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October 14, 2010


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Both those ideas sound a little risky to me. Especially the second.

I have been thinking about converting our traditional IRAs to Roth IRAs. Paying the taxes on the converted funds would use up a good chucnk of our non-retirement funds cash. However, I suspect that with our income, low six figures for a family of three, we would still have a high EFC. I think we'll be better off just controlling the total cost, as we do in our daily lives. Which means value for the money, other than buying into the hype that selecting a college has become.

I actually had the same far out idea with when I was in college and married my long term girlfriend. Now I really wish I had the debt instead.

The better plan would of been marry a close acquaintance and get divorced as soon as possible. Women tend to get a little squeamish about this thing, but as soon as they legalize gay marriage it should be much easier.

I emancipate during my freshman year at state U so as to max grants, work study, aid by year two of college. Managed to work PT and FT+ in summer, cumLaude w/ a DOUBLE major and never took a loan. Borrowed, begged, etc., but, graduatated w/ two old, but, paid for cars and over $1K in the bank and no student debt...IT can be done, the five-six year degree and thousands of $$ of loans are pure garbage of spoiling adults who should be WORKING FT or be a FT student, w/ PT work!

I have a big issue with the article: "if you have $100k in savings" then what the heck do you need a loan for? Just pay for college with that!

HeadNSpace: This formula isn't only used for loans, nor only for federal or state money. It is also used by private schools to decide how much grant aid you receive.

So - it's not just about loans. It's about who gets how much, and it is heavily dependent on parental assets and income.

When I married my wife during my second year of law school, my expected contribution went up. I hadn't been a dependent for years (so my parents' contribution was nil), but suddenly her $20,000 new college grad income was available.

I don't remember exactly, but think it increased our costs by close to $7,500 per year over two years.

Aid: a person, device, resource, or material that helps or assists with something.

So the discussion has turned to ways of recieving MORE aid than the system has set based on you and your family's finances.

The system makes sense to me, if your married you should get a break, it seperates your income from your parents. If you have zero in savings, then yeah, another break, because someone who has a huge savings has a lesser need for aid.

Some part of me cant help but think that people feel entitled to receive MORE government aid than what government aid has set for them. Where does this entitlement come from? Why not take what is given to you with a smile, after all, it is aid. I know people are going to claim that others cheat the system and get more than they deserve, but they can get caught, prosecuted, and served large fines with possible jailtime, just like tax fraud. The majority of people on here are smarter than that and will not take that risk.

If they legalized gay marriage, everyone would be marrying thier roommates and divorcing after college was over in order to save on college costs.

According to many private schools DO consider home equity when determining need.

Another excellent book is "Pay for College Without Sacrificing Your Retirement." It explains how the EFC is calculated and what's assessable for both parents and students. It explains why it's important to apply for financial aid, even if you're sure you won't qualify for need-based aid (because there's more than just grants out there -- just because you're not "needy" by government standards doesn't mean you can just pay for college outright). It also covers issues related to selecting a school and the admissions process. It's well-written and easy to understand.

I don't think trying to position yourself in the best possible way to be evaluated for financial aid is the same as feeling entitled to receive more aid than the government's formula deems you should get. It's better to strategize than just leave it up to chance. It's kind of like going on a job interview: You could roll out of bed and be confident your resume speaks for itself. But me, I would brush my teeth and put on a suit. I still have the same work experience and skill set, but I'm probably a better candidate than I would be in my jammies.

Note that EFC isn't used by all schools. Every school's financial aid dept has its own rules for how they determine aid. Keep that in mind before you try to game the system. You might find that the system games you!

One other thing to add is that most schools expect that a greater percentage of a student's assets will be used for college than a parent's assets. That means that any money that you save for college should be in the parent's name, not the students.

I think all schools calculate a family's EFC (estimated family contribution) because they expect that the family will contribute something. If there's a school out there that doesn't factor in a family contribution before giving aid, I want to know where it is!

My understanding is that what differs is whether a school uses federal or institutional methodology to calculate the EFC. For instance, federal methodology (used mostly by public colleges) does not assess home equity while institutional methodology (used mostly by private colleges) does. There are a number differences but that's just one example.

Anyway, I suggest people read about it and make an informed decision about what applies to their situation. The book I like says, "There are a number of legal and ethical EFC reduction strategies available. Most families will find one or two that they can make use of."

@jason: The reason people talk about gaming the system is primarily because they think the system is unfair. The reason they think it is unfair is that it rewards irresponsible behavior. Low savings and low student income translate to high aid.

If we had a system that looked back over the student and family's entire life and evaluate need, then it would be fairer. For example:
1. Look at parent and student lifetime income. Is the lack of saving due to poverty or lifestyle choices?
2. Look at circumstances. Where there reasons for the lack of savings, e.g. illness, accident?

If the financial aid formula determined what you should be able to contribute in a more complete way, it would be both fairer and harder to cheat on. (Unless you divorced 10 years in advance to plan for college.)

@ Jason: I'm with you.

The fact that we are even telling people to take their 100k in savings and apply it to their home, for the purpose of "legitimately" taking more from the government, is ridiculous!

How about taking the 100k and paying cash for your college because apparently federal aid is not really needed.

And to suggest getting married! I'm quite dogmatic that the inevitable divorce will end up costing far more than money saved in student aid.

However, unfortunatley to the book's credit, I do understand that the point is to not spend one's own money.

My husband and I got married the summer after our sophomore year of college, not to lower our EFC, but that ended up being an unexpected perk. It was too late to do anything for aid for our junior year, but for our senior year we were offered a few grants and a couple thousand dollars of subsidized Stafford loans. We took out the loans with the intent of tossing them into a CD for a year and paying them back immediately after we graduated. Instead, we consolidated the loans at an interest rate of less than one percent and ended up using that money to pay for my husband's grad school when he decided a year after getting his bachelor's that that was the route he wanted to take.

I'm not sure what my husband's parents EFC was for his first years of college, but my parents' EFC was close to 100%, I had some merit based scholarships that covered tuition at the state school I attended and I worked and used my savings from high school to cover living expenses.

"The system makes sense to me, if your married you should get a break, it seperates your income from your parents."

Why should you get a break for marrying young? Why would you expect my dad to pay for my college if I was single, but not if I was married? I don't see how that makes sense at all, unless we're just using it to incentivize early marriage.

I think the government looks at an individual differently when that person becomes married. For some crazy reason they assume you are more mature when married which in my mind makes you less of a risk. Unfortunately we all know people who are married and still not mature, thus still a risk. But anyway, our society is much different than it used to be, it wouldn't be a stretch to say people used to get married and be out on their own together getting by on their own dime at 20 years old. In today's society that is very difficult. You see a lot more married folks moving back in with their parents because they cannot make it on their own, along with single folks not even coming out of school with jobs currently. The FAFSA requires you tell it how many people live at a specific address and what each of their incomes are. A young married couple in my mind would do anything to keep from living with in-laws. This is where the FAFSA works in that they will not live under the same address where 4 people are working as opposed to the couple alone. That doesn't mean dad cannot still help out and pay for your college, but you are financially separated from your dad in the governments eyes.

@EM: That is what I meant. All schools have some formula to calculate the family contribution, but they might not use the "standard" EFC formula.

just breed smart kids who get full rides :)

but to address the article - wow . . .

Can't say that I agree with much of any of this post. How about having your children work hard to either obtain scholarships or pay for college. If you have 100K you are willing to take out of savings, why not pay for college and leave the federal grant money to people who honestly need help getting an education so they can better their situation.

And to suggest the idea of getting married to cut down on costs is absurd. I don't care if it works--it's abusing the system that is in place (no matter how fair/unfair it is) and stomping on the institution of marriage.

Very displeased with this one.

College tuitions are severely inflated due to the ease of gaining gov't assistance. That's a whole 'nother discussion, though. I just wanted to describe how my dad was smart enough to play their game successfully.

Before I went to college, my dad took the opportunity to quit his job and start his own business. Like most entrepreneurs early on, his salary was very small... just enough to cover household expenses. The rest of his cash was either converted to home equity or invested in the business. This made the FAFSA formulas happy, and we were able to offset some of those severely out of whack costs.

To all those who suggest it's immoral to take either path that the original post describes, I would ask why is it moral to tax people for a benefit, but immoral for them to collect on it? If it's forcibly taken from those who don't need it in order to give it to those who do then it's not really a benefit... it's communism. That's right... I said it.

This idea is dependent on the timing of the acceptance letter, but how about buying a second home in the city that the university your son/daughter will be attending is in?

@Ross, I agree that government assistance is the main driver of the "ever increasing tuition rates"(that goes for healthcare too). When I went to college I received the maximum aid package from the feds as well as large amounts from the state of Florida. Every year before filling out the Fafsa application I would empty out my checking account and put the money in a roth ira and repeat. I graduated with no debt and maxed out my roth ira my last three years of school. All the while only working a small summer job. That just goes to show you how horribly administered and skewed government programs are. Now that I'm out of school I think its time for some reform ;P.

I have a 100k in savings, and kids that will be in college in a few years. I am looking at these strategies too to maximize aid. My kids have lived in a small, and I mean small - like 1100SF for 6 people, house growing up, I have driven old cars, I have worked while my kids were put in daycare. My kids havent had ipads, cell phones, new TV, heck they havent even had cable. We dont have a housecleaning service, its called "chores"
There is a lot of sacrifice we have made to have that 100k in savings that alot of these lazy, entitled people who "need" help should get. BS. They could have gotten off their butts at 6 every morning and gone to work, or stayed up until midnight getting a second degree like I did whole working full time.

That is how I got my 100k in savings, and I am going to move it all around now that I know it will just be held against me at the time my kids go to college. Instead, a bunch of kids whose moms didnt work, or didnt make those sacrifices will be rewarded with grants. Bah, humbug, Im putting it in my retirement and house equity.


100% with you. I didn't sacrifice and save so that the guy down the street (who makes more than me, but doesn't have a nickle to his name) could get a free ride for his kids at my expense.

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