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

[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?

I wish that I could speak to you and to your kids in private.

Without privacy, can you share your kids' anticipated college majors and career plans if known ?

[Anonymous]

Anonymous wrote:

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?

I wish that I could speak to you and to your kids in private.

Without privacy, can you share your kids' anticipated college majors and career plans if known ?

Also, are you willing to list 5 LACs one of which is your child's target school ?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why do you have $200K in an emergency fund?

Is that for emergency Porsche replacement?

Have you ever calculated the minimum cash you need for a year - mortgage, utilities, food, insurance, cars, etc? It’s a lot more than you might think. Depending on their mortgage, $200k might be ballpark.

Most people can't afford to keep a year's worth of expenses as an emergency fund.

And it's not even recommended to keep 12 months of cash. 3 months top

They said stocks and cash....

[Anonymous]

Anonymous wrote:

Anonymous wrote:You’re not going to get FA with an income that high. It doesn’t matter what you do with that money.

+1. The npc you are looking at may be for merit not financial aid.

100% this.

Use the money to pay for tuition.

[Anonymous]

Can’t you pay in full at your state school? Isn’t this exactly what many people dream of? You’ve made it!

[Anonymous]

We're basically you (also just made it to 300k from 150k just a few years ago, same "big" cash savings). We're anticipating doing in-state (which we can pay easily) for both kids, or elsewhere only if good merit. We're not counting on financial aid.

[Anonymous]

Anonymous wrote:We're basically you (also just made it to 300k from 150k just a few years ago, same "big" cash savings). We're anticipating doing in-state (which we can pay easily) for both kids, or elsewhere only if good merit. We're not counting on financial aid.

You take that extra $150 a year and use that for college and don't change your spending. Simple.

[Anonymous]

Anonymous wrote:You won't get any FA, OP. Colleges are making their business to level the economic playing ground. People who are comfortable but not rich are not permitted to have any luxuries or benefit from their work but are expected to save it all for college tuition. While others go for nearly free, and at our expense. And then WE are told not to whine. LOL.

I don’t know anyone going for free. So try again. Even poor families pay, the are simply eligible for grants, and work studies. Scholarships and merit aid are available to everyone, with the right stats.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:America likes to punish middle class savers. It’s better to have no savings and get full need based aid.

Stupid statement. Only 5% of assets (savings) are counted towards paying for college.

Ha, ha, ha, ha! Maybe if you are low income. Most private colleges want you to raid your retirement, remortgage your house, take out loans…

+1 That's why they also ask for the market price of your house.

Yes, and whatever the equity of your house--5% is expected to go toward COA.

Is it only 5%? Where does it say that?

That's the fafsa formula. CSS schools calculate however they like. You can reverse engineer somewhat using their own NPC calculators but I've not done it.

No they don’t.

It’s 5%. The difference in financial aid at CSS schools depends on how much home equity is capped or not included, income protection percentage, amount of asset and income allowances subtracted from assets.

https://secure-media.collegeboard.org/digitalServices/pdf/professionals/what-is-institutional-methodology.pdf

https://collegeaidpro.com/how-home-equity-affects-the-css-profile/

[Anonymous]

Anonymous wrote:

Anonymous wrote:We're basically you (also just made it to 300k from 150k just a few years ago, same "big" cash savings). We're anticipating doing in-state (which we can pay easily) for both kids, or elsewhere only if good merit. We're not counting on financial aid.

You take that extra $150 a year and use that for college and don't change your spending. Simple.

You know people pay taxes, right? Lol. But yes, we're able to save more. Still not going to spend all that on private college times two when we can do in state/cheaper and then help our dcs with a downpayment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We're basically you (also just made it to 300k from 150k just a few years ago, same "big" cash savings). We're anticipating doing in-state (which we can pay easily) for both kids, or elsewhere only if good merit. We're not counting on financial aid.

You take that extra $150 a year and use that for college and don't change your spending. Simple.

You know people pay taxes, right? Lol. But yes, we're able to save more. Still not going to spend all that on private college times two when we can do in state/cheaper and then help our dcs with a downpayment.

DP. That's a valid choice. Even with taxation, it's $150K of flexibility that the family making half that does not have. And the family making half doesn't get a full ride at most schools. What's better paying $40K per kid on an income of $150K or paying $80K per kid on an income of $300K (plus $200K in savings). This is not an injustice, scenario two is clearly better.

[Anonymous]

My understanding, which could be wrong. So the cash assets and 529s are both parental assets and assessed at around 5.xx%. So I don’t see how switching cash to a 529 helps, unless maybe you make it a custodial 529 for the younger child. Consult an expert.
Otherwise, if you’re not currently maxing out retirement funds, couldn’t you do that and spend your assets on living expenses if needed? That would start that process on getting the assets moved into retirement funds.
You could also just spend the money on home repairs, cars, travel, etc. but you have to decide if any of that is worth it.

[Anonymous]

Anonymous wrote:

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?

I wish that I could speak to you and to your kids in private.

Without privacy, can you share your kids' anticipated college majors and career plans if known ?

You just know the poster is above board when they are not comfortable making their advice public.

Sleaze meet sleaze.

[Anonymous]

Anonymous wrote:Why do you have $200K in an emergency fund?

Is that for emergency Porsche replacement?

Agree. Emergency savings is supposed to be 3 mos of monthly bills or 6 months if you can swing it. If that is 3 to 6 months of your expenses, you need to reduce your overhead.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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?

I wish that I could speak to you and to your kids in private.

Without privacy, can you share your kids' anticipated college majors and career plans if known ?

You just know the poster is above board when they are not comfortable making their advice public.

Sleaze meet sleaze.

A private talk about swamp land in Florida at the magical price of $200k!