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ryeny3 said:   After using strategies suggested by beef and brody to present you financial situation in the worst (best for financial aid) manner, input the numbers into Princeton's model. Princeton may have the most generous financial aid in the country; so if Princeton won't give you aid, there is a good chance that nobody else will either. If you aren't going to be eligible for financial aid, it makes sense to utilize programs that save taxes like 529 plans.


Princeton

Although some, if not all, Ivys will match aid, Princeton will probably offer the best initial aid package. Since the Ivys don't offer academic or athletic scholarships, other private schools and many state schools may be less expensive for higher income families. Using the same numbers, the net cost was $27,180 for Princeton and $46,750 for Dartmouth. YMMV.


Ivy League Financial Aid Compariosn
"Based on the answers you provided, your family is not likely to qualify for need-based financial assistance. "

Basically, another tax on the "rich"

stamfordmike said:   I have to work hard for my $ and in 10 years even harder as they'll be younger kids who can do my job for probably half the pay and benefits, it's finance so I don't know if it's a bubble but it surely cycles and I'll most likely be working into my mid 60's. I live in Fairfield County, which is it's own bubble and while Obama thought I was rich (he moved to $450 recently) I'm really not. But this goes all off topic. Let me ask my OP in a different but more direct way.

What I'm asking for is a FW parent who has opened a 529 plan for the last 10-15 years and have actually made $ on the account, with the high fees, the limited options and the fact that you can only change your options once a year, I just wonder if the tantalizing tax free earnings end up being wasted in the end because if I look at historical returns, you sort of end up in the same place. For example what if I wanted to pull my $ out of the market in 2008, I'd have to wait a whole year to put it back in the market because I only can make a change once a year. But again everyone says they have a 529 plan but do they really think as their kid is entering college (in the last few years) that they say to themself "Wow I'm sure glad I invested in a 529 plan, it was a great decision, I'm glad I did it.


Yes I have made money on my 529. I am in Virginia and am up over 8% over the last 10 years (only been in 10 years). I have no clue if it is a great decision or a poor one. My goal is for each child to have $200,000 for school by the time they go to school (or at least finish school to pay any loans off if we need to wait a year or two after they start for market reasons)

dhodson said:   in the current OP situation however, he/she still has over 250k of income and thats gonna negate the grandparent ownership

if you are talking about someone other than the OP who has much more modest income then such things can be done with more success.


Depending on the school,you don't have to reduce the income to zero. Just less than $150k or $100k for some of the top 10.

But seriously, taking $250k down to $75k is limited more by intellectual laziness than anything else.

And with enough time, one should be able to make $1mm in assets conveniently disappear.

Multiply that by 5.6% times the number of years your kids will be in college and you can be talking some real money.

And you don't have to run 47 debit card txns each month at the gas pump to do it.

jkimcpa said:   Basically, another tax on the "rich"

No. The rich send their kids to school for free.

Financial aid formulae are a tax on the illiterate and lazy.

dhodson said:   F With high income you are always paying msrp type rates.

Not true.

Somewhat true if you have high W-2 income. But even then it's not always true.

jimmywalt said:   Lower your wages so that you can get some free money.

No. The goal is not to reduce your income so much as it is to recharacterize your income.

It's corporate finance concepts applied to personal finance.

BrodyInsurance said:   According to Princeton, they do not count home equity in a primary residence.

But many many other schools do.

Although it is less of a factor since the housing melt down.

Read between the lines on the CSS and you will start to get a sense of what people used to get away with. Simply criminal.

From all this conversation I would guess that A LOT of people cheat on their income taxes as well, uh????

I don't cheat, never have, never will! Cheaters don't win in the long run - no they don't!

Why would I want to STEAL from another student (or many students) who might have ACTUAL needs?

Should I stop paying income taxes, still enjoy the services of the government and let all you foot the bill for me?

Come on guys!!!!

Is it cheating on your taxes to have a mortgage on your house and deduct the interest you pay?

Is it cheating on your taxes to put money in a 401k and reduce the taxes you pay in the year you earn that income?

Is it cheating on your taxes to pay your January real estate tax bill a few days early in December?

No.

Is it cheating to put your money in a Roth instead of a 529?

Is it cheating to refi your house and put the money into a Roth?

No.

i dont think most people are interested in really cheating. i think most are interested in ideas like the post above which could make sense by beef. There are some who are interested in creating bogus companies or whatever it takes but thats the minority. The problem is for the OP, that person has and is planning on having high income during the college years. Thats gonna make it tough to get around without cheating.

jimmywalt said:   From all this conversation I would guess that A LOT of people cheat on their income taxes as well, uh????

I don't cheat, never have, never will! Cheaters don't win in the long run - no they don't!

Why would I want to STEAL from another student (or many students) who might have ACTUAL needs?

Should I stop paying income taxes, still enjoy the services of the government and let all you foot the bill for me?

Come on guys!!!!


Is it cheating for universities to keep growing their endowments at the same time they keep increasing the price of tuition (or, put another way, the price of the "ticket" ostensibly necessary to obtain professional jobs)? It's a game on both sides, so I don't feel like it's cheating if I learn how to play it.

jimmywalt said:   From all this conversation I would guess that A LOT of people cheat on their income taxes as well, uh????

I don't cheat, never have, never will! Cheaters don't win in the long run - no they don't!

Why would I want to STEAL from another student (or many students) who might have ACTUAL needs?

Should I stop paying income taxes, still enjoy the services of the government and let all you foot the bill for me?

Come on guys!!!!


Jimmy, I'm really curious about your viewpoint on this.

Let me give you a real example without any craziness. Everything is identical between you and your neighbor. You both have a 14 year old child and an 18 year old child. You both have 2 529 plans for your children each with $100,000.

The only difference is that the 529 plan for his youngest child is an UTMA/529 while you own the 529 plan for your youngest child.

With this set of facts, you will have to pay $5,600 more than your neighbor every year for school for your oldest child.

Do you believe that your neighbor is cheating? Like you, I would never cheat. In this case, I don't see any cheating. I just see you being an unnecessary sucker.

Yup. Cheating is dumb.

Especially when cheating is unnecessary.

BrodyInsurance said:   jimmywalt said:   From all this conversation I would guess that A LOT of people cheat on their income taxes as well, uh????

I don't cheat, never have, never will! Cheaters don't win in the long run - no they don't!

Why would I want to STEAL from another student (or many students) who might have ACTUAL needs?

Should I stop paying income taxes, still enjoy the services of the government and let all you foot the bill for me?

Come on guys!!!!


Jimmy, I'm really curious about your viewpoint on this.

Let me give you a real example without any craziness. Everything is identical between you and your neighbor. You both have a 14 year old child and an 18 year old child. You both have 2 529 plans for your children each with $100,000.

The only difference is that the 529 plan for his youngest child is an UTMA/529 while you own the 529 plan for your youngest child.

With this set of facts, you will have to pay $5,600 more than your neighbor every year for school for your oldest child.

Do you believe that your neighbor is cheating? Like you, I would never cheat. In this case, I don't see any cheating. I just see you being an unnecessary sucker.


I really don't know exactly how to answer your question. I don't know off the top of my head what a UTMA is. I feel that if I'm able to pay for my child's college then why wouldn't I? I suppose that when he's in grade school I could lie so that he could get free lunch in the cafeteria, but would I really be winning and will that help me get ahead?

My comments in this thread are about the number of times I "thought" I read that people suggested creating a business/company, or somehow lowering your income just so that OP might get some money in financial aid.

Why not be the absolute best you can be, make the most you can, and be able to pay for your child to go to school? If you have 7 or 8 figures in liquid assets then why try to get something you don't really need? For instance, how many people that posted in this thread went to the local food bank this month and got free food? Well why not? What's the difference? Where do you draw the line?

Spend your time making yourself better and contributing to the world rather than figuring someone owes you something. You'll be much happier and will end up much farther ahead in the long run!

Let he who did not join AARP solely to pillage the 5% card throw the first stone.

edit: FWIW, if you read my posts I think you will see that at least once or twice per thread I resoundingly denounce the current financial aid system as totally fubar at best or a crime against the lower and middle class student at worst.

More complex than the tax code, the current financial aid system is an abomination.

There is a difference between tax avoidance and tax evasion. The former is legal and the latter is not.

One strategy for someone who receives financial aid or a scholarship that doesn't need it is to donate the proceeds to the school. It is the same result for the school but the donor receives a tax deduction.

I feel a bit like I am reading tea leaves in here...

Is there a book which summarizes 'advanced' FAFSA strategies well? Or a website? Or is it all protected knowledge that is only allowed to be revealed as riddles?

I am being a bit facetious, and I honestly really like the discussion here, but would love to have it spelled out clearly

BrodyInsurance said:   ...For the two younger children, UTMA 529 plans can be used (or use UTMAs and turn them into UTMA 529 plans at a later date)...Now that you've converted these assets to child-owned, doesn't the FAFSA require a greater contribution of the child's assets toward college costs each year (up to 35%)? Haven't you just negated the benefit of moving the 5.6% out of the older child's expected contribution?

BEEFjerKAY said:   jkimcpa said:   Basically, another tax on the "rich"

No. The rich send their kids to school for free.

Financial aid formulae are a tax on the illiterate and lazy.
Beef, I for one am very interested in the finer points of financial aid that you have to offer, but the insulting rhetoric is getting a little old. Just because some (most) of us aren't able to employ your tactics for one reason or another doesn't make us illiterate or lazy.

I really don't know exactly how to answer your question. I don't know off the top of my head what a UTMA is. I feel that if I'm able to pay for my child's college then why wouldn't I? I suppose that when he's in grade school I could lie so that he could get free lunch in the cafeteria, but would I really be winning and will that help me get ahead?

My comments in this thread are about the number of times I "thought" I read that people suggested creating a business/company, or somehow lowering your income just so that OP might get some money in financial aid.

Why not be the absolute best you can be, make the most you can, and be able to pay for your child to go to school? If you have 7 or 8 figures in liquid assets then why try to get something you don't really need? For instance, how many people that posted in this thread went to the local food bank this month and got free food? Well why not? What's the difference? Where do you draw the line?

Spend your time making yourself better and contributing to the world rather than figuring someone owes you something. You'll be much happier and will end up much farther ahead in the long run!


Let's try this again. If you want to buy a new $50,000 car, would you choose to pay $50,000 when you know that they will sell it to your neighbor for $45,000.

In my UTMA example, you are choosing over the course of 4 years to pay an additional $22,400 over 4 years simply because of how your family titled assets.

An UTMA/529 in my example simply means that the asset belongs to your youngest child. When your oldest is in college, a 529 plan that you own for the benefit of your youngest child is treated as if it is available for your oldest child. If it is an UTMA/529, it does not get treated as if it is available.

So, you aren't paying $22,400 more for college than your neighbor because you can afford to pay $22,400 more. You are paying $22,400 more because you decided to ignore how financial aid is calculated.

You are also paying $44,800 more than the neighbor on the other side who chose to put money into an annuity instead of a 529 plan despite having an identical income and net worth.

It's a game. The rules are spelled out. You can choose not to play, but it probably means that you are choosing to pay more than is necessary.

The best analogy that I can think of is contributing to a traditional IRA, but choosing not to take the tax deduction because you can afford the taxes.

dcwilbur said:   BrodyInsurance said:   ...For the two younger children, UTMA 529 plans can be used (or use UTMAs and turn them into UTMA 529 plans at a later date)...Now that you've converted these assets to child-owned, doesn't the FAFSA require a greater contribution of the child's assets toward college costs each year (up to 35%)? Haven't you just negated the benefit of moving the 5.6% out of the older child's expected contribution?

Great question, but the answer is "no". 529 plans owned by dependent students are treated as parental assets.

BrodyInsurance said:   dcwilbur said:   BrodyInsurance said:   ...For the two younger children, UTMA 529 plans can be used (or use UTMAs and turn them into UTMA 529 plans at a later date)...Now that you've converted these assets to child-owned, doesn't the FAFSA require a greater contribution of the child's assets toward college costs each year (up to 35%)? Haven't you just negated the benefit of moving the 5.6% out of the older child's expected contribution?

Great question, but the answer is "no". 529 plans owned by dependent students are treated as parental assets.
Isn't that contradictory? I thought the whole point of creating the UTMA account for the younger child is precisely so that the account WON'T be included in as parental assets.

Also - see paragraph here: link

Financial Aid Because the money in a custodial account is your child’s asset and not yours, be aware that UGMA/UTMA assets potentially can have a significant impact on the financial aid package the student receives. College financial aid formulas typically require a student to contribute more of his or her total assets to college costs each year (up to 35%), whereas parents are expected to contribute less, sometimes only 5.6% of their total assets per year.

jimmywalt said:   From all this conversation I would guess that A LOT of people cheat on their income taxes as well, uh????

I don't cheat, never have, never will! Cheaters don't win in the long run - no they don't!

Why would I want to STEAL from another student (or many students) who might have ACTUAL needs?

Should I stop paying income taxes, still enjoy the services of the government and let all you foot the bill for me?

Come on guys!!!!


I've had the pleasure of watching tuition at my state university system almost double in the last decade. What I observed is their shift of the increased tuition burden to upper middle class and up students to subsidize the lower income students. There is no concept of shared burden. If you happen to be a more successful family, playing by the rules means you end up paying for your child and subsidizing someone else's tuition increase portion.

During the fee hike period, they also instituted a new scholarship program that guarantees lower income students (< $80K/year income now) will receive grants equal the full cost of tuition. In practice, this meant the University now had to pay out more grants because state based grants weren't growing to cover the increased tuition sticker price.

Tuition was raised for every student paying in cash or loans more than if the lower income students were to share some of the costs/budget shortfall burden. So imagine instead of a $1,000 tuition increase to all students this year (equally sharing the burden), they raised it $2,000 because 50% of students are given a needs based grant to cover the increase tuition, and those paying with loans/cash pay this higher fee to balance the budget.

yes, best argument I've ever heard for buying into a prepaid tuition plan which is tied to the exponential increase in the sticker price of college = the one that very few people actually pay.

dcwilbur said:   BrodyInsurance said:   dcwilbur said:   BrodyInsurance said:   ...For the two younger children, UTMA 529 plans can be used (or use UTMAs and turn them into UTMA 529 plans at a later date)...Now that you've converted these assets to child-owned, doesn't the FAFSA require a greater contribution of the child's assets toward college costs each year (up to 35%)? Haven't you just negated the benefit of moving the 5.6% out of the older child's expected contribution?

Great question, but the answer is "no". 529 plans owned by dependent students are treated as parental assets.
Isn't that contradictory? I thought the whole point of creating the UTMA account for the younger child is precisely so that the account WON'T be included in as parental assets.

Also - see paragraph here: link

Financial Aid Because the money in a custodial account is your child’s asset and not yours, be aware that UGMA/UTMA assets potentially can have a significant impact on the financial aid package the student receives. College financial aid formulas typically require a student to contribute more of his or her total assets to college costs each year (up to 35%), whereas parents are expected to contribute less, sometimes only 5.6% of their total assets per year.


That's a really bad job by TRowe with that link. They completely neglected to talk about 529 UTMA accounts.

The information given is correct, except when the UTMA is a 529 plan.

It's not completely contradictory. It is only treated as a parental asset when it comes to aid for the child who owns it. In other words, a parent owned 529 plan counts as an asset for ALL of the children. An UTMA/529 only counts as an asset for that child who is the owner AND it gets treated as a parent owned asset.

Ex. Jim has three children. He is the owner of a 529 plan on each of them. Additionally, each child is the owner of an UTMA/529. Each plan has $100,000. So, we have 6 plans with $100,000 in each.

When the oldest, Charlie, goes to college, the three plans that are owned by Jim will all be counted as parental assets. Additionally, the plan that Charlie owns will also be counted as a parental asset. The plans owned by his 2 siblings will be ignored.

dcwilbur said:   Beef, I for one am very interested in the finer points of financial aid that you have to offer, but the insulting rhetoric is getting a little old. Just because some (most) of us aren't able to employ your tactics for one reason or another doesn't make us illiterate or lazy.

Sorry. Did not mean to offend.

My point is really a condemnation of the system.

By illiterate I mean families where neither parent has gone to college, where the parents do the best they can but are not well read on the tax and asset strategies used by corporate finance or businesses ... or the intergenerational asset transfer techniques of the wealthy.

By lazy I mean people who rely mostly on sound bites and aphorisms from talk shows that espouse simplistic strategies and who do not take on their own due diligence on the available options.

Frankly, I think the current system does a huge injustice to those families and the children of those families.

There is no equity or justice in the fact that wealthy kids whose parents own businesses and employ CPAs should pay less for college than kids whose parents have diligently saved whatever they could ... that W-2 earners should be so abjectly, thoroughly punished just because they have fewer ways -- or less control -- on how they recharacterize their income.

The cynical part of me says it's a system the pretends to favor the poor while really and intentionally favoring the rich.

Few on this board fit into either lazy or illiterate.

If anything, the FWF crowd is the 1% of savvy savers.

My sincere apologies to any member I may have offended.

BrodyInsurance said:   
That's a really bad job by TRowe with that link. They completely neglected to talk about 529 UTMA accounts.

The information given is correct, except when the UTMA is a 529 plan.

It's not completely contradictory. It is only treated as a parental asset when it comes to aid for the child who owns it. In other words, a parent owned 529 plan counts as an asset for ALL of the children. An UTMA/529 only counts as an asset for that child who is the owner AND it gets treated as a parent owned asset.
Okay, makes sense, but as custodian (rather than account holder), the parent is then no longer eligible for any state tax benefit. In my case, that's nearly 9%, significantly offsetting the benefit of putting the funds in the utma account.

Whether a contribution is deductible or not would depend on the particular state.

I don't usually see people contribute to UTMA/529 plans. They are often used as an easy way to change an asset from being treated as a student owned asset to a parent owned asset.

Ex. 18 year old Jim has an UTMA worth $100,000. Before filling out the FAFSA, the custodian moves this money into an UTMA/529. This will lower the EFC by close to $15,000.

I believe, but can't recall, that it is 20% for student assets, so this changes it from $20,000 down to $5,600.

Is it possible to rollover a 529 that I have for my kids to one that their grandparents set up?

BEEFjerKAY: Perhaps you can outline some strategies we can implement? I think many people are willing to listen and make their own decisions about what/what not to do, but we just need some guidance.

Agreed. As of now I think I understand the UTMA strategy as this:

*If you have two or more college-bound children, consider putting any college savings (up to the max allowed in a 529) into a 529 plan under a UTMA for the youngest child. By doing this, the money will be 'shielded' from the FAFSA forms for all older children as they enter college. This allows 529 savings without being 'taxed' the 5.6% for the savings within the FAFSA (until the youngest child enters college, at which point you would have to declare 5.6% of the balance). If instead you 'spread around' the 529 equally into typical accounts, you will get double (or triple or more) penalized, as each year's FAFSA for each child would tax the total 529s, regardless of which child was the beneficiary.

Beyond that, I have heard topics of:
-salary reduction, possibly via
-business ownership
-strategies both for maximizing home equity and minimizing home equity
-annuities

But no concrete descriptions of how it works and the tangible benefits

mdfan said:   Is it possible to rollover a 529 that I have for my kids to one that their grandparents set up?

The answer is clear as mud.

Some plans don't allow changes of ownership. Some plans do allow it.

Of the plans that allow it, some treat it as an unqualified distribution that gets reported to the IRS and others do not. This makes zero sense to me. It is either allowed, in which case it is qualified or it is not allowed in which case it is not qualified and taxes and penalties should be due on the gain. The plans don't get to make the ultimate decision about whether something is qualified or not.

In other words, just because a plan allows ownership changes and doesn't report it as a non-qualified distribution, I would not make the assumption that the change stops one from having to pay penalties and taxes on the gain. And just because a plan says that the change is not qualified, I would not assume that taxes and penalties are actually owed.

That being said, the reality is that if a plan reports it as "non-qualified", it will take some effort to not have to pay taxes on it. If it isn't reported as "non-qualified", it is unlikely that the IRS will challenge it.

This is an area that is very ripe for abuse. The IRS is supposed to issue some guidance on this. To the best of my knowledge, they have not.

If you want to do it and either the plan doesn't allow it or the plan does report it as non-qualified, your best bet if you want to do it on a tax free basis would be to do it as a two step process. 1)Make a qualified distribution to a plan that allows it. 2)Make the change.




Also, be careful with grandparent owned 529 plans. The money belongs to the grandparent and they have the right to do with it whatever they please. Depending upon the state, it may not have creditor protection and it could prevent the grandparent from qualifying for financial assistance. Additionally, it will have a detrimental impact on financial aid if it is used prior to the senior year.

wilked said:   Agreed. As of now I think I understand the UTMA strategy as this:

*If you have two or more college-bound children, consider putting any college savings (up to the max allowed in a 529) into a 529 plan under a UTMA for the youngest child. By doing this, the money will be 'shielded' from the FAFSA forms for all older children as they enter college. This allows 529 savings without being 'taxed' the 5.6% for the savings within the FAFSA (until the youngest child enters college, at which point you would have to declare 5.6% of the balance). If instead you 'spread around' the 529 equally into typical accounts, you will get double (or triple or more) penalized, as each year's FAFSA for each child would tax the total 529s, regardless of which child was the beneficiary.

Beyond that, I have heard topics of:
-salary reduction, possibly via
-business ownership
-strategies both for maximizing home equity and minimizing home equity
-annuities

But no concrete descriptions of how it works and the tangible benefits


In general, the asset strategies are nothing more than understanding what counts as an asset and what doesn't. I'll use myself as an example projecting my situation into the future. When my oldest is a senior and filling out the FAFSA, I will also have a junior, sophomore, and, freshman in a private H.S. Let's assume that the tuition for each of them will be $25,000 and I have $500,000 sitting in my checking/savings accounts.

Let's just focus on that $500,000. That $500,000 translate to having to pay around $28,000 for college. How do I get rid of this money to lower what I need to pay? There are many ways, but here is one.

1)Put $25,000 into an UTMA for child #2. 2)Put $50,000 into an UTMA for child # 3. 3)Put $75,000 into an UTMA for child #4. This pays for 1, 2, and 3 years of their private school respectively.

After doing that, I only have $350,000 which gives me an EFC (expected family contribution) of $19,600.

If I put $200,000 into my mortgage, I'm down to $150,000 and an EFC of $8,400.

If I then take that other $150,000 into an annuity, I will be down to $0, and an EFC of $0.

Of course, there will be more to my financial situation, but the point is that much of this isn't much more complicated than knowing what is counted and what isn't counted based upon the formula that a school uses.

Is it possible to transform a regular 529 to a UTMA/529 plan, or is this the same situation as outlined above with regard to transferring ownership to a grandparent? I appreciate this discussion -- my kids are young, but this is something I need to keep in mind as time goes on.

bigdaddycincinnati said:   Is it possible to transform a regular 529 to a UTMA/529 plan, or is this the same situation as outlined above with regard to transferring ownership to a grandparent? I appreciate this discussion -- my kids are young, but this is something I need to keep in mind as time goes on.

I am GUESSING on this. I can't imagine that this would/could be a problem with the IRS.

Typically when an owner changes from one person to another, that owner has the ability to do anything that they would like with that money. There is no requirement that the money gets used for the benefit of the child. For this reason, combined with the fact that an ownership change has no gifting impact, ownership changes are ripe for abuse.

Changing the ownership to an UTMA doesn't have this problem. Once it is an UTMA, it legally must be used for the beneficiary.

Call your plan and ask. If they allow it, I would not have any concern about it.

Keep in mind that there is a definite disadvantage to you by having it an an UTMA. It takes away your flexibility since the money must be used for that child. Personally, I would not use an UTMA/529 until my children were close to college age and doing so helps the financial aid situation of my other children.

This is all very interesting and potentially useful information. However, is it not also important to consider what types of financial aid are likely to be available? Especially with a shift toward offering loans rather than grants. If you pay off your 3% interest mortgage to be given an aid package that just gives you a 6.8% interest loan, was it worth it? I'd be curious to hear what some of the aid packages being offered are like. For example at Princeton, if you drop your EFC to 0, how much of the aid will come as loans and how much as grants? I remember filling out a FAFSA, and it asked for information that day, so some of the tactics related to taxes would also apply (hold off depositing large checks, make large payments to draw down account size)

ksuwldkat said:   This is all very interesting and potentially useful information. However, is it not also important to consider what types of financial aid are likely to be available? Especially with a shift toward offering loans rather than grants. If you pay off your 3% interest mortgage to be given an aid package that just gives you a 6.8% interest loan, was it worth it? I'd be curious to hear what some of the aid packages being offered are like. For example at Princeton, if you drop your EFC to 0, how much of the aid will come as loans and how much as grants? I remember filling out a FAFSA, and it asked for information that day, so some of the tactics related to taxes would also apply (hold off depositing large checks, make large payments to draw down account size)

It's very important to understand what kind of aid is available. That's why one shouldn't pay off their mortgage (or take money out of their house if equity counts) or do anything else for the purpose of aid before they understand the impact. There are different calculators that can be used to help determine this in advance.

ksuwldkat said:   However, is it not also important to consider what types of financial aid are likely to be available? Especially with a shift toward offering loans rather than grants. If you pay off your 3% interest mortgage to be given an aid package that just gives you a 6.8% interest loan, was it worth it?

Some things to consider:

1) the loans will likely be subsidized, so interest won't start running until some months after the child graduates
2) your child may go into a field that offers some form of loan repayment from the employer
3) as long as your cash sits in a non-protected asset category, they're going to take a 5+% chomp out of it each year

Am I the only one who thinks an education will mean more to my kids if they have to figure out on their own how to pay for it?

I went to cheap in-state school and took out some loans, and yes, it will take me close to 20 years to pay them off. I was also encouraged by my parents to do my best in high school so I could qualify for a merit-based scholarship, which I did.

With all of the information out there about saving for college for your kids, I have only rarely seen information that says save for retirement and for yourself first, and let the kids figure it out for themselves. It will definitely mean more to them if they have some skin in the game.

wilked said:   Agreed. As of now I think I understand the UTMA strategy as this:

*If you have two or more college-bound children, consider putting any college savings (up to the max allowed in a 529) into a 529 plan under a UTMA for the youngest child. By doing this, the money will be 'shielded' from the FAFSA forms for all older children as they enter college. This allows 529 savings without being 'taxed' the 5.6% for the savings within the FAFSA (until the youngest child enters college, at which point you would have to declare 5.6% of the balance). If instead you 'spread around' the 529 equally into typical accounts, you will get double (or triple or more) penalized, as each year's FAFSA for each child would tax the total 529s, regardless of which child was the beneficiary.



and what happens when your child, at age 18, says, "Hand me the money Dad"?



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