Lost job, no FA

cptofthehouse
Thu, 04 Apr 2013 08:51:49 +0000

In situations like this, college takes a back seat. If there truly is a possibility of the parent getting another job in the range where he was earning, then the best thing to do is to take a gap year. I have a friend who had TWO of her kids do that when her husband got a large severance check which he rolled over into a business, but it inflated their income that year so that neither kid was eligible for any financial aid. One was already in school and was getting some aid, and the other was applying. So they went to work for Dad and helped him get his business going that year, and the following year, they went to college with a package that reflected their true financial situation better. The daugther went to a school very generous with aid, but they refused to ignore the one time payment upon appeal. They get them all of the time, they said, and that is the way they handle them. Gotta give a cut towards the college expenses that year is the way their rules work.

I don’t see how rolling the money into an IRA is going to be any solutions since the financial aid process is such that all retirement contributions that are deducted from income for tax purposes for the given year, have to be added back in that year. They figure that money could be going to them instead of towards an IRA. Rolling it into an IRA could help for taxes for last year, and if they can get around the 10% tax penalty in taking it out, that might be a good move for other than college planning reasons.

There is no good solution for this with the colleges as they are not going to want to give out money on what could be a temporary situation, and the family did get severance to bridge that gap. There is simply no telling whether this will be permanent or not, and sometimes it is. This could be early retirement. So to make a commitment to a school when things are so up in the air is not a wise financial move. I really thing taking the year off and starting over with a better idea of what the future holds is the way to go.