In short, we started a business that is tanking. For at least the next year or 2 we will have to fund working capital out of our mutual funds which also pay our living expenses. Our financial situation is really scary, even if we weren’t facing twin college expenses for 4 years.
However, if you took a snapshot of our finances today you would wonder why I was fretting. We have mutual funds to pay our bills for a few years but are in our late 50s and can’t expect to find employment that will make up for business losses. Maybe we’ll get the biz together, maybe we’ll downsize our house sooner and smaller than we planned.
Will schools care about any of this or will they just see mutual funds and home equity, and assume we don’t qualify for need?
depends on whether the school is fafsa only school…and I believe even if it is a fafsa school, you asset in mutual funds ( I assume investment account) will be counted.
We had a vaguely similar situation, but more due to approaching retirement age with no pension, and with a portion of “retirement” funds outside of IRAs/401k. As far as I was able to figure out the FA computations assume that a certain percent of your assets can be used for university, and don’t care whether you will hit retirement age very soon or if your business is struggling. If this is 6% per year, that can be a huge hit on retirement. Of course given the current price/earnings ration of the stock market money in mutual funds might be here today, better tomorrow, then gone in a year or two. It is very hard to predict (probably impossible).
As such the combination of “Our financial situation is really scary” and “if you took a snapshot of our finances today you would wonder why I was fretting” make sense to me.
Our approach was to set a limit and insist our daughters stick to it. This was easier with one daughter than with the other. However, they both did stick with the limit (with a very hard earned merit scholarship helping out in the case of the more reluctant daughter). This would however have limited our school choice significantly if either daughter had wanted to go to a private university in the US.
@BelknapPoint How does money taken out of mutual funds get mentioned on the FAFSA? Or does it depend on the type of mutual fund?
For 2018-2019, that will be the 2016 tax year. The OP should have the taxes for 2016 done already…right? Or at least know what the numbers are for 2016.
For 2019-2020, that will be the 2017 tax year.
@byadg123 I would strongly suggest your twins look for schools where they will receive significant merit aid. This is not income dependent. This is especially true since it sounds like your business income could actually fluctuate from year to year.
Another thing to consider…schools that use the Profile are going to looks at your business expenses VERY carefully. There are deductions allowed by the IRS for tax purposes that are not allowed for financial aid purposes. These are added back in as income.
And lastly, if your AGI comes in at $0 for FAFSA purposes, there is a very strong likelihood you will be selected for verification as the school will want to know HOW you are paying your day to day living expenses.
@byadg123 in another thread…one of your kids is looking at BU, NYU and Fordham. NONE of these schools guarantee to meet full need…and ALL are very expensive private universities located in expensive metro areas.
If your FAFSA EFC comes in at $0…the only guaranteed aid for these colleges is $5500 in Direct Loans and $5900 in Pell Grant money…which frankly, is a drop in the bucket for these colleges.
Yes, they both give institutional money as well…but if you have $0 in income…you would be finding AT LEAST half of the cost of attendance at each of these schools in all likelihood…inmy opinion… That’s $35,000 a year right out of the gate.
And the net price calculators on the college websites will NOT be accurate for you.
Fordham, NYU and BU ALL require the CSS Profile in addition to the FAFSA…and they WILL be looking at your business, business value (even businesses losing money have a value), and business expenses.
If the financial situation is scary, they need affordable schools, either ones where they can get significant merit with their stats, or a school that is affordable close enough to commute.
That one child’s app list is not a good one. Even if your EFC was 0, you’d be gapped a LOT and how would you pay?? Plus those are CSS profile schools and they will “add back in” some of your business deductions.
Really, for your situation, you need to determine how much you CAN pay per twin?
Is it 0? Well then obviously getting a “good, but not full aid” pkg will be a fail.
Is it $5k per kid? The above still applies.
Is it $25k per twin? Then you’ll have more options.
Tell your kids what you can pay per twin per year. They have to select a few schools that you know FOR SURE will end up with the net price you can pay per twin.
If your twins balk at making app lists that will work, then you, THE PARENT, will need to insist on them each applying to a few “parent pick” schools. Those would be schools that you know FOR SURE will be affordable because of ASSURED merit scholarships or ASSURED grants, along with what the family/student can contribute.
What is each twin’s stats and career goals? We can help you find a couple of schools that they can apply to as FINANCIAL safeties.
Luckily we are in NC so have some wonderful options. D1 is pretty safe for Chapel Hill, D2 a match at NCState, and both are solid for App State, any of which we can afford. The situation I dread is that each gets into App, D1 gets into OOS A at $20, and D2 gets into OOS B for $25. (These numbers are COMPLETELY made up). We can afford App x2, App +A, App +B, but not A+B. Add to this D1’s net is after massive work and Merit, while D2 is not. I’ll have to leave money for family therapy.
Is there a benefit to them attending the same school? I’m not sure there’s one OOS that works for both of them but could a single FA officer be more generous than he might be knowing only that there’s a sibling elsewhere with an unknown package?
In August I will be 55 and W will be 59. We do have separate retirement investments and own about 80% of our home. If calculations assume we can pay 6% of non-retirement assets per year it’s one thing but 6% x2 is out of the question.
As for schools like NYU and BU I’m fact finding and we will decide what makes sense. If she (D1 especially) is willing to do the application supplements and search for outside scholarships, knowing it might not get her there, then that’s up to her. The cost of OOS School A will be evaluated as the incremental expense above App State or CH.
Luckily both are very realistic about money. They don’t like shopping much and if they complain about driving the crappy Odyssey instead of a VW convertible like their friend they keep it to themselves. They’ve known from the beginning that “Safety” relates to Academic & Financial.
I just finished this process with my older D (HS '17). The key is setting a budget and not allowing kids to apply to schools that are unaffordable. Outside scholarships are a bit of an illusion. You might get a few thousand but not enough to bridge the gap at a school like NYU or a full pay OOS public. Few state schools give much aid to OOS students. There are some but you need to assume full pay to an OOS public.
We ruled out the less generous Ivies and privates that didn’t have strong odds at merit and in the end, we had realistic options on April 1.
Tulane and SMU have good merit options. I think U Miami as well but we didn’t look there. If you read CC, many students not from NC are clamoring for UNC, a great option. Most would probably mention UNC in same category as Cal, UCLA, U Mich, and UVA.
Your challenge is that Net Price Calculators will not be reliable. You might want to call financial aid departments of schools that are high on your list and see if they can provide any better guidance. But, as noted by other posters, some schools such as NYU are known for not giving good aid period.
I wouldn’t let your daughters apply anywhere you can’t afford. If D#1 can only attend OOS school A if her sister isn’t allowed to attend OOS school B (or vice versa), then both schools would be off my list.
@mommdc - I’d rather wait until we know what we’re choosing from. If the OOS school is the Dream it’s different than if it’s merely an interesting option. Perhaps I should make each define their Dream - if accepted it’s worthy of a bigger financial stretch than an interesting option would be.
@thumper1 - NYU is on the list only because she dreams of NYC and it would be foolish not to evaluate the biggest game in town. I doubt she’ll want to apply but as I’ve said, I’m the fact finder and she’s the one who has to do the applications. I suspect Barnard would come in cheaper than NYU and be more interesting at any price. Fordham somewhere in the middle. Maybe
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they get outside scholarships, it will reduce need based aid at NYY and BU.
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Yes. This happens
And…outside awards are usually for ONLY frosh year. Your DD may think a school is affordable, but really it’s only affordable for frosh year…and then what? She comes home with no degree??
I would limit each kid to only one financial reach and make it very clear to them NOT to fall in love with a school that most likely will not be affordable. I see that one of your twins is looking at school like SCAD…expensive and little/no aid.
I think the pure art schools are off the table and D2 is fine with it. App and NCState are in-state with solid design programs. I looked at the top line numbers for all the potential (unaffordable) out of state schools and they all fall in a tight range with 2 exceptions, Marist and Virginia Commonwealth, also D2 possibilities. All other OOS schools start with a 6 except Haverford that starts with a 7.
I wouldn’t be at all surprised if D1 ends up at Chapel Hill with D2 at NCState or App. They could do worse.
I don’t think you have to treat kids exactly the same, but I would set a budget for each child, separately, and make sure each stays within that budget. I have two very different kids who started college the same year. They each had a budget of $15k that I could pay. I didn’t tell one “Well, if your sister picks a cheaper school, you can have the difference.”
They both made it work in different ways it was surprising how many options they did have. All the state schools would have worked. One got a lot of scholarships and chose a much more expensive school. She does in fact have ‘money left over’ but it doesn’t go to her sister (except that it stays with me and we all benefit). The other takes more in loans and has to work to stay within budget, lives a much more ‘student’ existence. The one on scholarship has a really nice house and has more spending money, goes to concerts and the movies a lot, buys clothes.
If your budget is that you could afford Appalachian State (plus $5k?), then that’s the budget.