how do I avoid divorce settlement from wrecking my sons' chances for financial aid?

Paying for College
1

<p>My husband of 20 years lost his job in 2004, and he hasn’t worked since then. I lost my job at the end of 2006. The stress was too great and our family was destroyed. We went through a high conflict custody battle and divorce,and after two years, things are still not resolved. We have gone through all of our savings and I can’t find regular or temporary employment although I am trying to earn money as a consultant.My earned income in 2009 was under $5000, but in 2010 it will be about $40,000. Unfortunately, most of that is for non-recurring work.</p>

<p>I have legal and primary custody of a high school senior and junior.I do not receive child support and I am responsible for paying all of my children’s expenses.</p>

<p>As a result of the divorce, I had to cash in securities and equity in 2010 to purchase a house for all cash because I could not qualify for a mortgage. So I have capital gains I have to report as income even though all of the money went to pay for the house. I also received a final equity payment from my former employer [with a K-1 in my name]that I had to split with my former husband. As a result, it will appear that I have substanitally more income in 2010 than I actually received. </p>

<p>The bottom line is that I don’t know if I will ever have steady employment again, the money I received in 2010 either went to pay for the house or is all my sons and I have to live on until our circumstances change for the better. </p>

<p>This couldn’t have occurred at a worst time since my sons are applying to college now. Does anyone have suggestions on how to communicate these special circumstances to colleges? Is there a special consultant I can use to help me present my circumstances in a favorable light?</p>

<p>Any help you can offer will be greatly appreciated. I am quite concerned.</p>

2

<p>Do you have a projected EFC? Is your senior son looking at schools that would offer him merit aid? Are your instate public schools affordable? You might qualify for some aid if you appeal, or if he attends one of the few schools that meet full need, but it would be comforting to know that he has something in hand that would cover his tuition. Room and board generally runs around $10K a year or less, so a Stafford loan (freshman limit is $5500) and some help from you would cover that. He should start saving now to cover his books, personal expenses, etc. and plan to work a few hours a week while he’s in college. You should also look into your state’s student aid program as the income limits there may be higher. Encourage him to ask his GC for applications to any local scholarships - they’re generally small, but a few thousand extra for first year expenses can really help.</p>

<p>I would let him know asap what the financial situation is and help him to understand how FA works. Then try to come up with a college list together (if you post his stats and other deciding factors here you may get some good suggestions). It sounds as if he, and your younger child, would be eligible for a Pell grant and other federal/state aid after the first year if your income doesn’t increase dramatically.</p>

<p>It’s not necessary to hire someone to prepare an appeal for professional judgement. You’re more than qualified to write a letter and explain your circumstances, but they may not be able to help since you actually did have a choice in how you used the additional income from the sale of your assets. I’m sure you made the best choice for your family and financial situation, but that doesn’t always dovetail with FA guidelines. You might find some useful info on PJ by searching for posts by kelsmom or following the links here:</p>

<p>[FinAid</a> | FinAid for Educators and FAAs | Professional Judgment](<a href=“Your Guide for College Financial Aid - Finaid”>Professional Judgement - Finaid)</p>

3

<p>sk8 has summed it up well.</p>

<p>What you need to do is figure out how to make college affordable for your family. You might want to consider a community college for the first year or to to fulfill general education requirements at a much lower cost. While this may not be your son’s first choice, it could be a good means to his end. Remember, the goal is to get a college degree.</p>

<p>Things to consider…</p>

<ol>
<li><p>Look at your instate public universities. These will likely be your best financial bargain unless your child garners significant merit aid someplace. Check for a thread by momfromtexas…it’s older but she found excellent merit awards for both of her kiddos.</p></li>
<li><p>You don’t mention the financial status of your former husband. One thing you should know is that some schools DO require the financial information from the non-custodial parent. These are typically schools that are the most generous with need based aid AND use the Profile or a school financial aid form in addition to the FAFSA.</p></li>
<li><p>I realize college is looming, but you do have a roof over your head…and as pointed out, you made the choice to pay cash for that home. The good news is that in future years, FAFSA only schools will not consider the equity in your primary residence. The bad news is that Profile schools often DO consider at least a portion of your primary home equity. Since you have no mortgage, your equity will be high.</p></li>
<li><p>You say you aren’t sure you will EVER be employed again. Does this mean in ANY capacity? I would urge you to consider other jobs than your current career. If you have no income, how are you paying your day to day expenses (food, utilities, etc)?</p></li>
<li><p>Was college discussed during your divorce? Sometimes this happens.</p></li>
<li><p>It sounds like you are going through a lot of turmoil…you might want to make sure that your family and you are able to discuss this college situation the way it is. It is, what it is…</p></li>
<li><p>I hope one of the financial aid folks pipes in…I’m not sure a professional circumstances consideration will be considered…but I suppose you could try. The reality is the money you used to FULLY buy a house could have been divided up and used partially to buy a house and particially to fund other things like college. BUT only the financial aid department at the colleges you kiddos get accepted to can answer whether they will even CONSIDER this…never mind grant it. It is up to the discretion of the schools.</p></li>
<li><p>Remember that need based aid is computed EACH year. As you noted…it is the 2010 year that will have your income “inflated”. That is one reason to consider a low cost community college for that one year. After that year, your income could be lower and you kids MIGHT qualify for some need based aid. Again, it depends on the school. Sometimes need based aid comes in the form of the Pell, Stafford loans and work study.</p></li>
<li><p>I believe you child is eligible for the $5500 freshman Stafford loan limit regardless of your EFC, just by filing the FAFSA. If he commutes from home, this could cover the costs of that community college tuition for that first year.</p></li>
</ol>

4

<p>

This sucks. really. Your income will be inflated for one year. I don’t know how big your gain is but it could prevent you from qualifying next year.
This happened to me and I just don’t know a way around it.
You MIGHT want to encourage your hs senior to take a year off, after which you will qualify. Not sure how that will go over but you have some number crunching to do. If you have/know an accountant - get some professional advice.</p>

5

<p>You will have 2 in college, so their EFC should be split (are they twins?)</p>

<p>However, if their EFC is still too high, then your sons may want to take a gap year next year and work (but not earn too much).</p>

<p>If they have high stats and would qualify for scholarships, then they should NOT take any community college classes during that gap year because then they would no longer be incoming freshmen. </p>

<p>Incoming freshmen get the biggest scholarships and financial aid packages from universities. That’s why going to a CC next year might hurt them more than help them.</p>

<p>If their stats are high enough to garner a full-ride or near-full-ride, then they could go to college next year.</p>

<p>Your boys can apply to some schools this year to see what would happen, but they need to be prepared to “sit out” a year if their EFCs are too high.</p>

<p>What are their stats?</p>

6

<p>I was hoping someone would recommend a brilliant financial aid consultant who could communicate what happened to our family and why my 2010 income is an aberation. </p>

<p>My HS senior’s stats are pretty decent. He has a 3.93 weighted GPA [3.5 unweighted], a 30 composite score on his ACTs, and AP tests of 3 and 4 [all great when you consider that he was diagnosed with depression and anxiety during the last 3 years because of our situation].</p>

<p>He said he would retake the ACTs to try to raise his score by 2 points in the hope of qualifying for a merit scholarship or grant. I think a gap year would be disastrous because of our family stress. My sons desperately need to follow the regular routine to get normalcy back in their lives.</p>

7

<p>It might be a good idea to consider a gap year for the high school senior. Especially if he could find something worthwhile to do (job, internship, volunteer work… ?) it might help with your situation and even add an element to his applications.</p>

<p>That would line both kids up to be in college for the same four years which may increase the aid for which they are eligible (your EFC will be in a way “spread” between the two kids - not quite split, but usually a big advantage to have them both in school at the same time). It would also shift your base year for financial aid calculations to 2011 when you will not show the “extra” income. Of course, a fabulous job might be waiting just around the corner that will add to your 2011 income, but that would be GOOD news, even if you get a bit less aid. Good luck!</p>

8

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<p>Do your very best not to think of “normal” as being “they way things would have been if there hadn’t been a divorce.” Neither of the kids have been in college, so considering a gap year can be looked at as being as normal as you want it to be. Even without a divorce situation, it is a money-saving idea to have kids who are only a year apart get on the same college schedule by using a gap year.</p>

9

<p>*I was hoping someone would recommend a brilliant financial aid consultant who could communicate what happened to our family and why my 2010 income is an aberation.</p>

<p>My HS senior’s stats are pretty decent. He has a 3.93 weighted GPA [3.5 unweighted], a 30 composite score on his ACTs, and AP tests of 3 and 4 [all great when you consider that he was diagnosed with depression and anxiety during the last 3 years because of our situation].</p>

<p>He said he would retake the ACTs to try to raise his score by 2 points in the hope of qualifying for a merit scholarship or grant. I think a gap year would be disastrous because of our family stress. My sons desperately need to follow the regular routine to get normalcy back in their lives. *</p>

<p>Do you have 2 sons who will be going to college next year or only one? Your earlier post suggests two sons going next year. my sons are applying to college now.</p>

<p>If you have 2 sons applying, what are the stats for the second son?</p>

<p>What state are you in? Are there any state schools to commute to? What is the state tuition at a nearby college?</p>

<p>What major is your son with the ACT 30 considering? He might get a good scholarship.</p>

<p>I know that you were hoping for some magic words to get more aid out of schools, but the truth is most schools don’t have much aid to give anyway, so even if they sympathized, most could do nothing to help except point you to more loans. </p>

<p>I know that the words “financial aid” suggest that schools charge some kind of sliding scale, but that’s not true. Many schools expect families to pay for most/all costs…regardless of income. Free fed grants are for low income and are for low amounts…not enough to pay for college at all!</p>

10

<p>(Her first post mentions a high school senior and a junior.)</p>

11

<p>You are “house poor” with all your wealth tied up in your home. Is there any possibility of getting an equity loan? </p>

<p>This is drastic, but you could also:

  1. Sell the house.
  2. Take the cash and rent a place.<br>
  3. Help your older son out with his first year of college.
  4. As the economy improves, find steadier work and build up your credit rating.
  5. Eventually, buy a new home with a mortgage, so you don’t have to tie up all your cash.
  6. Apply for financial aid for your sons in subsequent years based on your “real” income, not the windfall from the divorce.</p>
12

<p>OP: If you are going through financial difficulties, the last thing you want is to pay for a high priced consultant who is going to tell you a lot of information that you could obtain for free, for example on CC. </p>

<p>As it stands, you have low income, a windfall gain that will distort your EFC for one year and home expenses. If you had not cashed the securities, matters might have been different. Also, any payments made to your ex husband, if properly documented will not be considered as your income. Assets in your name also are considered at 5% of value, so depending on the amount, the impact may or may not be significant. </p>

<p>No consultant can make those facts go away. However, if you call the colleges directly and do your own reserach, you may be able to get schools to take that into consideration by portraying your circumstances with the right perspective.</p>

13

<p>The main thing you’ll have to do (whether you consider a gap year or not) is to make sure your kids apply to a wide range of schools. Apply to some where acceptance will be a bit of a reach, but that might be able to provide generous aid, apply to a state univ. that is commutable from home, apply to some schools where your sons’ stats put them in the high achievement range for admitted students where they may be offered merit-based aid. Don’t be too fussy about where they apply. Encourage them to avoid the emotional trap of “falling in love” with a certain school.</p>

<p>Make strategic choices about where to apply. The thing is, that even if a school will make a professional judgement and adjust the aid award based on your circumstances, you won’t know that until after you get your preliminary award and then appeal it. You won’t get the adjustment on the first go-round. So, once your son(s) have some acceptance offers in hand, then you’ll arrange a meeting in-person or by phone with the FA officer and seek an adjustment. You may get it, you may not, it may be a significant adjustment or it may be a partial one. At that point you’ll be able to compare offers and figure out what, if anything, is going to be workable. If nothing is, then a gap year may be the only option, or community college.</p>

<p>You won’t know, though, until you go through the whole process.</p>

<p>Try very hard to find a school that you son can attend regardless of aid. Usually that’s a local cc or regional univ., unless you live close enough to your state’s flagship univ. to commute.</p>

<p>M2CK is right, though, to be careful about where your son starts school, because transfer students do not generally get offered FA that is as generous as incoming freshman. On the flip side, 2 years at a community college getting all general ed requirements completed and then transferring to a 4-yr school could save you more money than any initial 1st year aid award would give you anyway.</p>

14

<p>Also keep in mind that some private colleges (virtually all the ones that claim to “meet full need”) will also require your ex’s financial information and will factor that into your sons’ aid awards whether he agrees to contribute or not.</p>

15

<p>suddenlysingle -
let me tell you what happened to us…
My daughter got finanicial aid from her school; a combination of merit scholarship ($9000) and a need based grant ($6550) for her first two years. The thrid year we sold a piece of property (not our house) as we went through a divorce. There were significant capital gains on the property that we had to pay and she lost nearly all of her need based grant.
double whammy. With real estate it’s not like we could have sold a little bit here and a little bit there - it’s all or nothing.
After the divorce, she qualified for a pell grant, as I was supporting her. When we got her financial aid package; it showed the pell grant, merit aid scholarship but no need based grant.
I called financial aid and they apologized - this is what they told me…
Entering freshmen are given a financial aid award and if nothing changes, the award (need based grant) remains the same. If the EFC goes up, they reduce/take away the grant.
Since she got the grant first two years, they were able to re-instate it.
This college is a private FAFSA only college.</p>

<p>The best advice I can give you (which is worth what it’s costing you ;)) is to have the oldest take a ‘gap year’. Get your finances in order and send them through at the same time.<br>
Aside from your in-state colleges, I would have them look at colleges that are FAFSA only and offer merit scholarships.</p>

16

<p>You need to take a long deep breath, then pull out your financial information and run the EFC calculators at [FinAid</a>! Financial Aid, College Scholarships and Student Loans](<a href=“http://www.finaid.org%5DFinAid”>http://www.finaid.org) and at [College</a> Calculators - savings calculators - college costs, loans](<a href=“College Board - SAT, AP, College Search and Admission Tools”>Calculate Your Cost – BigFuture | College Board) This will give you a good estimate of your EFC as things stand - in other words what your EFC will look like for 2010. Then try re-running the calculators with adjustments that account for different scenarios. You also can download a paper version of the FAFSA EFC formula guide
<a href=“http://ifap.ed.gov/efcformulaguide/attachments/111609EFCFormulaGuide20102011.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/111609EFCFormulaGuide20102011.pdf&lt;/a&gt; if you prefer to see how the formula works out line by line.</p>

<p>Even if you hadn’t divorced, your family would still be in a precarious financial situation that would have affected your sons’ choices. Your oldest son has grades and test scores that put him in the range for merit aid at some institutions. If the two of you can go through the following threads, maybe he will get some ideas.
<a href=“http://talk.collegeconfidential.com/parents-forum/148852-what-ive-learned-about-full-ride-scholarships.html[/url]”>http://talk.collegeconfidential.com/parents-forum/148852-what-ive-learned-about-full-ride-scholarships.html&lt;/a&gt;
<a href=“http://talk.collegeconfidential.com/parents-forum/291483-update-what-i-learned-about-free-ride-scholarships.html[/url]”>http://talk.collegeconfidential.com/parents-forum/291483-update-what-i-learned-about-free-ride-scholarships.html&lt;/a&gt;
<a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/848226-important-links-automatic-guaranteed-merit-scholarships.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/848226-important-links-automatic-guaranteed-merit-scholarships.html&lt;/a&gt;&lt;/p&gt;

<p>When your sons meet with their guidance counselors to talk about their college lists, have them make it very clear to the counselors that money will be the deciding factor for them. In the reputation-building game that most high schools play with each other (and school districts play with each other), it is very important that each high school report the number of students who were admitted by famous-name-colleges/universities or regionally-important-colleges/universities. Consequently, counselors can end up focusing on that kind of list, rather than on lists that are truly functional for your sons. FWIW, Happykid graduated from a “Newsweek Top 100 HS” that every single year sends more graduates to the local community college than to UMD-College Park - in most year the local CC beats out the combined total for all other MD public institutions! Some of these kids couldn’t get in anywhere else, but most of them (Happykid included) go there because it is their cheapest option. If your sons end up commuting to your closest community college or public U, they will be in good company.</p>

<p>Wishing you all the best.</p>

17

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<p>Wouldn’t it have made more financial sense under the circumstances to conserve resources and rent?</p>

<p>Ordinarily when there is an aberration in income, it can be explained to colleges, but the problem that I see is that there is a choice that was made here that really doesn’t look very sympathetic to the eyes of a financial aid administrator. It looks like a conversion of assets to protect them from something (claims of the ex-spouse? creditors? disclosure on FAFSA?)</p>

<p>Unless you live in some corner of the country where property values are really low… or you were able to buy a distressed property at auction for well below market value – that’s a big chunk of money put into a house.</p>

<p>Almost all private colleges that promise to meet full need will also consider home equity, and the equity of a home that is owned outright is whatever the current market value is – or, whatever calculation the college makes based on the purchase price of the home. </p>

<p>I think your kid’s best bet is to look for merit money. You are going to have to assume that your 2010 tax returns are going to form the basis of the 2011 need-based financial aid award. You can and should write a letter explaining the circumstances, but you would get a more sympathetic ear from a college that is leveraging its aid to give more favorable packaging in favor of merit-worthy students in any case. The problem I see is that even if a full-need college cuts you a little bit of a break based on your circumstances, that doesn’t mean they are going to entirely disregard your assets and the choices you’ve made. You <em>could</em> have focused on preserving assets rather than buying a house – I understand that there may be good reasons why you chose instead to invest in a home, but you do need to recognize that you had choices along the way.</p>

18

<p><a href=“Her%20first%20post%20mentions%20a%20high%20school%20senior%20and%20a%20junior.”>I</a> *</p>

<p>I wonder why she mentioned that both would be applying to colleges “now”?? my sons are applying to college now. If the junior is intending on graduating early, that is probably NOT a good idea unless his stats are very high and could get big merit… </p>

<p>*Aside from your in-state colleges, I would have them look at colleges that are FAFSA only and offer merit scholarships. *</p>

<p>Absolutely! If the senior won’t take a gap year, then I think the college list needs to include…</p>

<p>1) some in-state publics that he could commute to and/or get big scholarships.</p>

<p>2) some privates that might also give him big merit scholarships.</p>

<p>3) some OOS publics that will give him big merit scholarships. </p>

<p>**The problem is that even without the one-year EFC issue, the senior’s current stats are not high enough for most schools that meet need anyway. ** So, even without this odd money issue, he might get gapped big-time at many schools. That’s why this student needs to pursue big scholarships at the schools that give them.</p>

<p>A student in this situation is going to have loans in his FA package and work-study, so he won’t be able to borrow to cover any gaps or uncovered EFC. </p>

<p>When students have big financial need and their stats are strong, but not stellar, then they need to apply to some schools that are mid-tiers and below that will give them big merit for their stats. </p>

<p>Your older son needs to take the ACT again! He also needs to take the SAT because some do better on that. If he can raise his test scores within the next couple of months, he would be in a better position to get a big scholarship. </p>

<p>What is his likely major?</p>

<p>What is your home state?</p>

<p>I don’t think taking out an equity loan or selling the house is a good idea. She probably couldn’t afford the repayments since her income is unstable and having the cash on hand would just hurt EFC.</p>

19

<p>As a result of the divorce, I had to cash in securities and equity in 2010 to purchase a house for all cash because I could not qualify for a mortgage. So I have capital gains I have to report as income even though all of the money went to pay for the house.</p>

<p>How much cash are we talking about? $100k? $200? more? less?</p>

<p>The first $30k is exempt for a single person (I believe). So if you’re talking about $200k, then 6% of $170k would be $10,200. </p>

<p>I’m not sure that this money is really the main problem. Even without it, their EFC would likely be about 3700. With an EFC of 3700, you get about $1900 in Pell - certainly not enough to pay for much of college costs. </p>

<p>And, even with 2 in college, if the EFC were to split, each EFC will be about 2200 - so each kid would get about $3400 from Pell per year. </p>

<p>And…if the mom can’t pay each child’s EFC plus any gaps, colleges won’t be affordable any way unless the schools are carefully chosen.</p>

20

<p>Mom2 - I think you are confusing assets and income.</p>

<p>The 5.6% figure is the percentage of unprotected assets over the asset allowance that goes to the EFC. (the protection asset allowance is based on age and does not reach $30,000 for a one parent family until that parent is 65 years old, for a parent aged, say, 50 the allowance is $20,500)). </p>

<p>But the OP said that she had to sell equities so will have capital gains. That will affect her income that she must report on FAFSA and the % of the income, after allowances, that goes to the EFC is much higher than the % of assets - between 22% to 47%. The % depends on the total amount of income.</p>

<p>In all honesty I doubt that selling equities to purchase a house would qualify for a special circumstances adjustment. Always worth asking, but don’t bank on it. But the impact will just be for a single year.</p>