EFC not really an "expected" amount

Parents Forum
41

<p>I disagree that people who chose more altruistic professions should be penalized for their choice on the contrary I feel they should be rewarded.
I feel bemoaning that you can’t switch careers because you still would make too much to qualify for any financial aid, as really insulting to the families who live on $40K a year and pay for college.</p>

<p>I also would add that most of poor dont’ even have college as an option. even if it was paid for ( which I doubt it would be with budget cuts) they most likely need to continue to work after high school to help support the family just as they did during high school.</p>

<p>The schools the poor often attend may not have enough books for the classrooms, have parents who are able to support their kids at home with their studies, or even have parents who are able to provide nourishing meals and a safe place to live.</p>

<p>I have just been doing my daughters taxes for last year. She made almost $4000 just working at a city park in the summer- she saved virtually all of that which will be used for school. Why is it that families who make over 100K are unable to either save money for college or spend money out of their monthly salary?
Why is it that they don’t expect their children to either contribute their summer earnings or take out loans?
The upper middle class has already reaped much of the bounty by living in nicer neighborhoods, being able to pay for health care, better schools… They have more choices than anyone except for the really affluent. They are prepared for college, and can either attend a school with merit aid, or they can pay for it out of their income/savings. If they don’t like those choices I imagine they will do what the middle class has been doing for generations, join the military to get money for school.</p>

42

<p>actually, professors can get a GREAT deal from the college at which they teach. Some colleges offer reduced or free tuition to children of staff, others even offer to cover tution at another college.</p>

<p>Jamimom: some qualified plans can hurt as well – the only real deal is the traditional defined benefit pension plan which escapes fafsa and the institutional method). For example, the only ‘retirement’ plan many companies offer is a 401(k). Since the employee’s contribution is considered discretionary money that could be used for tution, its an add-back to the formula, and efc goes up. On the other hand, contributions made to a defined benefit pension plan on behalf of an employee escapes the formula.</p>

43

<p>Head of Financial Aid at Bowdoin spoke at S’ HS. He said 3-5% of income and 6-8% of savings were expected to be used each year. Or was it 6-8% of income and 3-5% of savings? My age is showing, but you get the idea. I assume he is accurate and he was speaking to give us an overview applicable to competitive schools, not just Bowdoin. Altho, I believe he was referring to CSS computations (ie, institutional aid) and FAFSA does have differences. Didn’t appear, from his talk, that the expected % of income/assets to be spent varied that much. Rather, as others have said, they differ in such things as whether home equity taken into account.</p>

44

<p>Emeraldkity, what happens with many familys who are making around $100K a year, is that they have invested their money into their children. Many have done so in the form of a house in a good school district, music and sport programs to supplement the school ECs, and other things that help make their kids so attractive to the selective colleges. So if you have 3 kids and you make $100K a year, it’s not easy to sell that house to pay for kid #1’s college. Many of these parents had listened to what they wanted to hear. “The more you save, the less aid you’ll get”. “If you have a smart kid, he’ll get a scholarship”. “You’ll be surprised how much money is available.” “Many scholarships go begging.” And so on and so on. Then they apply for financial aid, and they don’t get much. They’ve got 2 car paymets, with mom in a van, most likely to house the hockey equipment for the son, and a SUV because of the snow and safety. They have a hard time cutting back on these things, because many of them are what made their kid the candidate for top colleges. Not fair for the other kids, but also this was the philosophy they had adopted. </p>

<p>We were in that boat except we could not afford the nice house and cars, but I can tell you that most families we knew were aghast at the ramshackle houses we had and the borderline neighborhoods. Our old van is really a junkmobile. We only bought at Goodwill, and everyone still brings me big bags of used clothes. Not the life most people picture. But given the costs of a private college, and if you run the numbers, a family in that scenario would have to pay about $20 in college, and if they have some equity in their home, depending on the college, maybe more. If they are lucky there is a grandma with some handouts, but other wise, it’s on to the PLUS loans. But at the second child, it really starts to hurt as other needs in life surface. I do feel for these people. I do not feel that they are insulting those who have less. They just don’t see where they can make the cuts; and I feel it is difficult for them to do so.</p>

<p>I know I am hitting the loan papers next year. I am closing up shop on my business which is mainly tutoring and helping families with the college process. The timing is really because of the new SAT. I don’t want to do the work to set up for it, and I don’t know enough about it to work with anyone. If we really needed, the money, I could just do what I could, since no one really knows what is going on, anyways, but I am really ready to stop. But it is going to be a watershed year for us, financially. We would not qualify for aid, but the numbers are staggering. Not looking for sympathy, but I can tell you that though I am used to doing things on a shoestring budget, I don’t want to cut anything this next year , as they are important to me, so we pay, and pay for 10 years to get through this one year.</p>

45

<p>Emarald, people shouls choose the professions they like, but I hardly see how not affording things others can is being penalized. Affording or not being able to afford some schools or cars or homes is just a factor of your choices for the well educated. </p>

<p>In no way am I insulting people who make less than I do by saying that I need to continue in my high paying job to achieve my educational choices. Like everyone else, I need to figure out what it’s possible for me to make doing different things. Then I need to assess my priorities. If I want 4 kids in private school I have to maximize my earnings to the extent possible for some years. Later I’ll hopefully get to do altrustic things if nothing unforseeable happens.</p>

<p>I came from the poorest of poor families. Yet my parents understood that my working after high school would not help the family’s lot in life. One less mouth to feed when I went off to college helped too. Yet my older siblings did work wihile going to cc. Where there’s a will there’s a way in this Country.</p>

46

<p>Somebody said 5% of your savings is fair.
I’m not sure. It depends.
A person has 3 kids. 5% of your savings each year for 12 years and you are down to 40% of your savings. If you have 3 kids to put through college, you might be around 60 years old when they are done.
60 years old, 40% of your savings left and not too many big earning years left.
I can see many scenarios where 5% a year sounds good, but when you add it all up, there are problems.</p>

47

<p>Yes, the contributions you make to a qualified pension plan or 401 K, though they may be deductible from income for tax purposes are added back to the income figure for financial aid purposes. However, the accumulated assets are not hit whereas if you have that money sitting outside of such plans, they are assessed 5.6% each year. So in 4 years that’s about 20% gone if you didn’t contribute more to the plan during those college years. Also the income, realized and unrealized gains are not assessed as they would be in a stock account.</p>

48

<p>jmmom:</p>

<p>Income is a key driver in the fafsa and IM. Every private college is different, and it really depends on individual situations, but if you use the CB efc calculator and start with an income of $90k and, then increase the income by say $50k (don’t we wish it was that easy), you’ll immediatly see that such an increase could potentially eliminate any finaid. A corresponding $50k increase in your home equity only decreases the efc by $3k.</p>

<p>According to the CB article I posted earlier, the needs assessment rate on “marginal” income starts at 22% and goes up to 47%, while the needs assessment rate on “marginal” ASSETS is only 3-6%, depending on assets – rate on savings is 5.6%. But, then, there is a little twist in the IM, in that a % of assets over a certain amount get added to the income column, but I digress.</p>

<p>Of course, the term ‘marginal’ is based on the feds determination of the bare minimum income a family needs to live on, on more precisely, that income amount which “everyone” agrees that leaves no extra change to pay for college. This is called the family income protection allowance, or IPA. The federal IPA for a family of four witih one child in college is $20,700; above that, and the govt assumes that some “fraction of additional dollars should be devoted to college.” So, someone who makes $80k could be expected to contribute $12k, or 15% of total income. The corresponding IPA for the IM is $24k.</p>

49

<p>Dstark, your assumption is that your savings do not continue to grow. That’s rarely the case. Also, age seems to matter in terms of what % you’re expected to contribute. That said, again, that’s where choice comes in. Maybe a $40K school isn’t the way to go if your retirement would be truly compromised.</p>

50

<p>dstark: essentially all tax deferred assets are exluded, such as 401(k), IRA’s etc. </p>

<p>btw: a math calc, since your savings would be declining annually at 5.6% compounded, and you’ll have 50% remaining, but your point still is still valid, IMO.</p>

51

<p>Bluebayou, I appreciate your calculating the numbers. I was being lazy.</p>

52

<p>kirmum - It’s hard for me to see that age matters, but there are so many complications, it’s hard to figure out. (And I guess I really don’t want to spend the time to become an expert in this. ) H is 60, I = 57. H is already retired from his career, but does some part-time low paid work somewhat for the income, somewhat for wanting to do it. Our EFC is over $70K. We have assets, but I have no idea how much “they” have decided we will need to live on each year after full retirement: $20K, $40K, 75% of our last earnings year??? Or how long they expect us to live. </p>

<p>I’m copacetic with no need $$ for us, but I still think the system leaves a lot to be desired. Otoh, I don’t see how it can ever take every circumstance into account. It’s “their” money to give away and I believe they try to get it right - based both on “helping” those in need and also in serving their own needs to get the kids they want and raise their stock in USNews, Best 350… and all the other rankins.</p>

53

<p>Dstark wrote:

</p>

<p>Unless the savings are stored in a mattress, they are probably earning interest. Additionally, there is an exempt amount (I think something like the first $40K or so, which is not counted in), and it is a declining percentage. So you don’t lose anything like 40%. Let’s say, hypothetically, you have your funds invested in a way that you are getting a net 4% return on your money - then you would be paying out 1% rather than 5%. Of course the interest also reflects as income - from which some portion is to be paid into the EFC – but the bottom line is that (1) the NET percentage that is going out each year toward EFC is significantly less than the number used for financial aid calculation, so your savings do not decline in a straight line, 5% per year, and (2) The financial aid figures are recalculated each year, so does the percentage of the original figure: i.e., you are not paying 5% of your year 1 savings in year 12.</p>

54

<p>Many people have asked us if son got scholarships-I answer yes he had merit money. I also tell them that EFC is about 1/4 of your income-no one wants to believe me. Not that I blame them. They usually come up with the stuff that “we all want to hear” about scholarships.<br>
Have run into families who have child change instruments “to get scholarships” or do football, baseball etc. Really hasn’t worked out here.</p>

<p>I played with the on line calculators-if 1/4 of income pays the tuition it doesn’t matter if you spend everything you make or save it. You still have to pay the tuition. I don’t spend much and I would rather save so I could pay and not have to borrow. We have also been fortunate in our careers, just one child and no major emergencies.</p>

<p>LA</p>

55

<p>As the price of the schools rise over the years , does the EFC stay the same?</p>

56

<p>Yes. The EFC is exactly the same regardless of the cost of the school. If you think about it, a student can be applying to a variety of schools. State U, Local State U, Catholic U, Private U. The range in cost can be extreme but the EFC is the same. That is what the family is expected to contribute. IF the student picks a college that costs less that the EFC, then the family can expect no financial aid from the school. If the EFC is less than the cost of the school, this is when the student may start seeing some financial aid. But the EFC does not guarantee any money short of state and federal funds that are allotted at certain threshhold amounts. A student can get no financial aid even when the EFC is below the cost of the school. If the income is above federal cutoff points, than it is up to the college whether they want to fund the student or not.</p>

57

<p>lamom - Our EFC is waaaayyy more than 1/4 income. Our own EFC is probably largely asset based. So I think the “1/4” rule of thumb might be too simplistic?</p>

58

<p>

</p>

<p>I don’t know if I agree with that philosophy. I don’t think you should have to spend money to make kids “attractive to select colleges.” EC’s shouldn’t have to cost a lot of money. Even most lower middle class schools have music programs, and most towns have Little League, rec league, and school sports. And kids can get into really good schools from really questionable school systems–mine did. In the end, they’re looking at the student, not the school. </p>

<p>Obviously, some kids who are a phenom in one area are an exception–if your kid is a musical genius, or a future Major Leaguer, then maybe extra money in that area makes sense. But spending money to plump up a college application is a choice, and if you choose to do so, I don’t think that’s a reason to think you need more aid than a family of the same income who saved their money instead.</p>

59

<p>emeraldkity4:
I found your post thought provoking. Maybe the fundamental unfair thing is that basically it is not necessarily the kids who have worked the hardest, or are the smartest, are the ones who will end up at the most “prestigious” schools. No, there will be a very large element of financial resources involved. Kids from the wealthiest communities (i.e. “finest schools”) and those whose parents can say “Apply anywhere you like,” undoubtedly have the advantage. Granted, most kids (not all) who end up at the most selective schools will be solid achievers. But many solid achievers will end up at schools that simply are not as good, or are not as good a fit. But given the cost of colleges, and the fact that basically this system is just the way things work in America, I don’t see how it could ever change.</p>

<p>blossom:
I too think the inequities in K-12 are really REALLY unfair. Read this from an article about our urban vs. suburban schools:
“But statistics obtained from the City School District confirm a wide gap between city and suburban schools’ arts spending. The district spends an average of $820 per school for K-6 arts supplies, compared with $3,940 for the average Monroe County suburban school. City schools get an average of $103 for K-6 music equipment, while suburban schools typically receive $3,500.”<br>
It stinks.</p>

60

<p>Weenie, regarding your comments on school spending, urban schools may not be spending it on art supplies, but Urban schools are spending more overall. All the top spenders, on a per pupil basis, here in eastern MA are urban districts. </p>

<p>Mind you, I’m no fan of No Child Left Behind, but, as a taxpayer, I do wonder about the efficiency (that is to say, bang for the buck) of many urban school districts. Too often, they seem to be patronage shops. But this is a very subjective impression, and could be flat wrong, and also a bit off topic…</p>