lowering EFC for non-traditional student

Paying for College
1

<p>I’m a new student in my 30’s, I had an EFC of 0 for last year due to having no income and so got a full pell grant for this financial year. I was looking ahead to see what my future financial aid would be like, and from what I can tell I’ll be in a little trouble. I expect to make a total of about $11,000 for the year working part time. The protected income for students for the 2010 year is supposed to only be about $7800, so I’m expecting I won’t be elligible for the pell grant next year, and was really counting on continuing with my current level of financial aid for next year. I see that investing in an IRA can reduce my AGI, and I also see that you can do an early withdrawal from an IRA to pay for education expenses without penalty. Is it possible for me to invest $3000 in an IRA towards the end of the year, leave it for a couple months, file my taxes, and withdraw the money to pay for school?</p>

2

<p>No because IRA contributions for the current year are added back to your income. But if your available income is only $3200 ($11000-7800), your EFC should only be 1600 and you should be Pell eligible.Although Pell is going up a bit next year, you can estimate your award here:
<a href=“http://www.ifap.ed.gov/dpcletters/attachments/P0901PaymentSchedules1D.pdf[/url]”>http://www.ifap.ed.gov/dpcletters/attachments/P0901PaymentSchedules1D.pdf&lt;/a&gt;&lt;/p&gt;

3

<p>No that would not work. Any contributions to an IRA are added back to the AGI in the EFC formula.</p>

<p>But you should still be eligible for some Pell. If the income protection allowance is $7800 then your available income in the EFC formula would be reduced by that and also any actual federal taxes and some work based allowances (usually for FICA and state taxes) . For instance if your income from work is $11,000 then you would pay @ 6.7% of that in FICA (@ $715) and perhaps $285 in State and federal taxes giving $1000 in allowances (total guess number for illustration purposes only). In the EFC formula your available income would be 2200 (11,000 - 7800 - 1000). Of that 50% would go to your EFC so it would be @ 1100. Your pell would not be the max but you would still get some.</p>

<p>I am assuming you do not have a dependent for whom you provide 50% support? If you do you would be eligible for the automatic 0 EFC.</p>

4

<p>There’s no way to get around the EFC generated from income. IRA’s can only shelter asset value, not income.</p>