DD got into USC with a $17,000 grant and $4,000 scholarship in addition to a NMF scholarship. That makes our OOP within the confines that DH and I set for what we would be willing to spend for each of our kids’ educations. We currently have another child at our state flagship university as well a third child in high school.
DH will inherit $150,000 soon. We can shelter about $100,000 in retirement accounts and our home. Does anybody have an idea how much of the $17,000 grant and $4,000 scholarship might be wiped out because of the inheritance? DD would be on the hook for most of that amount.
She is debt averse and is considering less prestigious schools where (among other things) she wouldn’t have debt even with the inheritance. I would hate for her to go to USC with the understanding that she will graduate debt-free, and then, in fact, have $60,000 worth of loans. Is there a downside to calling the USC financial aid office to ask them the hypothetical effect of the inheritance? For what it’s worth, USC uses the CSS Profile to figure financial aid.
I understand that DH and I could simply use proceeds from the inheritance to pay for the difference but that’s not what we had originally agreed to pay, and we have the needs of two other kids to consider. Who has a crystal ball?
If you have $100,000 in the bank when you file your FAFSA and Profile …it will be assessed at 5.6% for FAFSA purposes. So…$5600 added to your FAFSA EFC.
For a very right estimate…run the net price calculator on the USC website with the added asset money, added home equity. And see what you get. The NPCs are for incoming freshmen usually…but it will give you an idea.
How can you shelter $100,000 in retirement? Isn’t there a limit? Remember that contributions MADE to tax deferred retirement accounts are included…it’s the balance in those accounts which isn’t.
If your assets rise by $50K, the federal formula assumes you will contribute 12% of it towards college. Your grant should drop by $6000, but tuition will rise offsetting the drop somewhat. Since you have other children, I would check with the FA office to get an exact figure. There is no downside to it because you have not received the money yet.
@TooOld4School where do,you get the 12% number? For FAFSA purposes, assets are assessed at 5.6% of their value.
When will the older child graduate and how will any resulting financial aid change affect your limit for this child?
Where can this child get $60k in loans for college in her name?
Pulled it off a manual calculation sheet for private schools. Maybe that is the figure for the child’s assets. Even better if the rate is 5.6%.
Thumper1, it’s the combination of paying off my home and contributing to retirement accounts that gets me to the $100,000 sheltering mark. I appreciate your pointing out that retirement contributions are counted. I hadn’t realized that.
Pretax retirement contributions are counted, not after tax (such as a Roth).
Madison85, our older child will graduate in a year. She has a scholarship but no financial aid.
How much can you shelter in a Roth per year…per parent?
@TooOld4School the assessment for student assets for FAFSA is 20% of their value.
We are able to contribute $5,500 per parent per year to our Roths. DH has a 401k option at work that isn’t currently being maxed out. We could also pay off our home and make home improvements.
So how much will the grant money decrease with only 1 in college?
what does DD, DH, and OOP stand for?
As long as all goes as planned, we will have two children in college for the four years that our middle daughter will be an undergraduate.
As thumper1 suggested, I ran USC’s net price calculator. It’s difficult to compare apples to apples, but the drop wasn’t as drastic as I had feared. Thanks for the insights, everyone.
DD = Dear Daughter
DH = Dear Husband
OOP = Out Of Pocket
An inherited IRA would not be visible to FAFSA. Whether or not it would be visible to the financial aid calculations of a CSS Profile institution is another thing entirely.
Does the OP say the $150k is an inherited IRA?
Does USC ignore home equity? I didn’t think it did.
Your concern isn’t with FAFSA …it’s with CSS since USC is a CSS school.
Are there two concerns?
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impact of inheritance/impact of more equity (since USC probably doesn’t ignore home equity)
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an older sibling will be graduating and suddenly most/all grants will disappear? (nvm…just saw that younger sib will then be in school)
USC is not known to be generous with need-aid. We’ve seen a LOT of complaints here on CC about USC being their worst or one of their worst aid pkgs.
The $150k is not an inherited IRA.
Thanks for your comments, @mom2collegekids. Yes, the concern is with how a grant might be impacted by increased assets, including home equity. There seems to be information about how the FAFSA is affected but not as much on how the CSS is affected. Of course we can’t know USC’s formula for determining aid. I was dismayed to see your comment that USC is not known for their generous need-aid.
I’m coming to peace with the fact that we may not use the inheritance as I had thought we might (more educational expenses and less travel), but that’s OK. We’ve been given a gift, and for that we are grateful.