After 45 minutes of work, my second FAFSA is filed. Based on some Facebook threads, there are some extremely panicked parents, but is really just isn’t that tough.
The FAFSA generates an EFC (Expected Family Contribution) that will be sent to my Radford University. Radford will use this number to prepare a financial aid package for my son JumpStart Jack’s sophomore year. Like everybody else, I hope for a low EFC that results in a great aid package.
Assets are based on totals the day of filing, and so I spent the first 25 minutes printing current bank/brokerage/real estate numbers. My assets are spread into lots of accounts, and the process will be quicker for almost everyone else.
I pulled 2016 tax folders, but they weren’t necessary thanks to the Data Retrieval Tool.
Filing your FAFA just involves answering questions. It is not necessary to understand the details below, but I was curious to understand how each factor would affect my bottom line.
There are 4 categories that contribute to EFC.
Category 1: Student income.
My son JumpStart Jack showed earnings of $3200 on his 2016 taxes. This amount is less than the threshold where it begins to matter. After about $7300, he would have been expected to contribute 50% of all additional earnings.
0$ added to EFC.
Category 2: Student assets.
JS Jack has $2200 between his saving and checking accounts. He is expected to contribute 20%.
440$ added to EFC.
Category 3: Parent income.
The AGI (adjusted gross income) on our 2016 taxes was about $101000. Our FAFSA income will be bigger after some things like retirement contributions and life insurance are added back on top of the AGI. The sequence of tables, allowances and percentages assessed is
freaking nuts crazy and too freaking nuts convoluted to explain. In my case, after $53k in allowances, any money over $33k was assessed at 47% and added to $9000? Don’t try to apply this to your situation because the allowance simultaneously increases by 5% in Virginia and 7% due to social security as your income increases.
Anyway, we are expected to contribute about $17000, due to parent income.
17000$ added to EFC.
Category 4: Parent assets.
Our assets are in a bunch of different accounts/places and include savings for a variety of future needs:
- Summer unemployment (We are both teachers.)
- JS Jacks spring college money. ($9000 already saved)
- Our daughter JS Jill’s 1st semester of tuition in 2020. ($9000 already saved)
- A mutual fund that we have contributed to for 22 years. It is for retirement, but not an official retirement vehicle. ($88,000 at current strong stock market levels)
- Equity in our townhouse in Myrtle Beach, which is currently rented. We’re not selling our townhouse to pay for college, and this money is the opposite of liquid.
Anyway, thanks to careful spending and a great stock market, our assets have grown by $28k to $110,000, over the last year. After the first $19,300 allowance (based on age and number of parents), we are expected to contribute 5.6% of our assets to college each year, which totals 5100$.
Assets such as 401k’s, home equity, Roth IRA’s, pensions, and cars are not counted.
5100$ added to our EFC.
Add these 4 numbers and our official final EFC is $22608. A $300 increase from last year.
Very conscious and deliberate changes have been made to our spending habits over the last year. Our sacrifices are paying off, and we have managed to save money.
- JS Jack’s car is in the back yard without license plates.
- We just watching Netflix. She aint got no cable. Okay though.
- Our spending on food, restaurants, and clothes has been slashed.
- We use window units, instead of fixing our broken central air.
- Side gig coaching soccer for me.
- Side gig at the gym for Mrs. JS.
As a result, hope for financial aid other than the Stafford loan is out the window.
It still bugs me that saving is punished. A crazy spending spree for a boat, a corvette, bigger house, furniture, and vacations would reduce my assets, lower my EFC by $5k, and possibly result in better aid. I’m proud JS Jack is working, managing money wisely, and on track to have money left at the end of the school year, but any unspent money will raise our EFC again next year.
We’ve got $9k for JS Jill’s 1st semester already saved. Those savings increased this EFC by $504 this year, and will also increase every upcoming EFC as well.
I could wait on the FAFSA filing until a better spot after the spring tuition bill is paid in Dec, and a few more months of JS Jack spending his summer savings. I could wait until Jan and dump $11,000 safely into the Roth IRA, or watch for a stock market crash. I could pay down a big chunk of my mortgage and place the money safely in home equity. However, I’ve already began saving for next year’s tuition, and I don’t think it will make a difference.
The FAFSA has become pointless to me.
I’ve come to accept that our family of 2 teachers only has 2 choices:
- Pay for college out of pocket.
- Let our children graduate with college loans
I’m thankful our plan seems to be on track, and JS Jack’s cost of attendance (after merit aid) is way lower than our EFC. JS Jack will get through freshman year debt free. We’ll save $18k this school year, and Jack will use that money to fund his sophomore year.