Will colleges take my EFC of 50,000 lightly?

The only reason my EFC is so high is because of a one-time income in 2019 (hardship distribution). It virtually doubled our AGI this year, but our AGI will go back down for this year’s tax returns. Basically, I know some colleges accept this as a “special circumstance” for financial aid. Does this mean there’s a chance that I can lower my COA after receiving a financial aid package upon admission? My parents are okay with paying that much for my freshman year because it will lower for the other years I’m in college. I just wanted to know if anyone has any experience with sorting out financial aid with a college after sending in a special circumstances form.

Thanks :slight_smile:

You can ask for professional judgement from the financial aid officer at the schools to consider that as one time exceptional circumstances income. Explain the reasons and back it up with prior year tax transcripts

However, unless your EFC is under ~ $6k level, you aren’t eligible for the PELL grant, and unless your state has FAFSA based college grants and loans, all you may get is some subsidy of student loans and eligibility for work study. Few school will meet full need based on FAFSA EFC.

I would still submit Special Circumstances to the financial aid offices to have an early bid in for school money.

@riverandsasha3 on your previous thread you said the income was double because of withdrawals from retirement accounts…which is it? Withdrawals from a retirement account or a hardship distribution (please explain what you mean by this)


You will be lowering your net cost potentially. The COA at the college won’t change. But your need based aid might change if your one time income is removed from the equation.

Does this college guarantee to meet full need for all accepted students?

Contact your college. Ask what needs to be done for a special circumstances consideration. They will tell you what they need to receive and if they do these. Please keep in mind…some colleges do these and others do not. In addition, they are done on a case by case situation so knowing what others have gotten won’t really help you.

If the college does not guarantee to meet full need for all accepted students, you might not see an increase in aid…or enough of an increase to make this affordable.

But you won’t know until you ask and apply.

Do you have other affordable options on your application list? Just in case.

Question: what happened to the additional 2019 income? Is it in an account, or was it used to pay bills? IOW will that amount of $ still be considered an asset?

@thumper1 A hardship distribution is a withdrawal from a retirement account. It’s just a specific type.

The college I want to go to does meet full need, but I have 2-3 academic/price safeties on my list. I tried to contact their financial aid office, but their response basically just said that I won’t know until I get my financial aid package and I turn in the special circumstance form.

@Tigerwife92 All of the money has been used to pay bills, so it was not included in their assets. My parent’s combined assets (cash, checking, and savings) was less than $5000.

@BelknapPoint what would make a “hardship distribution” any different than any other elective withdrawal from a retirement account? Anything?

@riverandsasha3 so you applied ED to Duke, without knowing if it would be affordable, and you are hoping for a special circumstances review that will remove the retirement withdrawal from your income total?

And your parents are still saying they can pay $40,000 a year having only a $100,000 a year income (or is that income not including any taxes or other deductions?). How are they going to do that?

They had to borrow money to pay bills, but they can pay that much of their income annually for your college costs? I don’t understand how this can be.

Somewhere, I believe you mentioned that your net cost would be $17,000 or so if their income was in the $100,000 a year range. I’m going to say…that sounds low to me.

From a financial aid officer’s perspective, it probably depends in large part on what the distribution was needed and/or used for. OP in the other thread stated that the money was used to “pay bills,” and blossom very reasonably said that a professional judgement decision would hinge on what kind of bills were paid. Without further explanation from OP, we’re all just guessing.

A hardship withdrawal is very specific by IRS rules. If your parents took certain true hardship withdrawals by that definition, I believe your chances a high that the college financial aid offices would take it off of income. You can look up what those exceptions are. Medical expenses , funeral expenses , catastrophe expenses, disability expenses would likely all qualify. To pay off bills that got too big, help out some family member, are not considered hardship to many. It will depend upon the financial aid director as to whether the distribution was used for a true hardship and paperwork would likely be needed to submitted as proof.

Friends of ours were denied such a withdrawal when a parent lost his job and used distributions to keep the household from going into debt and to start a business to continue a level income flow. They got zero consideration. They ended up pulling their daughter from college for a year, which gave them an extra year of two in college due to that denial.

Also, schools that guarantee to meet full need have their own definitions of need that are generally more stringent than FAFSA. CSS PROFILE is usually involved.

So do go on ahead and set up your request and have documentation of the hardship use of that money. Paying bills is not good enough. The kind og bills and proof that the money went there will likely be required.

Not really. Defining what a hardship distribution is and is not, writing rules regarding hardship distributions, and implementing those rules is the responsibility of each retirement plan and not the IRS. Generally speaking, “hardship distributions are subject to income taxes (unless they consist of Roth contributions). They may also be subject to a 10% additional tax on early distributions.”


So, a quick recap: retirement plans, and not the IRS, make the rules about hardship distributions from retirement accounts. Independent of a retirement plan’s hardship distribution rules, school financial aid officers will use professional judgment to determine whether or not taking a hardship distribution should change a student’s EFC.

I believe that hardship distributions from IRAs do eliminate the 10% penalty tax for those who are under the threshold age for those distributions. Reasons for this include payment of medical expenses that are follow deductibility rules on the Schedule A, payment of health insurance premiums for the unemployment , buying ones first house, school expenses and other medical, funeral and disability related expenses.

I agree that it’s up to the schools how they choose to consider withdrawals from any qualified retirement plans, whether they meet IRS standards or not. It Almost always comes down to the individual college as to how they handle this

Do you understand that the language in quotes from my post is directly from the IRS?

“Hardship distributions are subject to income taxes (unless they consist of Roth contributions). They may also be subject to a 10% additional tax on early distributions.

So, no.

Edited to add: I feel it’s important to correct an error you made in a different thread. You wrote this today:

This is wrong. Parent assets are still assessed on FAFSA at a maximum of 5.64% towards the FAFSA EFC, as has been the case for years. You are forgetting Step 26 in FAFSA EFC formula A (for dependent students), which applies a sliding scale using Table 8 that maxes out at 47%. 47% of 12% = 5.64%.