hi,
We are potentially looking at full pay situation.
Are there strategies we could follow to get some break? We are not rich but unfortunately, schools and FAFSA think we are since we both work and get W2’s. It appears folks with W2’s are a great disadvantage when college time comes.
Would appreciate any tips.
At this stage, there is not much you can do. There are many many families in the same situation, and choose to go to other affordable schools.
FA is calculated on the prior prior year income and tax returns, i.e. 2 years before the current year. Even if you could make any changes this year, it will effect only Senior year of college.
FA does not consider retirement account balances, so if you were not contributing the max allowable amount, that would have helped a bit. Some of the generous schools do not consider Home equity, but many others do.
I think it is too late to do any of these changes now.
Merit aid will be your friend.
It appears that you are considering Duke at full pay. What other options do you have ? Any state schools or merit aid from other schools ? If you can manage to pay the full tuition, by reducing expenses or postponing vacations etc. then do it, otherwise, it is not worth taking on debt for an undergrad, other than the federal max loan (27k total).
There are many families (search doughnut hole families on CC), who give up the full pay private schools in favor of merit scholarships at schools ranked below. Check out Alabama thread (they are still giving out merit aid for NMF until May 1st)
There is really no avoiding paying the full price. This is exactly why my DS applies to schools that offer merit scholarships for his stats. We can pay our EFC out of savings and current income without resorting to loans.
If you cannot afford your EFC, then your student could take a gap year and reapply to affordable schools.
There is a thread about a family with a large retirement fund balance who felt comfortable taking out ParentPlus loans and accessing the retirement account to pay off the loans at 59.5. Depending on your financial situation, this could be ok. If you don’t have a mortgage or have a small one with a lot of equity, refinancing is a possibility. Your student can take out $27,000 in loans over the 4 years.
It comes down to do you think paying close to $300,000 for a college education for one child fits in with your family’s finances. Some full pay families can do this and others cannot.
Many people find themselves in this situation. Unfortunately, there isn’t anything you can do, unless there is some circumstance that is going to show you are facing a financial hardship. I have heard of examples such as house fires, devastating medical diagnoses, and the like. Hopefully your child was accepted to some affordable schools.
By itself, the fact that one or both parents work and are W-2 earners is completely irrelevant. What matters is how much is earned, what is done with the earnings, and how much the parents have in unprotected assets.
There IS something you can do. Don’t apply to schools that cost $70K per year. Or make it very clear to your child that a $70K per year school will only be considered if your child is awarded significant amount of financial aid.
Would you test drive a Mercedes if all you can afford is a Huynday?
Would you look at million dollar homes if you will only qualify for $500,000
You don’t have to drive a Mercedes to get around, you don’t have to live in a million dollar home, and your child doesn’t HAVE to go to a $70K per year school to get a good education.
“It appears folks with W2’s are a great disadvantage when college time comes.”
Folks with small businesses, farms, rental properties, or high savings are also at a great disadvantage. If you were over 65 and retired, the money that you have in the bank might look like retirement savings to you, but not to the schools. University in the US is expensive.
“We are potentially looking at full pay situation.”
For many of us, this means finding universities which are less expensive. For most this means looking for merit aid or attending in-state public universities. A large and growing number of high stats students are attending their in-state public universities. For those of us who happen to live reasonably close to the US/Canadian border, schools on the other side of the border are looking increasingly attractive.
If your child is not yet in university, then full pay at some universities is likely to be over $80,000 per year by the time that they graduate with their bachelor’s degree.
I guess I wasn’t clear. My question is not how to avoid paying 70k or what are the alternatives?
What sort of strategies we can follow to still pay 70k but try get something out either through tax deductions etc ?
Certainly increasing savings to reduce the pinch is out there
Thanks
I don’t know of any. We are full pay at a private college. There’s no break for people who can afford to pay the full amount. Not really sure what you are looking for.
Start dumping funds into a 529 and at least the interest will accumulate tax free. That’s about the only thing I can think of off the top of my head.
It is too late now to hope the 529 does a lot of work, even assuming that the 200K is in the 529 already. Most funds advise FDIC type investment once the money is actually required to pay for uni (aged base once kid turns 18, certainly not mandatory though). The only way to keep it in max risk and return is to not actually need it LOL. OP will be chipping away 70K a year from the balance.
Is your student interested in a military career? If so there is always ROTC, which can pay scholarships to attend college. My son’s roommate is a ROTC student and is going to college for free. I believe there is some way to get the ROTC scholarship, even after starting college. Not sure of the details.
@middleclassparent if you’re a business owner talk to your accountant about tax deductions/strategies.
@My3Kiddos - That’s what i am thinking, which is to at least move money in my regular investments account to 529 which will help me not pay taxes on interest and/or any capital gains.
One other thing i heard is to have any other income go to my son and have him file taxes independently which will help reducing taxes as well as help him build history
529 accounts can only take cash deposits, so you can’t just “move money” from an investment account. You would first have to liquidate the funds in the investment account that you want to put in a 529, which means paying tax on and reporting as income any gain realized.
What kind of “any other income” would you have go to your son? If it’s money that he has earned through his own personal services or from assets that are actually his, fine. If you’re talking about attributing income from your assets to him, that’s a bad idea.
What are you hoping to achieve with these financial gymnastics? Are you trying to qualify for a Pell grant?