<p>we are a middle class family, living frugally and have been saving for our kids college education diligently for quite a while. We have a high EFC of 64k due to our real estate rental investment property. I can reduce our EFC to 45k by forming a LLC and placing the real estate property in there. We don’t expect qualifying for need based aid but will hopefully qualify for merit based aid.
My question is would it be worth creating a llc for my real estate rental to reduce our EFC from 64k to 45k since a EFC of 45k is still quite high. would it make a difference qualifying for merit based aid?</p>
<p>Most (nearly all) merit based aid doesn’t consider “need”, so may not be worth this. We’ve never applied for need based aid, yet our kids got merit awards from all the schools they applied to that give them. </p>
<p>BTW…if you’re applying to any schools that use CSS Profile, I don’t know if forming the LLC won’t capture that anyway. </p>
<p>At FAFSA only schools, I doubt the difference in EFC would matter a hill of beans. </p>
<p>What schools are you looking at for merit consideration???</p>
<p>Merit aid most of the time is just that; for merit for those students the schools most want… Usually it is given out by the Admissions Department which works separately from financial aid. It’s usually given for high test scores, to be blunt about it, though schools will also use to to attract diversity in gender, URMs, geographics, build up a major that needs students. I will also include a “rumor”–I call it such because it is unconfirmed, but I’ve heard it a number of times, that it’s better not to have need to get a merit award. The reason is that Admissions has its own pot of money separate from fin aid, and whatever it gives reduces need, so that a student that might have gotten $20 in an aid package from fiancial aid, would get the whole thing from admissions instead in merit money, so the money would come out of their pot, not the financial aid department’s.</p>
<p>The list of schools will determine a lot of this. FOr many state schools, it isn’t going to make a much if any difference whether you have a 45K EFC or a 64K one. The cost of most state schools, even OOS will be at or around the 45K mark in terms of EFC, and they dont tend to guarantee to meet need anyways. THe private schools that do tend to meet need tend to require PROFILE and they may still count your real estate property, LLC or not. They look at things like this in more depth and small business owners often get slammed. The same could happen with your real estate holding even placed in an LLC. </p>
<p>Also bear in mind that signifiant merit aid is tough to get. Very difficult. But the large awards truly seem to go to the top students (Test score wise) and finances and need have nothing to do with it.</p>
<p>Also bear in mind that signifiant merit aid is tough to get. Very difficult</p>
<p>It can be difficult when the awards are competitive. In those cases, the choice of who got the award can seem odd to the casual observer, but as Cpt notes, sometimes the awards goes to students for a major with low enrollment or for geographic diversity or some other “hook”.</p>
<p>I’ve seen schools like Vandy, which does have some awards, seem to make no sense as to who they award. However, they must have their reasons…more females in eng’g, more students from Hawaii, more male URMs, or whatever.</p>
<p>That said, it’s super easy to get large awards if you have the stats and apply to some schools that FOR SURE give big awards to every student who has the specified stats. For many, applying to a few of those schools is a quick and easy way to have an assured financial safety in one’s pocket from the get-go.</p>
<p>Since your EFC is high due to real estate values, that suggests (to me) that you feel that your EFC is unaffordable since you’re likely not going to sell any assets to pay for college (I understand that, I have rental property as well). </p>
<p>If you want a good sized merit award so that your yearly contribution is more reasonable, then be sure to apply to at least 2-3 schools that will give your child assured large merit. That way, if those safeties end up being your only affordable schools, your child will still have the luxury of making a choice next spring. No child wants to feel railroaded into attending his only affordable school…choice is always good for morale. :)</p>
<p>Other than merit aid that is guaranteed based on set criteria (and we have a section on our board that lists the programs we have so found), it’s very difficult to be able to count on getting a sizeable award that way. You do need to research how many such awards are given at each school on the list and where your kid is in the stats. If a school gives 20% of its kids merit awards, and your student is not in the top quarter stats wise, it’s not a good sign that he will get anything. If the average award is $10K, the chances of him getting anything sizeable, say $20K are very small. If a school only gives out, say 5-10 or even fewer big awards in a freshman class in the thousands, you can see the chances of your kid getting one of those is minuscule. He has to be one of the very top contenders. </p>
<p>On the other hands, schools like Fordham do include merit awards in their NPCs. We have a section on the board that lists such schools, and you might want to run your numbers thorugh their calculators. No guarantee on those things, but it gives you some idea whereas with some schools, it’s totally up in the air.</p>
<p>My one talented son (very talented in the performing arts) got a number of merit awards in the arts from a number of schools despite not being in the top echelon of students academically. But…those awards were all $5K or less, hardly a dent on some of today’s private school prices that are looming in the $60K+ level. The big money is NOT easy to get.</p>
<p>Thank you all for the comments</p>
<p>sorry to bring this up again but with the private colleges we’re looking at costing 50k-60k per yr wouldn’t it be worth bringing down my EFC to 45k from 65k? Wouldn’t any EFC under the cost per year be worth something?</p>
<p>Not necessarily, most schools gap need.</p>
<p>Pacnorth, yes, it could be worth something at a school like Albright that guarantees to meet EFC excluding discretionary expenses, but that is the only school that has such a guarantee. What you would be doing is raising the ceiling for your student’s POSSIBLE financial aid package at those schools that use EFC alone to determine need. If you can bring down the institutional expected contribution as well, at those schools that use PROFILE and guarantee to meet full need, or tend to meet full need, or at very least you might lower that ceiling as well, yes, it would make a difference.</p>
<p>So, yes, if it doesn’t cost you a lot, and isn’t too much trouble, go on ahead, but don’t assume it will make a whole lot of difference. Because:</p>
<p>1) Most schools don’t meet full need anyways, so that you may not get that additional amount. Or if you get it covered it might be via subsidized vs unsubsidized loans, which may not make a whole lot of difference. Or your student may just get work study. </p>
<p>2) Those schools that tend to meet a goodly amount of need, may use PROFILE which may just include your LLC assets, and add back the income from anything there. Maybe not. But PROFILE schools tend to do that. Look at a PROFILE and see if it addresses LLC assets and income, and see what a difference it makes.</p>
<p>But it does give your student eligiblity for federal fund and if your state has them and it brings you under the theshhold, sometimes state funds. </p>
<p>What I warn peope agains is going through financial contortions expecting a whole lot more money when it likely is not going to happen.</p>
<p>However, a friend of mine did get some extra money from some school, albeit mostly in student loans by reducing EFC by making her ex the custodial parent (had student spend more time with dad that year). BU and a few other schools did come up with some financial aid that the young man would not have gotten with my friend as the custodial parent, because her EFC was over $60K. Though she had to include her info on PROFILE as NCP, apparently NCP financials are hit less hard at some schools. At some schools, he got a big fat zero in aid, other than subsidy on the Student Loans ($3500 of the loans had their interest not accrue while he’s a full time student), But a few schools did come up with some of their own money for him, not much but some. It also made him eligible for work study, but they don’t want him working the first year, and most kids can find jobs around campus without that option, but it did add that option.</p>
<p>But with an EFC in the level over around $6K, there are no federal grants to which your son is entitled. The PELL and Direct (Stafford) Student Loans are the only federal entitlements, and pretty much any studnet can take out the loans, with or without need, and the difference amounts to the possibility of having the interest on $3500 of it deferred in its onset that freeshman year which can save under $150. </p>
<p>But every bit helps. It’s just is it worth the cost and trouble to do what you have to do with your assets, or your business? if it’s no big deal, go on ahead. If it’s going to bring risks and cost you a lot, reconsider. Maybe give it a whirl and see what the impact is. </p>
<p>What schools does your student have in mind?</p>
<p>*sorry to bring this up again but with the private colleges we’re looking at costing 50k-60k per yr wouldn’t it be worth bringing down my EFC to 45k from 65k? Wouldn’t any EFC under the cost per year be worth something?
*</p>
<p>those privates are asking for CSS Profile, right? if so, then putting those properties in a LLC will not protect them from being considered. CSS Profile doesn’t use FAFSA rules about “businesses”. The value of those properties are going to count no matter where you put them as long as you own them. </p>
<p>this about it…those Profile schools are giving away their own money. They’re not about to overlook people’s efforts of financial gymnastics and give them more money. They will see that you have those assets and include them.</p>
<p>If the privates aren’t asking for CSS Profile, then they likely don’t give good aid, so reducing your EFC wouldn’t likely matter.</p>
<p>Weren’t you looking for merit aid? Has that changed? Or are you now willing to spend $45k+ per year for college?</p>
<p>This information is from 2006, you can see if it has been updated.</p>
<p>
</p>
<p>[FinAid</a> | Financial Aid Applications | Small Business Exclusion](<a href=“http://www.finaid.org/fafsa/smallbusiness.phtml]FinAid”>http://www.finaid.org/fafsa/smallbusiness.phtml)</p>
<p>See also <a href=“http://www.irs.gov/pub/irs-pdf/p527.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p527.pdf</a></p>
<p>This is just one family’s experience from last year. We applied for aid everywhere D applied. Our EFC was around $33K. Pretty much every offer that came in left us with that $33K due, except for those schools that were aggressively looking for students like our D. (Female, National Merit Scholar, science major). So we weren’t gapped, but it looked to me like the merit award was made in relation to the EFC.</p>
<p>I do wonder if some of the suggestions above to just go for the merit aid might not work out better for you, assuming your child has great stats. If we hadn’t applied for aid might my D have garnered more in aid? Sounds plausible now, though I wouldn’t have believed it before we went through the process.</p>
<p>The EFC is the LEAST amount you are to pay and still get federal aid. If you have an EFC of $33K, if you get a combined financial aid and merit award that could reduce your cost to lower than your EFC, the federal amounts other than PELL have to be reduced. However you can still borrow the DIrect loan student amounts as long as COA issues are not breached, but just not on a subsidized basis once you are at EFC.</p>
<p>I don’t think not applying for aid would have given your DD more merit money. It appears that some schools gave your D merit money that exceeded any financial aid that had federal money in it. A school can use its own funds any way it pleases, so it can stack merit and need, as long as no federal funds (other than PELL) are involved. But a lot of schools have their own procedures not permitting this.</p>
<p>People tend to think that the EFC will equal the price that the school will charge. That is not true. It is equal to the minimum that parents will be assumed to be able to pay, but not the maximum that the schools are able to charge.</p>
<p>Say that you change your EFC to 45K but your child chooses to attend a school that costs 57K. The school can still bill you for the 57K.</p>
<p>Your best bet is to look at schools that offer guaranteed merit scholarships. My kid found a school that took an automatic 80% off her tuition, and because we qualified for need based in addition, gave us that as well. She then worked as an RA her sophomore year in exchange for free room and board which, after federal loans, left her a balance of $0 to attend a $47K per year school.</p>
<p>If you haven’t already, try running some net price calculators for schools on your child’s list. That’ll give you a better estimate of what the school may offer in aid. You can play with the numbers and see if moving your assets will make any difference. My guess is as others have already said: not gonna work. </p>
<p>In another post it looks like your D is interested in Lewis and Clark. D2 is applying there, and I’ve checked with their admissions/FA people: no need to file FAFSA or PROFILE to apply for merit aid.</p>
<p>OP, if you can reduce the EFC from $65K to $45K, where it could make a difference is possible in subsidied loans and workstudy at any number of schools, and also it does give some schools some wriggle room to give you aid. Some private schools do practice “enrollment management” and take a somewhat holistic approach to admissions and it is possible when a student is highly desired that though the PROFILE costs may come out a lot more than EFC, they can maybe make some adjustments. Also how business and certain assets are viewed such as LLCs can differ from school to school. </p>
<p>There was a student who was accepted to Swarthmore, on this board, wth an EFC that indicated financial aid was forthcoming, but Swarthmore, though one of the more generous schools out there, that do guarantee to meet full need as they define it through PROFILE, deemed that the family business assets and deductions precluded him from aid. The family appealed, to no avail. But another PROFILE school, Carlton, I think, assessed the business totally differently and came up with an acceptable package. So YMMV with PROFILE schools and so by reducing ones EFC, it is possible that some schools use an approach more like FAFSA than PROFILE.</p>
<p>One way to reduce EFC, is if you have, say $200K in assets, use it to pay off down your mortgage. That reduces your EFC by about $10K or so , depending on other assets and protection allowance. But PROFILE wants the value of your house. BUt house valuation is done on a reasonable quick sale figure with net proceeds, with some schools more lenient about the methodology, and also PROFILE schoool vary from not using the primary home values just like FAFSA to using full values, with most capping the values, I believe at either 1/2X or 2.4X income. So that move can reduce some PROFILE expected contributions more than others. </p>
<p>It comes down to the fact that it depends upon the schools, and they don’t release their fin aid formulas. </p>
<p>Also there are colleges that use FAFSA only, don’t meet full need for all students, but YOUR student if he is highly desired might be one that gets full or close to full need met.</p>