the money you save for college should be counted as an asset to pay for college. Why on earth wouldn't it?

[Anonymous]

Anonymous wrote:

Financial aid is a grant, not a loan.

Not in college, it's not. Your FA "package" is likely to include a combination of need-based grants, loans (subsidized and not), and merit scholarships.

Except for at a very small number of highly selective colleges, this is correct. FA typically includes a student loan.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is a little different but the financial guy at my bank told my that unless you fully fund a 529 you shouldn't do it. It counts as an asset. So if you save as little as $50,000 you could end up not qualifying for FA. And as we all know $50,000 will barely make a dent. I had never heard of this or thought of this. I'm going to talk to my actual financial planner to confirm if this is true. The guy at my bank said I should open a SEP IRA (I'm self-employed). It does not count as an asset and you can pull from it, tax free, for educational purposes.

Well of course the money you save for college should be counted as an asset to pay for college. Why on earth wouldn't it?

No, this isn't right. Only about 5% of the money in a 529 counts in the FAFSA EFC calculation each year. Colleges do not require you to deplete your savings. They may require you to pay an amount equal to a significant share of your income.