Fafsa

[undertheradar]

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.

This also is a risk since there have been municipal bankruptcies. Your 12% interest rate does not appear to be the norm and between taxes on the gains and costs for investment, what is your actual net percentage?

 

[Happy Snowman]

This also is a risk since there have been municipal bankruptcies. Your 12% interest rate does not appear to be the norm and between taxes on the gains and costs for investment, what is your actual net percentage?

I posted the taxes on the gains...again, it's a very small amount we will borrow-under $30,000. The net difference on our taxes would be about $28 if they were not muni bonds..... and if there was a risk of bankruptcy in the 4 years or so that we would have these loans, the rates wouldn't be that good and we wouldn't have bought into them. Worst case is we are out a few hundred in interest, big deal. The interest rate on grad school loans is 6.71%...it's worth the risk, plus there is a cap on what you can borrow so this just gives the kids more leeway if they go that route.

 

[undertheradar]

I posted the taxes on the gains...again, it's a very small amount we will borrow-under $30,000. The net difference on our taxes would be about $28 if they were not muni bonds..... and if there was a risk of bankruptcy in the 4 years or so that we would have these loans, the rates wouldn't be that good and we wouldn't have bought into them.

Never seen a no risk bond. As for $30,000 being a small amount to borrow, that's relative to individual household incomes. For many on these boards, $30,000 is a lot of money. Haven't read too many investment stories advocating borrowing to invest.

 

[Happy Snowman]

Never seen a no risk bond. As for $30,000 being a small amount to borrow, that's relative to individual household incomes. For many on these boards, $30,000 is a lot of money. Haven't read too many investment stories advocating borrowing to invest.

Well, if borrowing $30,000 puts a strain on your budget, you probably will qualify for financial aid and you will need to use your student loan dollars to pay for school....and you are in the same place either way.

Plenty of people will borrow cheep money for whatever if their investments are earning more, it's a pretty standard practice actually. Why would you take money out of an investment earning 12% + to pay for something that would cost you 4% to borrow?

Never said the bonds were not risk but if you look up the benefits of muni bonds you will understand what I said....just not worth arguing with you about it since you seem to think you know better....


....and, as I've said many times, I'd rather pay 4.66% vs 6.71%.....

 

[undertheradar]

Well, if borrowing $30,000 puts a strain on your budget, you probably will qualify for financial aid and you will need to use your student loan dollars to pay for school....and you are in the same place either way.

Plenty of people will borrow cheep money for whatever if their investments are earning more, it's a pretty standard practice actually. Why would you take money out of an investment earning 12% + to pay for something that would cost you 4% to borrow?

Never said the bonds were not risk but if you look up the benefits of muni bonds you will understand what I said....just not worth arguing with you about it since you seem to think you know better....


....and, as I've said many times, I'd rather pay 4.66% vs 6.71%.....

Perhaps I have a different view due to the real estate meltdown that we experienced in Southern California. This was the one where "investors" let properties go as the real estate market started to tumble. We had an investor dump the house next door, we lost 1/3 of value($200k +) overnight. Makes you take a hard look at risk.

As for the municipal bonds, they are not tax free in every state. The federal funds are, but not state and local. Glad it works for you in Northern California, the benefit is minimal where we are currently living in the Mid West.

 

[Happy Snowman]

Perhaps I have a different view due to the real estate meltdown that we experienced in Southern California. This was the one where "investors" let properties go as the real estate market started to tumble. We had an investor dump the house next door, we lost 1/3 of value($200k +) overnight. Makes you take a hard look at risk.

As for the municipal bonds, they are not tax free in every state. The federal funds are, but not state and local. Glad it works for you in Northern California, the benefit is minimal where we are currently living in the Mid West.

again, it's $30,000, not $3,000,000....and we still aren't even at the $30,000, only about $12,000 right now, if we get stuck with paying it off, oh well, but the money is still there in the account so, we are pretty safe and yes, we did our homework, and yes, they are tax free and again, we are talking a few hundred dollars.....and if need be, we do have other funds we could use but given current market conditions, this was a better choice....

 

[IDoDis]

again, it's $30,000, not $3,000,000....and we still aren't even at the $30,000, only about $12,000 right now, if we get stuck with paying it off, oh well, but the money is still there in the account so, we are pretty safe and yes, we did our homework, and yes, they are tax free and again, we are talking a few hundred dollars.....and if need be, we do have other funds we could use but given current market conditions, this was a better choice....

Thanks for the info. I spoke with a family friend this morning who is a financial planner who recommended we not go that route. He said for some it could work, but is not really worth it in the long run for the minimal amount of return it would heed.

 

[Happy Snowman]

Thanks for the info. I spoke with a family friend this morning who is a financial planner who recommended we not go that route. He said for some it could work, but is not really worth it in the long run for the minimal amount of return it would heed.

Our planner had a different view and it's working quite well I guess he would have to take the time to run the math out 7 or 8 years or more for med school though. Again, we are not doing it for the return on the investments as much as borrowing the funds at a much lower rate for future use. If we don't need it, we just pay it back and all is good and we were not out anything while we had the loan...

 

[JanaDee]

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

My son won't qualify for any aid.

 

[IDoDis]

Our planner had a different view and it's working quite well I guess he would have to take the time to run the math out 7 or 8 years or more for med school though. Again, we are not doing it for the return on the investments as much as borrowing the funds at a much lower rate for future use. If we don't need it, we just pay it back and all is good and we were not out anything while we had the loan...

I do understand your main reason being the lower rate. It is likely DD will apply to med school the summer she graduates instead if her Junior year which means she'd be out of school for a year before med school which means payments would kick in 6 months after graduation an that's IF she even gets accepted on her first application cycle. Also, she will be borrowing close to $150k or more for med school, so we would be hashing over peanuts, not to mention the 1% loan fee per year for the unsubsidized portions would have interest tacked on.

When I was in college, my mom did use the loan money one year as a loan to herself because she couldn't borrow that cheaply from a bank. I had gotten an early loan disbursement because I was studying abroad and leaving before the actual disbursement date, but then when the other loans came through at the regular time, the money was there for me again!

 

[undertheradar]

My son won't qualify for any aid.

Remember that student loans are considered to be aid. We only qualify for limited scholarships and student loans. Lucky us, tuition and room and board for Spring 2015 are due in less than 30 days, weeeeee. I wait until the last possible day to pay that bill.

 

[JanaDee]

Remember that student loans are considered to be aid. We only qualify for limited scholarships and student loans. Lucky us, tuition and room and board for Spring 2015 are due in less than 30 days, weeeeee. I wait until the last possible day to pay that bill.

I don't consider loans aid.

 

[SydSim]

I don't consider loans aid.

I feel you on that one! But since loans "aided" me in being able to pay for my D's tuition, I'm gonna have to consider it "aid".

 

[disykat]

Filling out the FAFSA is never a waste of time. My kids haven't recieved any grants, nor have they taken out loans, but we faithfully fill it out each year.

They have recieved some departmental and/or school based scholarships based on GPA. They would not have been eligible for either had they not filled out the financial aide paperwork through their schools - which you can't do without filling out the FAFSA. Even if financial need is not part of the particular scholarship, the financial aide paperwork is.

Fill it out, and do it as early as possible to get your child "in line" for any possible scholarships or aide. We'll be filling ours out this week, then updating it after we do our taxes.

 

[Starbrite]

Is the EFC expected family contribution a yearly amount? Or is that per semester? Or total?

 

[Happy Snowman]

Is the EFC expected family contribution a yearly amount? Or is that per semester? Or total?

For the normal school year, not including summer...kind of depressing isn't it...

 

[Colleen27]

I'm curious because I've never done the FAFSA before my taxes... How do you go about filing the FAFSA before you have all your year-end statements in hand? The uni I attend has send out several e-mails, posted on Twitter and Facebook, saying Jan 1 is the best day to file your FAFSA but I wouldn't even know where to begin since DH has two 1099s and one W2 coming in addition to his self-employment income (of which I have detailed records - I don't have anything on his W2 income and only an approximation on the 1099s). Is this one of those things where they're assuming most people have a stable job as their primary income and can just refer to their last 2014 pay stub, or is there a process for filing and then correcting that would be worth the time and effort?

 

[MOpGrad2013]

I'm curious because I've never done the FAFSA before my taxes... How do you go about filing the FAFSA before you have all your year-end statements in hand? The uni I attend has send out several e-mails, posted on Twitter and Facebook, saying Jan 1 is the best day to file your FAFSA but I wouldn't even know where to begin since DH has two 1099s and one W2 coming in addition to his self-employment income (of which I have detailed records - I don't have anything on his W2 income and only an approximation on the 1099s). Is this one of those things where they're assuming most people have a stable job as their primary income and can just refer to their last 2014 pay stub, or is there a process for filing and then correcting that would be worth the time and effort?

You just put in the gross wages from your last pay stub. Then click the "Will File" tab. Last year, we didn't have the pay stub so we just put in a reasonable amount of wages.

We also received emails reminding us to go back and file.

Even when we did the FAFSA after filing, we still had to go back in and review the form. Anytime we want to send to a different school, we have to review...a bit of time, but very simple.

 

[WDWMom]

I'm curious because I've never done the FAFSA before my taxes... How do you go about filing the FAFSA before you have all your year-end statements in hand? The uni I attend has send out several e-mails, posted on Twitter and Facebook, saying Jan 1 is the best day to file your FAFSA but I wouldn't even know where to begin since DH has two 1099s and one W2 coming in addition to his self-employment income (of which I have detailed records - I don't have anything on his W2 income and only an approximation on the 1099s). Is this one of those things where they're assuming most people have a stable job as their primary income and can just refer to their last 2014 pay stub, or is there a process for filing and then correcting that would be worth the time and effort?

We use the previous years taxes to file the fafsa today. When our taxes are filed we update. Perfectly legally and our kids get more state aid filing the fafsa early.

 

[tvguy]

We use the previous years taxes to file the fafsa today. When our taxes are filed we update. Perfectly legally and our kids get more state aid filing the fafsa early.

This is exactly what the College financial aid offices told us too.