Best financial planning tip for donut hole families

[Anonymous]

Anonymous wrote:

Anonymous wrote:we shifted 600k of assets into non reportable. mostly paying down our mortgage, but also wrapping up a long list of needs: new roof, added an ADU, did dental work, redid driveway, maxed retirement, updated a bunch of legal work like trusts, etc.

If you had $600k of assets to "shift", it's an absolute joke to call yourself a donut hole family. You could have paid cash for the most expensive private college in the US and walked away whistling.

Donut hole is not supposed to mean "I don't want to pay for college even though the money is sitting in my accounts" it's supposed to mean "I need financial aid to make college possible but am above the cut-off for recieving financial aid."

This. I think there are dual definitions. One for the privileged 250/300k+ set and one for the low/mid 100s set.

[Anonymous]

Anonymous wrote:

Anonymous wrote:we shifted 600k of assets into non reportable. mostly paying down our mortgage, but also wrapping up a long list of needs: new roof, added an ADU, did dental work, redid driveway, maxed retirement, updated a bunch of legal work like trusts, etc.

So this is what I don’t understand. If you have enough money laying around to pay down the mortgage, redo the driveway, new roof, and an ADU (!) how can you possibly qualify for financial aid? We don’t qualify for financial aid. We are a donut hole - HHI about $250, $100k in a 529, and we’ll be full pay. We could use a new roof and all sorts of house repairs, but we don’t have that kind of money laying around. If you’ve got that kind of money what is the point of rearranging your finances? You won’t qualify.

If you have HHI of ~$250k and $100k in a 529, those are less than the numbers my sister and brother-in-law had (their HHI is about $10k more) and I'm just letting you know that they're child was offered a financial aid package at a private school (Georgetown). So, don't assume you are going to be "full pay".

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We paid off our mortgage.

This is sound advice, OP! You can pay off the mortgage and also when the time comes, see if you can get merit at private universities

Seems short-sighted to do that when most expensive schools will expect you to tap home equity to help pay for college. Now you'll just be taking out a home equity loan, probably at a higher interest rate than your mortgage.

People making poor financial decisions left and right.

[Anonymous]

Top 10 schools discount primary home entirely.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:we shifted 600k of assets into non reportable. mostly paying down our mortgage, but also wrapping up a long list of needs: new roof, added an ADU, did dental work, redid driveway, maxed retirement, updated a bunch of legal work like trusts, etc.

If you had $600k of assets to "shift", it's an absolute joke to call yourself a donut hole family. You could have paid cash for the most expensive private college in the US and walked away whistling.

Donut hole is not supposed to mean "I don't want to pay for college even though the money is sitting in my accounts" it's supposed to mean "I need financial aid to make college possible but am above the cut-off for recieving financial aid."

This. I think there are dual definitions. One for the privileged 250/300k+ set and one for the low/mid 100s set.

Eh. If someone has 200k in their retirement and has a 600k windfall, they’re in no better position than the person w 600k in their retirement and 200k savings outside retirement.

[Anonymous]

Anonymous wrote:Lowest paid parent quits working for four years. Will make a huge difference in the net price calculation!

We are doing opposite. Non working parent will return to work. It closes the affordability gap.

[Anonymous]

Our HHI is about $200k, but we have almost $400K in savings outside of our retirement (partially from an estate) and 529 (funded for in state only). We are older, and one spouse just stopped working.

There is no way we are getting any FA.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:we shifted 600k of assets into non reportable. mostly paying down our mortgage, but also wrapping up a long list of needs: new roof, added an ADU, did dental work, redid driveway, maxed retirement, updated a bunch of legal work like trusts, etc.

So this is what I don’t understand. If you have enough money laying around to pay down the mortgage, redo the driveway, new roof, and an ADU (!) how can you possibly qualify for financial aid? We don’t qualify for financial aid. We are a donut hole - HHI about $250, $100k in a 529, and we’ll be full pay. We could use a new roof and all sorts of house repairs, but we don’t have that kind of money laying around. If you’ve got that kind of money what is the point of rearranging your finances? You won’t qualify.

If you have HHI of ~$250k and $100k in a 529, those are less than the numbers my sister and brother-in-law had (their HHI is about $10k more) and I'm just letting you know that they're child was offered a financial aid package at a private school (Georgetown). So, don't assume you are going to be "full pay".

How much financial aid did your BIL get from GT? I'm very surprised to hear that

[Anonymous]

Anonymous wrote:Community college to in-state. Your kid will be fine, and you desperately need to learn to stop "keeping up appearances."

This isn't about keeping up appearances.
DS would really like to go to Duke or Brown and he is working his ass off to be an attractive candidate for those schools.

[Anonymous]

Anonymous wrote:we shifted 600k of assets into non reportable. mostly paying down our mortgage, but also wrapping up a long list of needs: new roof, added an ADU, did dental work, redid driveway, maxed retirement, updated a bunch of legal work like trusts, etc.

Yes, we are renovating the house and taking any left over assets and paying down the mortgage. I think this takes care of the asset side of the formula. Thanks

[Anonymous]

Anonymous wrote:Lowest paid parent quits working for four years. Will make a huge difference in the net price calculation!

We thought about this and this seems like a pretty high risk strategy.
It sort of makes sense, especially if the spouse is getting burned out.
How do you know you can get your job back after 4 years out of the industry?

[Anonymous]

Anonymous wrote:

Anonymous wrote:When our oldest was in late elementary school, we did the math and realized that our house would be paid off when he was in his 3rd year of college. By adding just a bit to each monthly payment, we accelerated it so that it was paid off halfway through his senior year of high school. That is freeing up a ton of cash flow during his college years.

So you paid off the 3% mortgage instead of putting it into investments that could earn a lot more than 3%. Yay!

Colleges will skim 5% for family contribution so your investments would need to beat a guaranteed 8%. That's tough.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here. We are definitely considering in state but there are a handful of "dream" schools that are oos. Not a lot of them but a handful. If DS gets in, we'd like to send him with as little pain as possible.

What is doughnut hole to you? Too much for aid at state school or private? There's a big difference. At 135k, we didn't qualify for aid at state schools but did at many privates, not just top tier. Our house is (now) worth a lot, but that didn't seem to be a problem. We paid oof car, paid for necessary repairs/improvements for the year, full year's property tax, full credit card amounts, essentially anything we could, before filling out CSS.

250K AGI 200K in cash and non-retirement in securities.
After we get a new roof, a new heat pump and insulation (pretty much anything that will save us money during the college years), we will probably pay down the cash and securities to almost nothing.
This leads to like 10K in financial aid. This means 75K out of pocket at places like duke and brown

[Anonymous]

Anonymous wrote:

Anonymous wrote:Lowest paid parent quits working for four years. Will make a huge difference in the net price calculation!

We are doing opposite. Non working parent will return to work. It closes the affordability gap.

OP here and we did the calculation and we would gain like 25K in aid and lose retirement contributions and about 50K in free cash. Cutting employment doesn't seem to make sense, unless there is something else that spouse wants to do.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Community college to in-state. Your kid will be fine, and you desperately need to learn to stop "keeping up appearances."

This isn't about keeping up appearances.
DS would really like to go to Duke or Brown and he is working his ass off to be an attractive candidate for those schools.

Best of luck!! These are super hard admits...