Fafsa

[eliza61]

From our experience, that $100,000 is too high. The household income limits were closer to $50,000.

Yes, loans are available to anyone. We didn't see the benefit of borrowing at 6% interest when we could make sacrifices to allow us to pay for school. We have taken 1 vacation in the past 7 years, bought less of a home than we could have, drive our cars for 10+ years, don't eat out much, etc. Allows our kids the opportunity to not start out life with huge student loan payments. Again, we do sacrifice things in order to do this.

my standard answer is always this.
money is a tool, it is to be used. I too saved and sacrificed to send my kids to college. right now the performance on their college fund is 8.86%, and I can borrow money very cheaply (I got one offers of 2.88 - 3.5%).

So now the focus changes a bit, since my goal is to send them to college for as cheaply as possible and since I can at any time use their college fund to pay off the loan if it came to that, borrowed money increases my net worth.

that's my goal. to make as much money as possible, so for me sacrificing is not the only tool. I want my money to make money also.

neither of my kids will have a student loan when they graduate unless they start fooling around because I'm not paying for them to live la vida loca on my dime.

 

[eliza61]

Are you sure about that? If you have the funds dispersed to you, you have already paid any applicable taxes on the funds. Plus, there are estate tax exemptions for husbands/wives. I'm not sure where you are getting the 50% from.

I thought the inherited IRA rules were the same as the regular IRA rules for those under 55 (my husband died young) and I thought the penalty was the same.
I got the up to 50% from the assumption that if I take a withdrawal from my 4011k by the time I finished with taxes (27% tax rate) and the penalty I'm at darn near 50%

I didn't have the funds dispersed. I converted them into inherited IRA's so there pretty much just growing

 

[Goddesstree]

my standard answer is always this.
money is a tool, it is to be used. I too saved and sacrificed to send my kids to college. right now the performance on their college fund is 8.86%, and I can borrow money very cheaply (I got one offers of 2.88 - 3.5%).

So now the focus changes a bit, since my goal is to send them to college for as cheaply as possible and since I can at any time use their college fund to pay off the loan if it came to that, borrowed money increases my net worth.

that's my goal. to make as much money as possible, so for me sacrificing is not the only tool. I want my money to make money also.

neither of my kids will have a student loan when they graduate unless they start fooling around because I'm not paying for them to live la vida loca on my dime.

But can you touch that money right now? What if the market crashes? Would you have cash to pay back the loans then?

 

[Happy Snowman]

But can you touch that money right now? What if the market crashes? Would you have cash to pay back the loans then?

Depends on how you have them invested. Ours are in a fixed rate fund. You don't have to put them in risky funds. Even if you break even, it's cheep money to hedge against grad school or whatever down the road.

 

[IDoDis]

Depends on how you have them invested. Ours are in a fixed rate fund. You don't have to put them in risky funds. Even if you break even, it's cheep money to hedge against grad school or whatever down the road.

Well, now I'm curious about this. A fixed rate CD or Money Market account is going to net around 1.5% in interest, but you are paying over 1% in loan fees which are deducted for each disbursement on most federally subsidized student loans, but have to be paid back as if the funds were never deducted. So, how are you netting any kind of profit on a fixed rate account with very low interest and with paying the loan fees??

 

[Happy Snowman]

Well, now I'm curious about this. A fixed rate CD or Money Market account is going to net around 1.5% in interest, but you are paying over 1% in loan fees which are deducted for each disbursement on most federally subsidized student loans, but have to be paid back as if the funds were never deducted. So, how are you netting any kind of profit on a fixed rate account with very low interest and with paying the loan fees??

Municipal bond funds

You still have to pay interest since they are unsubsidized (but if you qualify for subsidized you don't pay any interest while the kids are in school). The rate the bonds are earning is higher than the fees/interest on the loans. Again, it's mainly to hedge against the higher rate down the road for grad schools or whatever. Even if we broke even, it's still worth doing. Never spend your own money if you can borrow at the same or a better rate

Also keep in mind, we are talking a total of about $30,000 over 4 years, its not like we are getting rich off of the interest, but its still making more then we would pay out in interest by a few points.

 

[teller80]

Even if we broke even, it's still worth doing.

You'd better do better than break even, since you have to claim that interest as income on your taxes. Whats the average tax bracket, 15%?

 

[Happy Snowman]

You'd better do better than break even, since you have to claim that interest as income on your taxes. Whats the average tax bracket, 15%?

well, that would be calculated in the break even part then....

again, it's not like we are talking millions....it's maybe $1000 over the next 4 years, not even, probably closer to $750, so, under $200/year which is less than what the higher interest rate would be for a year or two of grad school anyway and will have no impact on our overall taxes each year.....I'll take a chance on that $28 or so...

You are trying to make this into some huge deal, it's not really...talk to your financial planner....

 

[Silly Little Pixie]

My DD is a high school senior so this is our first time with FAFSA. I just recently found out my parents have a 529 plan for her. Does their contribution to her overall bill for tuition count as income against her next year? They would be helping with our EFC (and it's not a lot, but anything helps).

 

[Happy Snowman]

My DD is a high school senior so this is our first time with FAFSA. I just recently found out my parents have a 529 plan for her. Does their contribution to her overall bill for tuition count as income against her next year? They would be helping with our EFC (and it's not a lot, but anything helps).

You will be asked if there is a 529 or other savings plan for your child and while its not "income" it is factored into your overall EFC. If it's not a lot, depending on what that number is, it's probably best to use it all in the first year if you need to. Also know that if she does end up getting scholarships to pay for her schooling, they can take a withdrawal in the same year the scholarship was awarded without penalty. It may or may not apply, but its also not something people are aware is possible.

 

[JanaDee]

Can you still fill out the FAFSA even if your child has no idea where they are going yet?

Because if you can't, I'm not wasting the time right now.

 

[Happy Snowman]

Can you still fill out the FAFSA even if your child has no idea where they are going yet?

Because if you can't, I'm not wasting the time right now.

Yes, and you put on there the various schools they are considering attending. Most kids don't know where they are going yet this early in the game so it's pretty normal to send it to 10 schools or whatever. Filling it out sooner rather than later for freshman year is always a good idea because a lot of schools, especially state schools, are first come, first serve with financial aid dollars.

 

[goofy!]

That is odd. Are you sure you need this year's? Technically if your child is still in high school they aren't "eligible" for FAFSA.

Yes, I am sure. This is not my first time at the rodeo.

 

[Happy Snowman]

Yes, I am sure. This is not my first time at the rodeo.

How did you get his done then?? It's not available yet and you would have to put that information in the FAFSA?

 

[IDoDis]

Municipal bond funds

You still have to pay interest since they are unsubsidized (but if you qualify for subsidized you don't pay any interest while the kids are in school). The rate the bonds are earning is higher than the fees/interest on the loans. Again, it's mainly to hedge against the higher rate down the road for grad schools or whatever. Even if we broke even, it's still worth doing. Never spend your own money if you can borrow at the same or a better rate

Also keep in mind, we are talking a total of about $30,000 over 4 years, its not like we are getting rich off of the interest, but its still making more then we would pay out in interest by a few points.

How do you borrow 30k in subsidized loans over 4 years when the limit is $3500 for the first year, $4500 for the 2nd year, and $5500 for the 3rd and 4th year? I'm not trying to second guess you. I am genuinely interested since DD aspires to go on to med school after undergrad. However, if she ends up taking a gap year after college graduation to give her more time to build up her EC's, repayment would start at the 6 month mark.

 

[barkley]

Can you still fill out the FAFSA even if your child has no idea where they are going yet?

Because if you can't, I'm not wasting the time right now.

yes, you can and it's to your child's benefit to do so if there's any chance they may qualify for certain state aid programs. you can just list a local community college or the nearest state college.

in some states (like ours) there are state aid funds that are VERY LIMITED, and while MANY may be eligible to those funds they are first come, first served until the yearly budget is exhausted. dd has a friend she went to high school with who has been working towards going to college for the last couple of years. had I known her goal was to go at the beginning of the winter '15 quarter I would have told her to do the fafsa last January 1st b/c she would have been eligible to full state and federal aid. she didn't apply until this past summer and as a result while she will receive the full prorated pell grants for winter and spring, the state grants were exhausted so while eligible she will lose out on several thousands in prorated state funds

 

[SydSim]

I may be wrong, but I seem to remember attending a Financial Aid presentation where we were told to make sure and list our state schools (NJ) first on the FAFSA in order to ensure that the student will get state funds.

I didn't realize it made a difference what order the schools were listed on the form, but maybe someone else can chime in.

 

[teller80]

How do you borrow 30k in subsidized loans over 4 years when the limit is $3500 for the first year, $4500 for the 2nd year, and $5500 for the 3rd and 4th year? I'm not trying to second guess you. I am genuinely interested since DD aspires to go on to med school after undergrad. However, if she ends up taking a gap year after college graduation to give her more time to build up her EC's, repayment would start at the 6 month mark.

Happy Snowman did not have subsidized loans, only unsubsidized, which still have a pretty good interest rate.

 

[Happy Snowman]

How do you borrow 30k in subsidized loans over 4 years when the limit is $3500 for the first year, $4500 for the 2nd year, and $5500 for the 3rd and 4th year? I'm not trying to second guess you. I am genuinely interested since DD aspires to go on to med school after undergrad. However, if she ends up taking a gap year after college graduation to give her more time to build up her EC's, repayment would start at the 6 month mark.

Because our loans are not subsidized like I said earlier...chances are if you actually qualify for subsidized loans that you need the loans to pay current expenses. The max you can borrow as an undergrad is $31,000 between subsidized and unsubsidized loans.

 

[Happy Snowman]

Happy Snowman did not have subsidized loans, only unsubsidized, which still have a pretty good interest rate.

The interest rate for both is 4.66%...our bond rate is 12.xx%...it's kind of a no-brainer. Obviously this doesn't make sense if the bond rates would be 2% and the interest rate is 5% or whatever.