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Do your kids qualify for needs-based financial aid for college?

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  • Do your kids qualify for needs-based financial aid for college?

    As physicians or other high earning professionals, would your kids ever qualify for financial aid?
    I ask because I have been on the fence about setting up an UTMA/UGMA account for my kids. They say that these funds are considered the child's assets, and therefore become counted in full when computing for financial aid. My wife and I don't wish to impact this negatively. But is it reasonable to expect that we won't be eligible anyways, now or in the future? Our combined income is around 400k. I am sure many of our colleagues here earn much more when we talk about full household income. We wanted to use those accounts to teach the kids about stock investing and saving. Thanks for all your inputs!

  • #2
    Colleges will also count parent incomes for financial aid purposes, whether you plan to contribute or not. Having worked in financial aid at the university level in the past, there is not much most people can do to hide assets to quality for need-based aid when you are high-income, unfortunately.

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    • #3
      Only thing I can think of would be an early retiree who had a super low taxable account and all tax deferred since I don’t think they look at retirement accounts or primary home equity, or I could be wrong.

      That’s probably unlikely enough that it would be a poor decision to bank on that to pay less for college if it was a priority for you to get kids through college debt free

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      • #4
        if you want to be rich and yet qualify for needs-based aid, look at the FAFSA form. It's clear how to hide your assets. Basically what Turf said: it needs to be in retirement accounts (not taxable) and home equity. 529 plans count towards FAFSA but they "count against" the student a lot less than if the student has a UTMA account. And, your HH income come FAFSA application time needs to be low (in other words, if you were a physician, you no longer are and/or are early retired)

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        • #5
          Originally posted by JBME View Post
          if you want to be rich and yet qualify for needs-based aid, look at the FAFSA form. It's clear how to hide your assets. Basically what Turf said: it needs to be in retirement accounts (not taxable) and home equity. 529 plans count towards FAFSA but they "count against" the student a lot less than if the student has a UTMA account. And, your HH income come FAFSA application time needs to be low (in other words, if you were a physician, you no longer are and/or are early retired)
          Be careful on this. Many schools require a supplemental application. That is where they get you (and will count these assets against you). Not all universities require additional applications, but those that do I think are aware of some of these loopholes.

          To be perfectly honest, financial aid wasn't really created for rich people who are good at hiding their assets. It's unfortunate, as I know it will affect my children in the future. But it's really not meant to be a way to help rich people pay less for college.

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          • #6
            Changes on the 2021–22 FAFSA® Form
            The income threshold for an automatic zero Expected Family Contribution (EFC) increased from $26,000 to $27,000 for the 2021–22 award year.

            I hope you dont qualify.

            I stopped even filling out the FASFA form , it was a waste of time to get a non subsidized loan of 6500, which was the most we qualified for.

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            • #7
              Very few on this forum will find that their kids will qualify for needs based aid. The FAFSA formula is very much against the wealthy and particularly against high earners.

              https://www.whitecoatinvestor.com/wh...-aid-planning/
              Helping those who wear the white coat get a fair shake on Wall Street since 2011

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              • #8
                I did not even bother filling out a FAFSA form for my daughter. I was told it was a total waste of time and it is easier to find snow in H*** than her qualify for it.

                So I decided to use my time wisely. Like perusing this forum.

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                • #9
                  Originally posted by NumberWhizMD View Post

                  Be careful on this. Many schools require a supplemental application. That is where they get you (and will count these assets against you). Not all universities require additional applications, but those that do I think are aware of some of these loopholes.

                  To be perfectly honest, financial aid wasn't really created for rich people who are good at hiding their assets. It's unfortunate, as I know it will affect my children in the future. But it's really not meant to be a way to help rich people pay less for college.
                  yes, you're talking about the CSS form (college scholarship service). While the form does as for a lot of things, the schools that use CSS use different things from it, and it's not the same across all schools! Some use home equity, some don't. Some consider Roth IRA accounts, others do not. I do not believe though that pre-tax retirement accounts are asked about/considered for anything. The idea being that it's terrible to expect parents to pay for college with their life/retirement savings, since that is for....their life and their retirement

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                  • #10
                    Originally posted by JBME View Post

                    yes, you're talking about the CSS form (college scholarship service). While the form does as for a lot of things, the schools that use CSS use different things from it, and it's not the same across all schools! Some use home equity, some don't. Some consider Roth IRA accounts, others do not. I do not believe though that pre-tax retirement accounts are asked about/considered for anything. The idea being that it's terrible to expect parents to pay for college with their life/retirement savings, since that is for....their life and their retirement
                    There are actually some school-specific forms as well (the institution I worked for used these). My job was to comb through tax returns to find the things that were hiding. Learned a lot and figured out then my children have no chance (hence, the 529s and hope for scholarships or tuition remission through my husband's job).

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                    • #11
                      Originally posted by NumberWhizMD View Post

                      There are actually some school-specific forms as well (the institution I worked for used these). My job was to comb through tax returns to find the things that were hiding. Learned a lot and figured out then my children have no chance (hence, the 529s and hope for scholarships or tuition remission through my husband's job).
                      that's interesting! How does combing through tax returns help you find out what's in a pre-tax retirement account, because unless you're taking a distribution, that money isn't reportable on taxes. Nor is home equity...though I suppose you can use a fairly unscientific formula to guess for the few people that fill out the form with the mortgage interest deduction (which still doesn't ask about equity)

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                      • #12
                        Not necessarily the examples you referred to. And to be honest, I can't remember which parts we were looking at specifically (this was more than 15 years ago now). Basically, it was all the ways people were reducing their taxable income that then got "added back in" for the final calculations to count towards their income. Taxable losses usually helped people (I saw people benefit a lot who were in the farming industry, for instance).

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                        • #13
                          Originally posted by The White Coat Investor View Post
                          Very few on this forum will find that their kids will qualify for needs based aid. The FAFSA formula is very much against the wealthy and particularly against high earners.

                          https://www.whitecoatinvestor.com/wh...-aid-planning/
                          Thank you, very helpful thread of responses and excellent article! Thanks for the example in your blog post Jim, brings home the point that yes, for many of us, we won't qualify for needs based aid.

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                          • #14
                            My brother, a surgeon, retired early due to a disability. His income from all of the disability payments was quite high, but none of it was taxable income as he had paid his disability insurance premiums after taxes. Because of this, despite his wealth, his kids were able to qualify for financial aid.

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                            • #15
                              Does anyone actually know the level of income needed to be below to qualify for some level of aid? And I mean real aid not just loans.

                              I always found it very annoying that because my parents made too much I had to take out more loans than the guy next to me getting the same education.

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