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#43489 - 06/17/08 11:05 AM Financial Aid - Impact on various investment vehicles
Bozanimal
Registered: 12/20/07
Posts: 7 		To preface, I am not a tax guy, I'm an investments guy, so you might understand how perplexed I am by how the EFC is calculated, and how different investment vehicles are treated by the EFC for purposes of financial aid. So I am hoping to get some things either confirmed, clarified, or out and out rebuked, the first being that grandparent assets and income are always excluded from the EFC calculation. Thereafter, for purposes of the EFC:

529 plans: Assets are treated by the EFC as those of the parent if the account owner is the parent or student starting in 2009. Qualified withdrawals are excluded from income for purposes of the EFC.
Coverdells: Assets are treated by the EFC as those of the account holder; students assessed at the student rate (20%) and parents at the parent rate (5.6%). Qualified withdrawals are excluded from income for purposes of the EFC.
UGMA/UTMA: Assets are always counted as those of the student, income is treated as student income (seems harsh).
Roth IRA: Assets are always excluded from the EFC calculation, but income is treated as that of the account holder, meaning withdrawals from prior years are assessed as income for purposes of aid (?).
Savings Bond: Assets and income are assessed as those of the account holder for purposes of the EFC.
Taxable account: Assets and income are assessed as those of the account holder for purposes of the EFC.

Right? Wrong? I know there are some caveats for the particular tax year, where UGMA/UTMA-owned 529s are excluded for 2008, but I'm looking further into 2009 and beyond.

Cheers all,

Boz
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#43494 - 06/17/08 09:54 PM Re: Financial Aid - Impact on various investment vehicles [Re: Bozanimal]
anonymous
Registered: 03/29/05
Posts: 1992 		Some slight changes:

529 plans: parent or DEPENDENT student
UGMA/UTMA: True unless we are talking about an UGMA/UTMA 529 plan which will then be treated as parental asset.
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#43495 - 06/17/08 10:51 PM Re: Financial Aid - Impact on various investment vehicles [Re: anonymous]
Joe Hurley Administrator
 Registered: 01/07/00
Posts: 2080 		More:
Coverdell treatment is same as 529.

Note: Grandparent-provided support is student income. Grandparent direct payments of tuition (except from 529) are dollar for dollar reduction of need.

Joe
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#43496 - 06/18/08 08:48 AM Re: Financial Aid - Impact on various investment vehicles [Re: Joe Hurley]
Bozanimal
Registered: 12/20/07
Posts: 7 		Thanks, Joe!

Boz
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#43497 - 06/18/08 09:46 AM Re: Financial Aid - Impact on various investment vehicles [Re: Bozanimal]
anonymous
Registered: 03/29/05
Posts: 1992 		Hey, Boz. My feelings are hurt. Where's my thanks?
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#43498 - 06/18/08 10:51 AM Re: Financial Aid - Impact on various investment vehicles [Re: anonymous]
Bozanimal
Registered: 12/20/07
Posts: 7 		Thanks Anonymous!
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#43505 - 06/19/08 01:05 AM Re: Financial Aid - Impact on various investment vehicles [Re: Bozanimal]
itstoomuch
Registered: 01/01/06
Posts: 757 		Do not suppose that the determination of financial aid is solely based on FAFSA's EFC. Financial Aid people are paid to attract and maintain a student body at the lowest cost. Job desciption, Home location, SAMMI reports, analysis of 1040 could be important parts to FA whether Need or Merit or Outright Grant. Your goal is not to get the lowest EFC but the HIGHEST, assuming that you are an "investment" guy.
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#43506 - 06/19/08 07:41 AM Re: Financial Aid - Impact on various investment vehicles [Re: itstoomuch]
Bozanimal
Registered: 12/20/07
Posts: 7 		@itstoomuch - My "goal" was not to get a low or high EFC, it was to clarify some points about its calculation. But thank you for responding!
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#43507 - 06/19/08 11:32 AM Re: Financial Aid - Impact on various investment vehicles [Re: Bozanimal]
Drew
Registered: 01/09/00
Posts: 2478 		Of course its never quite that simple--if Grandpa owns the 529 its out of count, if you get divorced the megabuck noncustodial parent is out of count, and if kid has a child the student is emancipated.

And in some educational circles they threw out English as a language--to wit, in PA if you pay me big bucks to take in your child and enroll him as my own because my local public high school has a superior program to that of East Centercity---the law says deal is "gratis" for purposes of enrollment. (A May 19, 2008 Appeals Court decision )
_________________________
Drew

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