Shocker Pre-read from Ivy

Paying for College
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<p>Be forewarned…</p>

<p>SHOCKER pre-read…</p>

<p>We just got our FinAid stuff–
The calculated EFC is more than double what the calculator gave us…(our numbers come from the PROFILE)
This is a HYP</p>

<p>They took our income,
added back IN my husband SEP contribution,
then took only PARTIAL deductions (evidently they do not allow dollar for dollar on deductions such as FICA, income taxes etc…)
Then from that “available income” they calculated, they are asking for 30%!!!</p>

<p>AND even though that AGI as they calculate it-- was under the 200k cap…and they want 30%!!! from the parents…
I should mention we have no assets, our house is upside down and we have no stocks etc</p>

<p>On top of that, they want $1500 from our kiddo in summer earnings-kiddo doesn’t have summer earnings/$1500 cash,
They want $850 from kiddos acct (stock) which is worth less than 5k total, so kiddo’s acct will effectively be gone in 3 yrs…
AND they want kiddo to work on campus (on top of classes and varsity sport) for an additional $3k a year</p>

<p>So I called to ask about this and that’s what it is–</p>

<p>When I asked why we weren’t being offered the 10% cap on income like they have in their book about “affordability”–she said “your case doesn’t fit under that”…
I asked WHY–??
She said…I will have to have someone else call you back, it won’t be today.</p>

<p>OMG…Not only are they not allowing dollar for dollar what we pay into FICA, taxes and medical (we had over $30k in other medical expenses last year), they want ALL of the SEP contribution included in income!! And that SEP was on the business side of the tax returns not the personal…and its a business deduction! She told me “No institution allows dollar for dollar on the deductions”.</p>

<p>The “institutional method” is a mess…
and evidently those nice little charts showing what your student’s expected award will be in relation to your income and no more than 10%… MAY not apply?? and they can’t tell you why??</p>

<p>Believe me, we have no assets, and a year of this school costs more than my DH has in an IRA!
How can we not fit into a capped EFC even with our income under the published threshold!!</p>

<p>Sigh…</p>

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<p>I didn’t think there was a $200k cap at HYP.</p>

<p>I thought that once you’re over $160k, they expect more than 10%.</p>

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<p>Well I am looking at a pretty chart,
in a lovely book from this school…
and we are under the cap…using 2009 tax returns
and frankly, our AGI for 2010 will be then 20% less than 2009</p>

<p>What is also shocking is that they don’t take dollar for dollar on deductions like FICA and state income taxes or medical expenses not covered by insurance etc…
so too bad if you paid a dollar to taxes, FICA etc,
They will add part of it back in as “Available Income”</p>

<p>Hello??? tax money is no longer “Available income”</p>

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<p>First, I know this is shocking to you and a disappointment. BUT…it’s good that you know this now. Better to have a preread and know than to be shocked in April. I know this isn’t what you hoped for, but it does give you time to think about applications and such.</p>

<p>FYI…everyone’s pretax retirement contributions get added back in as income. In addition, at less generous schools, the family contribution is typically between 25% and 33% of your income. Most schools also expect a student contribution. For very low income students, this can sometimes be met with work study. That isn’t unusual either. It sounds like your family is over the threshold for the 10% generous aid that some of these schools offer. </p>

<p>But there is sort of good news…if your child really is a competitive admit for an Ivy League school, there will be schools where he can garner some significant merit aid. Hopefully the merit aid he receives AND your family contribution will total an affordable combination.</p>

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<p>Were you unaware that SEP and/or IRA type contributions would be added back in? This is quite normal. They are added back to income on FAFSA as well. Money in a retirement account are not counted as an asset by FAFSA but current year contributions can not be used to reduce income so are added back to income for FA purposes on FAFSA. I would not expect a school to do any differently when they are awarding their own money.</p>

<p>However the FICA and state taxes not reducing income dollar for dollar does not seem to make a lot of sense. Though even on FAFSA these are calculated using tables within the FAFSA EFC formula, rather than actual amounts paid.</p>

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<p>We are under the thresholds for the 10%, and without assets…
–and so are stumped
–and the fin aid rep said she didn’t know why “our case” doesn’t qualify…
I asked if I had made an error in the profile, as I am not a cpa and did the best I coudl with our tax forms etc</p>

<p>Such a pretty chart in the college’s book and yet, not true…and without a fine print explanation…we are left without answers…</p>

<p>It is surprising that income taxes, FICA etc are not taken dollar for dollar in the deductions…they aren’t avaiable income, yet a percentage is added back in…
according to the fin aid rep–all of the schools using an institutional method reduce the deductions by a percentage</p>

<p>The student contribution will eliminate our student’s acct in about 2.5 yrs not 4. And the job for kiddo on campus is for another $3k …</p>

<p>I expected kiddo to contribute, and to need to hold a job…I didn’t expect that a business deduction on the business return–not the personal return, would be added back in…
almost makes it worth paying taxes and holding it as retained earnings on the business side rather than having it added back on the personal side…</p>

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<p>This part seems pretty typical. And usually the expected student contribution from summer earnings is lower for fr that the subsequent years (eg. at Y it doubles). 3k work study is what D1 has this year, but that’s where outside merit comes in handy, it reduces the WS amount first.</p>

<p>Agree about contributions to retirement accounts, they come from income, so that’s where they’re counted.</p>

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<p>I don’t think that the 200k that schools talk about is an absolute threshold, but rather an income level where some families receive aid if there are other factors that contribute such as multiple children in school, older parents, etc. And unfortunately you never know all of the factors underlying the FA examples that schools give.</p>

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<p>On top of that, they want $1500 from our kiddo in summer earnings-kiddo doesn’t have summer earnings/$1500 cash,
They want $850 from kiddos acct (stock) which is worth less than 5k total, so kiddo’s acct will effectively be gone in 3 yrs…
AND they want kiddo to work on campus (on top of classes and varsity sport) for an additional $3k a year</p>

<p>I think entomom is right…this is typical.</p>

<p>The one thing that I’ve noticed is that even the most generous schools don’t want to pay for a student’s toothpaste and deodorant and pizza with pals on a Friday night. </p>

<p>I’m being a bit silly, but when you look at COA, about $3k-5k is pad…personal expenses…travel…etc… So, schools don’t want to pay for that. So, that amount is the “kid responsibility” thru summer jobs and work-study.</p>

<p>As for the student’s savings account…isn’t a small amount isn’t “protected.” If he has about $5k in there now, and they’re asking for $850, then next year (I think) they will ask for a smaller amount (since the balance will be smaller). Frankly, many just empty the account (except for maybe a thousand) by paying for computers and stuff to avoid that contribution expectation.</p>

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<p>At least at Y, they state in their student handbook that 25% of a student’s assets are expected, $850 would be 25% of $3.4k, so that seems in the ballpark. I agree that it’s smart to spend down from the student account.</p>

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<p>One final comment, schools expect the EFC to be paid from three sources: past savings, current earnings and future loans.</p>

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<p>In our case–the retirement comes off the business side --its expensed by the business…it isn’t income on the personal side and isn’t even on the personal side returns.</p>

<p>The kids acct will be gone easily within the 2 yrs–maybe sooner…I figured they would want it…we expected that…</p>

<p>Like I said, we have no equity,
and DHs IRA is less than a yr of COA at this school…</p>

<p>I wonder if the offices will give me any info on the institutional method–I need to know how they are looking at our business…which is a business of 1. I think for FAFSA the business is ways.</p>

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<p>Nothing sounds unusual here. Sounds like your DH is self employed/owns a business, no college ever thinks your AGI is what you think it is when that’s the case.</p>

<p>Kiddo needs to get a summer job this summer, it’s the first time for many, and work study is typical although I agree it’s a lot when you’re a varsity athlete. Many find easy jobs.</p>

<p>Here’s the kicker, if this is what a HYP wants, you probably won’t get a cent anywhere that isn’t offering merit aid. You may want to look at schools giving athletic scholarships.</p>

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<p>I understand you’re reeling right now and hope that you can get clarification from someone in the FinAid office who can address your specific questions. </p>

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<p>Are you sure that this is all lumped together, or is it possible that the FICA and taxes were fully deducted while a percent of medical expenses were added back in?</p>

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<p>If this is an S-Corp, if you hadn’t contributed to a SEP, your earnings would have increased by the amount of the SEP contribution, so either way this money would be included. In other words, the corporation could contribute $10K to a SEP to reduce its earnings by $10K, OR that $10K could have been passed on as earnings to its shareholders, which would have increased your AGI by $10K. The advantage of the SEP is to lower earnings and therefore lower taxes -> a good thing.</p>

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<p>^^Correct. The amount from the student assets is a % of the total balance held by kiddo. After deducting the $850, the balance goes down and next years’ expected contribution from that account will decrease accordingly.</p>

<p>Summer earnings are always expected, even in this economy (and regardless of whether one can find a job or is a recruited athlete).</p>

<p>Contributions for IRA-SEP-401k accounts are considered voluntary by you. They are always added back, even by the feds in fafsa. Even if they are paid by the wholly-owned business, they are still ‘voluntary’ contributions since the owner (your H) makes a business decision which also affects his personal return.</p>

<p>Does your H own his own business, such that he pays both sides of FICA, but they are disallowing the “employer” portion?</p>

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<p>^ Good question about FICA</p>

<p>Thanks for everyone’s help</p>

<p>Yes its an S corp, and he’s self emplyed–paying both sides of FICA–I dont know what they are “dis-allowing” since with our AGI and tax returns we are clearly, clearly under the threshold…</p>

<p>Does anyone know–what these schools look at on the business side of assets, depreciation etc? I think that Self employed S corps get scrwd huh?</p>

<p>Even so–how we dont qualify for the 10%–the woman didn’t know–just said “not in your case”…I was like…well on page xyz of this lovely book about affordability…the chart says…
sigh</p>

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<p>*
Does anyone know–what these schools look at on the business side of assets, depreciation etc? I think that Self employed S corps get scrwd huh?*</p>

<p>I don’t know how this all works, but others have said that some business deductions get added back in because they’re believed to be “excessive” or not “real” or something like that.</p>

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<p>I’m so sorry you received bad news. I’m always concerned by the posts that proliferate around these forums about HYP generous aid. It is generous, but they do have expectations about parental contribution and student contribution. Hopefully there was an error and it will be revised, but from everything you’ve reported it doesn’t seem that different than how other Profile schools look at the situation.</p>

<p>Hang in there, as others said, if you have a student with the stats for that caliber of school you’ll undoubtedly have some aid packages to compare in the spring.</p>

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<p>OP, you stated that you “have no assets”, yet have made several references to a “business”. Doesn’t any business have an intrinsic value? Could some imputed intrinsic value of your business been added to your FA application. </p>

<p>Also I spent ALL my savings (on clothes/supplies for college) before I would have had to declare it on a FA application. Most college bound kids should probably do this …</p>

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<p>What threshold are you under? My understanding is that SOME students with incomes in the $200K range receive SOME need based aid…not ALL students.</p>

<p>I thought the threshold for aid at HYP was $150K and that would include your retirement contribution for this year AND business expenses that the schools add back in as well.</p>

<p>As noted, for business owners, the schools don’t look at your expenses/losses the same way the IRS does. </p>

<p>And except with the very low income students, those who are Pell eligible (you are not, I don’t think…your EFC would have to be VERY low for that) it is expected that there will be a student contribution AND student employment.</p>

<p>Is your youngster a recruited athlete elsewhere? Perhaps schools with athletic scholarships might be a consideration as mentioned above…if he’s being recruited.</p>

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<p>We are in a similar financial situation and I assumed even if S could get into an ivy we would be paying 30% of our income, which is why he probably is not applying. I assume he would have to make more than $1500K over the summer and work on campus. We are upside down in our house, have no assets nor the ability to pay 30%. I assumed the only way we would have gotten aid was if we had another kid in college at the time. We knew they didn’t look at the four who we already put through.</p>