mom2collegekids

However for institutional grants the award is simply a tuition reduction. This is not, I repeat, real money.


I don't think that's true most of the time. That's why schools with large endowments can give the most grants. They are using profits from the endowments and using them for tuition. I'm not saying that there aren't a few schools that play "fast and loose" with "fake grants". I do think that some lesser privates have "upped" their tuition rates and then they "award" a $5k grant. But, that's not what the schools that give large grants are doing.

A full need private that has a low income kid attending is going to take $50k from endowment profits and put it towards that kid's tuition.

It's not like a 20% off sale where you simply pay less and the business accepts the lesser amount.

If the money weren't coming from somewhere, all schools could be generous with grant money.


So, for the taxpayer supported grants like Cal Grants and Pell Grants, the money comes from the taxpayer and passes through the kid right into the coffers of the privates that charge massive tuition. The kid never sees the money. The institution gets the taxpayer's money. Lovely.

???

Why is that surprising or even sarcastically "lovely"???



ETA: My state provides no grants (consistently). I don't know if B&G covers private schools. I thought it didn't. I am probably mistaken.

B&G is for UCs only...not even for CSUs.

However, all Calif schools, including privates, are given Cal Grants of various amounts.

notrichenough

Well, like I said, for the vast majority it's a fool's choice, if not downright stupid.

If I had a few million in the bank I might be tempted to lower my income below $50K (perhaps by quitting) and set things up so I didn't need to file a 1040 so I could qualify for the simplified means test where assets aren't counted. If.

notrichenough

This part is a good idea.

This part is illegal. You can't just give one person's money to someone else, it's not yours to do that.

sryrstress

Way back to the OP's previous comment concerning IU and DePauw--DePauw is quite generous with their aid; 3rd in our state behind only Notre Dame and Wabash (both full need).

I think DePauw was a FAFSA only school when S applied, 5 years ago. At that time they also did not count home equity. It does matter if OP is an Indiana resident for DePauw, because his D will then also be eligible for Indiana money (which goes to students attending private as well as public Indiana schools)

Someone said a FAFSA only school could require a farm/business supplement. I'm not sure about that, as the farm/business equity does not count as a FAFSA asset (assuming one lives on the farm).

findingZzero

Seems like I touched a nerve here.

My daughter has $4000 in savings. According to the EFC short form i FILLED OUT, THAT AMOUNTS TO AN $80 INCREASE IN EFC. Not consequential. I HAVE PROBLEMS WITH CAPS LOCK SO FORGIVE ME THE capital letters. I promise I'm not shouting. My wife is more private than I apparently, and thinks I shouldn't be broadcasting our plans here. She has a pHD, so she's always right (actually she's right most of the time). We were both Valedictorians in our high schools, but I was 1 of 1 and she was 1 of 9. Different states. She just presented me with a Reeses peanut butter egg, and a Cadbury egg. Then I realized I'd just bought them at CVS. I love this woman! They are baking some cool cakes!! I think I love my life!!

jturley

@notrich My kid can give (loan) any money to anybody anytime. This is, i believe, not illegal. The take away here is to reduce student asset contribution. The formula says 20%, but OP had a different number. I was thinking a 4000 reduction in savings would be a 800 reduction in EFC. At least that's what the EFC worksheet says.

notrichenough

Let's be real, it's not your kid giving the money, it is you.

If it is an actual loan, there would be a note, which would be an asset.

A "gift" given with the expectation that the money will be given back when you want it is not a gift. If you do this to increase your FA, it's fraud.

Odds of getting caught are near zero, but that doesn't make it legit.

You can spend the money on the kid, such as paying for summer camp or buying him a computer or music lessons or whatever.

thumper1

20% of $4000 is $800.

One other thing for the OP to remember...parents have an asset protection allowance. Only assets above this are used in the FAFSA calculation.

But back to the OPs questions. He is looking for a way to reduce INCOME not assets (unless I read the OP incorrectly).

vballmom

notrichenough is right, there's no legal way to remove assets from a custodial account other than to pay for something that's for the benefit of the minor. And moving sizable assets from one person to another runs into the possibility of hitting the $13,000 annual exclusion for gift taxes.

thumper is also right, the OP might want to take another look at at the student asset formula.

No one's mentioned the obvious thing to do for student assets: move student savings from custodial accounts to custodial 529 accounts. The funds must be used for college, but are assessed at 5.6% rather than 20%.

buenavista

Phony loan ideas like this were a major strategy at the suburban college financing seminar I attended, and I was very bothered by it. My favorite was the suggestion that those with lots of home equity--common in this high cost area--take out a big second mortgage and parcel out the money to family members for safekeeping (or put it under the mattress). Presumably family members without children in college or tempting financial needs, I guess.

But for the OP, surely the D has legitimate ways to spend down a lot of that $4000 before college anyway--computer, car, etc.?

notrichenough

^ I went to one of those seminars, and their recommendation was to take out all your house equity and buy single premium whole life insurance or an annuity of some sort. They ignored the fact that FAFSA doesn't count HE at all, and many of the schools that do cap the amount of HE that they count.

I got an ad for one in the mail recently, and the big come-on was hiding your vacation home inside a blind trust. I can't figure out how that would help, but what do I know.

buenavista

Not only that, but as with some of the ideas mentioned in this thread, it ignores that you might actually NEED the home equity for something else--the market tanks and you have to move, you lose your job, major repairs....or to pay those college bills when your "financial gymnastics" don't have the intended result.

thumper1

Could the OP please clarify? I really thought he was trying to reduce INCOME.

findingZzero

I was trying to do both, but as others have said, and I've seen from filling out those worksheets, reducing income has a greater effect. BTW, the $4000 my daughter has as savings would make her contribution $800, not $80 as others have pointed out. I lost a zero on the form. We were thinking she could use that money for expenses at college.
Here is what's confusing me. Wife pays herself a reasonable salary which is on her W-2. That won't change. But, if she reduces her draw from the Co, line 17 is reduced by that much. Now let's say the difference appears in the Co's checking account. If a school doesn't take into acc't a small business, where does this appear and affect income? Normally at the end of the year, that acc't has next to nothing in it (she breaks even). This year it could pile up if I help her with non business expenses. Maybe my brain is frozen, but line 17 becomes that much less. I'm sure the difference appears in the tax form, but not on line 17. If the school wants to look at last year tax form they would see a reduction on line 17 this year that would be significant. It is transparent to any school that checks. Do they check? I'm sure we haven't, in one day, come up with a plan that no one else has thought of (not to end a sentence with a preposition).

p.s. Forgive my effusiveness about my life in my former post. Our 2 daughters were with us for lunch, the weather was spectacular, the view was great, and one of my sheets (maybe 2) were to the wind. It's good to be retired. YEMV.

notrichenough

What we are saying is that profit from an S corp, *whether or not she pays it to herself or leaves it in the company*, winds up getting reported on line 17. That's how S corps work. So from an income perspective it won't matter.

From an asset perspective, assets in the company won't be counted on FAFSA. But that is a small piece compared to income.

Not 100% sure what you mean by this, but it sounds like you are having your personal expenses paid by the company. This creates income to you which should be reported on your taxes.