Result of FAFSA #1. Oct 2016. Used 2015 taxes. Applies to the 2017/18 school year where my son will be a freshman. Year 1 of 7 with a kid in college.
I filled out all the requested questions to the best of my ability. The website automagically spit out my expected family contribution (EFC) at 22300$. That is almost a fourth of my income after taxes. I do feel like complaining about the cost of college, and complaining about how high my EFC is but I will try to minimize that because it is just plain boring, and it doesn’t help. I can’t fix the price of college. Everyone else’s EFC is calculated the same way. Some people will say I am lucky to have that much in savings. Some people will say I am lucky my mother set up UGMAs for my children. Some people will say I am lucky to make that much money. Some people will say that I am lucky to have a two income family. Some people will say I am lucky to have children on the college track. Frankly all those people are right. I am blessed, but I am still freaking out and I still need to figure this out.
I did a few proactive things to influence My FAFSA. I used all available cash, and paid down the loan on our Lexus. I had a very low balance in my checking accounts. In fact it triggered a Bank of America 12$ monthly charge for the first time. I transferred the max money yearly contribution from our investment account into our Roth IRA’s. The new October timing of the FAFSA was actually great for me as teacher. There might be a 20k$ dollar swing in my bank account between Late august and mid-June. In the summer I do not get a pay check and I do not receive townhouse rent. I have lots of free time to waste/spend money in the summer. I typically build/renovate, and give lots of money to Lowes and Home Depot.
While filling out the FAFSA I had lots of ideas about how the numbers can be manipulated.
My list of ideas.
Idea #1 (Nothing I can do about this now.) My son had money in an UGMA. The parent’s savings and the student’s savings are treated differently. It would be better for my son’s savings to be in my name instead of his.
Idea #2 (Nothing I can do about this either.) I should I have transferred money from my investment account to the Roth IRA’s over the last several years. Retirement accounts do not count against you.
Idea #3 (I am actually considering.) Move 80k$ from my investment account and pay down my mortgage. Instead of stocks I have home equity. Home equity does not count against you. Stocks count against you on the FAFSA.
Idea #4 (Cool idea.) Pull 80k$ from the investment account and by a red 1966 Corvette Coupe. Put it in the garage. Keep it clean. Run the engine enough to keep it good shape. Don’t drive it anywhere. Try to avoid insurance/registration/license plate fees. Wash my vet in the driveway with no shirt and Prince music blasting. Sell it in 7 years later, hopefully for a profit. Awesome classic cars do not count against you on the FAFSA.
Idea #5 (Nerdy idea.) Buy 80k$ worth of toys like legos or pokemon cards. Keep 7 years, try not to let a bully steal them, and hopefully sell for a profit. Mythical Japanese monsters do not count against you on the FAFSA.
Idea #6 (Pirate idea.) Buy an 80k$ dollar boat. Doh! Pirates don’t buy boats. They steal boats. OK, instead cash out the 80k$ and I mean actual cash, like dimes. Use my stolen boat to hide 800,000 dimes in a cave, only accessible at low tide. This idea is probably illegal, because you are expected to report cash on the FAFSA. I am pretty sure there is also a law against stealing boats. However pirates steal, plunder, and lie, so it fits the pirate theme.
Idea #7 (Stupid idea.) Go buy 80k$ worth of stuff that will be worth nothing in a year. I could buy steaks, rounds of drinks for the guys at the Village Grill, clothes, or anything made by Apple. Being stupid actually counts in your favor on the FAFSA.
I made 2 hypothetical changes and plugged them into a FAFSA calculator.
Change the UGMA to my asset instead of my sons.
Not have 80k$ in an investment account. I could accomplish this by never investing 80k$. I could have made Roth IRA contributions over last 8 years. I could convert the cash into a corvette, boat, Pikachu’s, or buried dimes. I could simply buy my beautiful wife some shoes and handbags.
According to a FAFSA calculator, with these 2 changes, my EFC would be reduced from 22300$ to 16200$.
Those 2 changes reduced my EFC by a little over 6000$.
I have had an auto withdrawal from my bank account to an investment firm since I started teaching. The monthly amount has increased. I have taken back some of that money twice when purchasing real estate. Anyway, the number 6000$ is weird to me. My current monthly withdrawal is 500$ a month or 6000$ per year. So according to government calculators, saving 6000$ per year has put me in such great shape that I can afford 6000$ extra per year for college.