Understanding EFC calculations & 529 plans & medical/insurance costs

Hi All,
I’m running numbers to get the EFC for 2016, and forecasting 2017. In 2016, we withdrew 30K in 401 to help with living expenses, EFC came out as $3261. In (projected) 2017, using home equity to assist with living expenses, EFC is $296, plus I’ll have kid #2 going into college as well. AGI in 2016 is 65K with 30K in 401K $, projected AGI in 2017 is 35K with home equity keeping us afloat.

In both scenarios, I have questions, even after reading the “help”:

  1. I didn’t see where the 16K 529 plan gets factored in for either kid?
  2. Spending $9600 on self employment health insurance, and I’m not supposed to add that to medical expenses of $7100?!
  3. Maybe S should consider gap year, and I have 2 go off to college at the same time? Or do I just address the 401K as the one time event with the colleges, and hope year 2 the aid is increased accordingly.

I’m trying to get a decent EFC number to run the school’s net price calculators, knowing the the self employment factor makes it less reliable. Again, just want to do everything I can to find a few schools that are more affordable, be it talent, need, or merit aid

S Stats: GPA 3.65, He’s a poor test taker with an IEP for extended time, and SAT score of 1050. Trying to focus on schools that are more “whole person” focused, less on standardized testing scores. Spends 20+ hours weekly in theater, on youth theater board. Wicked talented.

Do you have 16k for each kid or is that total?

@gearmom I have 16K for each kid. Not much is the big scheme of college costs today, but at least it’s something.

@DoinResearch No that isn’t bad. What will kid #2’s stats look like?

One VERY important thing to remember. Just because you have TWO kids in college doesn’t mean you will,get additional need based aid. Your EFC per kid can be lower, but that doesn’t translate necessarily into increased need based aid.

This ONLY will matter if BOTH kids attend colleges that guarantee to meet full need for ALL accepted students.

MOST…read that again MOST colleges do not guarantee to meet full need for all students. The ones that guarantee to meet full need for all students are HIGHLY competitive.

You can try the net price calculators on some of the potential,college websites.

If I’m not mistaken, your 529 money is considered a parent asset.

The MOST important number is what YOU think you can actually contribute to your kiddo’s college education. If you have $16,000 per kiddo…you have $4000 per year…plus the $5500 Direct Loan (it goes up each year…but only up to a max of $7500), and any portion of the Pell grant to which you are entitled. With a $3500 EFC, you would,get a little over $2000 in Pell. With $300 EFC it would be closer to $5000 or a to more.

So…for the 2018-2019 year…which will use 2016 income and assets…you would get a $5500 Direct Loan, a small Pell…about $2000. That’s $7500. Add to that the $4000 from the 529 and you have $11500. Right now…that is your budget…unless you have more money someplace else. Oh…does your state have any grant money for lower income families?

$11500 should pay for a community college if your kiddo commutes.

@gearmom Last semester Kid 2 had a 4.25, but current GPA is 3.7. Freshman year adjustment. Kid #2 is loading up on AP and honors classes Jr. year, and has the competitive temperament to work hard (and hopefully) score well on standardized tests. She has the benefits of my learning curve from Kid#1. I’ve already handed her a list of schools that give good need based aid, in addition to trying for merit aid.

Kid#1 is an artist, and thinks people are so much more then stats - has a very unique perspective that I personally love. Not sure if forcing him to “play the game” and study for standardized testing this summer would work. Square peg, round hole. Picture early Sean Penn taking the SAT.

@DoinResearch Your knowns are that with savings and Stafford loans, you can contribute 10k a year for each kid. Personally, I would have Student #1 take a gap year so they can help each other by maximizing your aid. Student #1 should be able to take advantage of interesting opportunities in their field AND earn money. This could be a good chance for S#1 to network. I don’t know about arts opportunities so go post a question on the Theater forum. S#1 doesn’t want any more debt than the 30 k from Stafford loans in a theater field.

Also, they both need to be working in the summers and saving as much as possible.

If you live in a state with low cost public schools, that’s probably going to be the best bet, especially if you can qualify for Pell grants, federal loans, and any state aid.

I had two go off to college at the same time, and it didn’t change anything. Also, just because they started at the same time doesn’t mean they will finish at the same time. Mine won’t.

Why kind of artist? Visual? Music? Drama? Dance?

The student will either need a great portfolio or a terrific audition to get significant artistic merit aid.

If theater, he will need a great audition of a performer, or some significant portfolios if something like set design or lighting design or costumes.

Thanks @thumper1 I will rerun the EFC calculator adding in the 529 money, guessing “Other real estate and investment equity” bucket. I’m curious on how to convert the EFC to the federal pell grant? There is state aid for low income, I plan on being the first in line on Oct 1.

S might benefit from a community college the first two years, and save the 529 money for the last 2 years at a university. That way he can see how he does with college level classes and saves money the first 2 years.

See what art programs local community colleges might offer.

D will need to find a school where merit or need based aid covers all but her student loan of about $5k, her $4k from 529, and summer work earnings.

If your self employment health insurance is that much, could you try and find a job where you work for an employer and get employer paid (or subsidized) coverage?

Do either kids have running start options at their high school?

With 16k savings, Federal Stafford Loans ($5500, $5500, $6500, $7500), a gap year with $10k earnings, and then 2k earnings after that, distributing all these assets evenly over 4years, Student #1 has $14250 per year to contribute. S#2 if starting college the same year and working summers has $12250 a year.

If they went to the same school, the same time, there could be potential cost saving opportunities of travel expenses, apartment or room sharing, food if they worked together. Just something to consider.

The federal,loan goes up to $6500 for second year…and then is $7500 for both the third and fourth years.


@thumper1 Thanks. That mean S#1 has 14,750 a year and S#2 has 12,750 a year.

^to these numbers you could probably add a small Pell @thumper1 of 2k.

@thumper1 He is an actor, and will no doubt be very prepared for a great audition. I’ve been in the Theater section of CC for a longer time researching and list building, which is where I’ve learned that merit aid is more meaningful than talent aid. He has his monologues already, competition is fierce, but he’ll be ready. @gearmom Kids both landed jobs this summer, so there’s some skin in the game.

Thank you all! I reran the EFC, and crunching net price calculators to find a few financial safeties.

A withdrawal in 2016 from a 401(k) account (and any income in 2016) won’t have an impact on EFC until the 2018-2019 academic year. Likewise, any income in 2017 won’t be a factor in EFC until academic year 2019-2020.

If the 529 account owner is a parent or the student, the account gets reported as a parent asset in FAFSA question #91.

Are you claiming the health insurance premiums as a tax deduction? Or are the payments made on a before-tax basis?

@BelknapPoint health insurance premiums are a tax deduction on my taxes, but when I was running running the college board estimator to get a EFC, for the purposes of running college’s various net price calculators, it stated not to include premiums. My eldest is a Jr., and I’ll fill out the FAFSA for the first time this fall. Perhaps the premiums get picked up in another bucket in the FAFSA.

Since your health insurance premiums are deducted on your taxes, they reduce the income that you report on FAFSA. Similarly, those who have health insurance premiums deducted by employers from their salary before tax is assessed get a FAFSA advantage. In both cases for FAFSA, and probably for most college NPCs, the health insurance premiums paid reduce the income that is reported, which generally results in a lower EFC. Note that on FAFSA there is no place to report “medical expenses,” and no place to report health insurance premiums paid.