FASFA and college costs

[LivingAlmostLarge]

So if DH and I were to retire before our kids start college, how would that affect their college based needs? If we retire do assets count against FASFA? Or is it only income? My DH will be 57 in 2034 when our youngest will be finishing college. As it looks i think we've saved enough for both of them to go to college 100% paid without saving more. I actually worry we might have oversaved but better safe than sorry. I did do something smart and saved 50% in taxable and 50% in ESA/529. So we won't get hit with the 10% penalty.

But that being said as this decade begins I think maybe we don't want to work until age 55 and 57. That was always the "plan" just because it seemed reasonable. But now I ponder more how does not having income? Is it based on tax return? So if we retired and had income of $80k then it would help them get financial aid? Or is that a moot point because I saved for them in ESA/529 and taxable accounts?

[disneysteve]

Here are things that you need and are included when you fill out the FAFSA.

• Federal tax information or tax returns including IRS W-2 information, for you (and your spouse, if you are married), and for your parents if you are a dependent student:
  • IRS 1040
  • Foreign tax return, IRS 1040NR, or IRS 1040NR-EZ
  • Tax return for Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federated States of Micronesia, or Palau
• Records of your untaxed income, such as child support received, interest income, and veterans noneducation benefits, for you, and for your parents if you are a dependent student
• Information on cash; savings and checking account balances; investments, including stocks and bonds and real estate (but not including the home in which you live); and business and farm assets for you, and for your parents if you are a dependent student

[Thrif-t]

Your retirement accounts will only be counted at private schools if you fill out the Profile.

If you go to public colleges and do the fafsa retirement accounts are not counted. The amount in your 529s will be counted, make sure those are in the parent's name with the kids as beneficiary's not the kids as owners. Fafsa will also take in account the dollar amount in checking, savings and any investment accounts that aren't retirement as well as any earned income. When you file the fafsa it looks at your tax return from 2 years ago in figuring out the next school years aid, but will look at the value of your earnings, savings, checking investments in real time.

I have to admit when my oldest was in elementary school, I started rolling funds out of my investment accounts and into IRA's so the funds wouldn't count against financial aid. We never qualified for pell grants or anything but we did get the subsidized student loans and qualified for the American Opportunity Tax Credit.

[MonkeyMama]

FASFA is for public schools. Private schools all have their own rules.

This is very rough, but colleges expect you to contribute 5% of your assets and 50% of your income. (Though both income and assets have a low baseline that can't be touched).

I would expect that it's going to be moot for you, LAL. The only exception I've seen for people in your shoes is maybe if they have multiple kids in college at the same time. Then you might get a tiny break. If it's $150K per year (for 2), which is 5% of $3 mil. But you'd want to hope you don't have $3 mil in taxable assets, or that the school doesn't count retirement or home equity.

There's lots of great calculators online. Whatever the FASFA calculators are were absolutely spot on (it's a pretty simple formula). Like taxes, it's probably garbage in/garbage out. The hard part is probably knowing what assets/income count, what doesn't count, etc. I think there is also a CSS calculator that spits out an average. That's more rough because every private college is different. If you have any colleges in mind, or just want to test a few random private schools, they all have in depth calculators on their websites.

My son is applying for colleges right now. Some of the more competitive colleges (in high cost regions) have -$0- tuition below $150K income. I share because from what I have seen the colleges are more lenient on the income side, but they absolutely aren't going to give you a penny if you have substantial assets (and low income). These schools don't do merit aid either, so they really won't give you a penny. It would be a no-brainer for my child to attend any of these schools (with very average income and assets). You might have to strategize differently and would be more interested in schools with more merit aid? I don't know, probably a good bogleheads question.

[disneysteve]

FASFA is for public schools. Private schools all have their own rules.

Our daughter went to a private school. The FAFSA was required for ANY aid at all. You couldn’t get an academic scholarship without filing the FAFSA.

[MonkeyMama]

Our daughter went to a private school. The FAFSA was required for ANY aid at all. You couldn’t get an academic scholarship without filing the FAFSA.

I just meant in terms of OP's questions. The FASFA calculators aren't relevant to what private schools would expect parents to contribute.

[Like2Plan]

Have you done one of those practice FASFA forecasters modeling with your expected future income and assets?

Here is one: https://fafsa.ed.gov/spa/fafsa4c/#/landing

[moneybags]

Each college has their own calculators online to determine what type of aid you would receive at their school. You could test a few to see where you land.

[LivingAlmostLarge]

FASFA is for public schools. Private schools all have their own rules.

This is very rough, but colleges expect you to contribute 5% of your assets and 50% of your income. (Though both income and assets have a low baseline that can't be touched).

I would expect that it's going to be moot for you, LAL. The only exception I've seen for people in your shoes is maybe if they have multiple kids in college at the same time. Then you might get a tiny break. If it's $150K per year (for 2), which is 5% of $3 mil. But you'd want to hope you don't have $3 mil in taxable assets, or that the school doesn't count retirement or home equity.

There's lots of great calculators online. Whatever the FASFA calculators are were absolutely spot on (it's a pretty simple formula). Like taxes, it's probably garbage in/garbage out. The hard part is probably knowing what assets/income count, what doesn't count, etc. I think there is also a CSS calculator that spits out an average. That's more rough because every private college is different. If you have any colleges in mind, or just want to test a few random private schools, they all have in depth calculators on their websites.

My son is applying for colleges right now. Some of the more competitive colleges (in high cost regions) have -$0- tuition below $150K income. I share because from what I have seen the colleges are more lenient on the income side, but they absolutely aren't going to give you a penny if you have substantial assets (and low income). These schools don't do merit aid either, so they really won't give you a penny. It would be a no-brainer for my child to attend any of these schools (with very average income and assets). You might have to strategize differently and would be more interested in schools with more merit aid? I don't know, probably a good bogleheads question.

Okay so here's the breakdown

$45k ESA/529
$40k taxable for each kid

So that for each kid already basically says they pay 100% and may or may not qualify for any financial aid? Correct?

For us I'm was just contemplating what if we decide to retire early and our income will be $80k from our 401k then we are looking at no aid correct?

[disneysteve]

Okay so here's the breakdown

$45k ESA/529
$40k taxable for each kid

So that for each kid already basically says they pay 100% and may or may not qualify for any financial aid? Correct?

Keep in mind that not all financial aid is needs-based.

Our daughter got a $19,500/year academic scholarship. While in college, she was awarded a $3,000 annual departmental scholarship for years 2, 3, and 4.

Loans are also part of financial aid.

There are also all sorts of outside scholarships they can apply for. Once they're in high school, starting looking into that. A wide variety of organizations offer scholarships and many of them go unclaimed because nobody knows about them or applies for them. They are often small, like $500 or $1,000, but every little bit helps even if it just pays for books for one semester. They may involve writing an essay or doing some other sort of project. There are various resources for researching what's out there when the time comes.

[LivingAlmostLarge]

Keep in mind that not all financial aid is needs-based.

Our daughter got a $19,500/year academic scholarship. While in college, she was awarded a $3,000 annual departmental scholarship for years 2, 3, and 4.

Loans are also part of financial aid.

There are also all sorts of outside scholarships they can apply for. Once they're in high school, starting looking into that. A wide variety of organizations offer scholarships and many of them go unclaimed because nobody knows about them or applies for them. They are often small, like $500 or $1,000, but every little bit helps even if it just pays for books for one semester. They may involve writing an essay or doing some other sort of project. There are various resources for researching what's out there when the time comes.

I plan on trying to get my DK to apply to any and all scholarships.

[kork13]

Keep in mind that not all financial aid is needs-based.

Loans are also part of financial aid.

There are also all sorts of outside scholarships they can apply for.

I never even bothered with FAFSA back when I was going to college. My parents, while by no means wealthy, earned a healthy income & had saved a good chunk of money for college. They told me I wouldn't qualify for any needs-based stuff, and I/we weren't interested in student loans. So I just applied to colleges & scholarships, and ignored FAFSA.

I will add that another opportunity that FAFSA gets you access to are campus jobs -- for example, part of my brother's financial aid package (after my mother stopped earning income) included a job at the campus bookstore. Many campus jobs are exclusively (or largely) staffed through FAFSA. Not sure if FAFSA was a thing back in the late 70s, but my father worked as a campus janitor in college. IMO those campus jobs are a fantastic option, because rather than just doling out cash or loans, a person has the responsibility & dignity of working to fund their education.

Looking back, some colleges may have wanted me to do FAFSA as part of their local scholarship/aid programs. But I ended up with a couple small $1k-ish scholarships, as well as a full-ride scholarship at a great school (plus a small stipend, with guaranteed job afterward), so it worked out for me. Of course, that was a military academy, so kind of a different deal than most universities.

[disneysteve]

I never even bothered with FAFSA back when I was going to college. My parents, while by no means wealthy, earned a healthy income & had saved a good chunk of money for college. They told me I wouldn't qualify for any needs-based stuff, and I/we weren't interested in student loans. So I just applied to colleges & scholarships, and ignored FAFSA.

As I mentioned earlier, it really depends on the school. My daughter's school wouldn't do anything, even internal academic scholarships, without the FAFSA. We had to file even if we knew she wouldn't qualify for anything.

[LivingAlmostLarge]

As I mentioned earlier, it really depends on the school. My daughter's school wouldn't do anything, even internal academic scholarships, without the FAFSA. We had to file even if we knew she wouldn't qualify for anything.

This is something I wondered. I guess there is no way around paying for it if you have no income and just assets!

[moneybags]

There are also all sorts of outside scholarships they can apply for. Once they're in high school, starting looking into that. A wide variety of organizations offer scholarships and many of them go unclaimed because nobody knows about them or applies for them. They are often small, like $500 or $1,000, but every little bit helps even if it just pays for books for one semester. They may involve writing an essay or doing some other sort of project. There are various resources for researching what's out there when the time comes.

I believe this unclaimed scholarship info is a myth. Majority of scholarship money comes directly from the school. Small scholarships tend to be local. Our high school had a list of all local scholarships each year and all were awarded.

My son's school required us to file the FAFSA even though he only qualified for merit scholarship and no aid.