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Our EFC is more than we can afford. I figured if we really skimped on expenses, we could free up $5,000 per year. Last year, the school my daughter attends said we could come up with $12,000. Unless we sell our house or stop buying food, I don't see how we can do this. How does this happen?

By Roger (Roger) on Tuesday, September 18, 2001 - 11:03 am: Edit

Marge, your EFC is based on the income and assets of the student and family. I don't know what your situation is, but if you have a comfortable income but are locked into high fixed payments - mortgage, car loans, etc., it is entirely possible that your EFC will exceed your disposable income. Also, if you or your daughter have significant assets, they too can raise your EFC. The EFC calculation doesn't really look at your disposable income, i.e., your income after your fixed expenses, food, and the like. Rather, it looks at your total income and assets and computes what you should pay.

In some ways, that makes sense - if someone drives an expensive car and lives in a costly home, you wouldn't expect them to get a break on tuition, would you? On the other hand, the EFC can seem onerous, particularly if you live in a high cost area of the country where ordinary shelter, transportation, and food consume most of your take-home pay. Middle class families feel the most pain, unfortunately.

When the EFC exceeds your ability to free up income, you'll have to make up the difference by drawing on savings or by using loans. Or, try to find a less costly college or one that will offer merit aid to your daughter. If you have some exceptional circumstance - job loss, illness, etc., you can also appeal directly to the college financial aid office. Even schools that follow the EFC religiously often can make exceptions when unusual circumstances exist.

By MargeMom on Friday, September 21, 2001 - 02:20 pm: Edit

Thanks, Roger. I don't think these aid people undestand how difficult it is to live on a middle class income today. I agree that we should pay our fair share, but do we have to sell our house to afford college? If we get loans, I don't know how we would be able to make the payments on those, too.

By BeenThere on Thursday, September 27, 2001 - 06:58 am: Edit

Margemom,
I'm a single parent and I know how you feel. When I first saw the EFC, I thought, "how can I possibly pay that?"

But when I sat down and worked with the numbers, I realized that the loan payment I have to make on a parent PLUS loan - at least for the first year or so of college - is not that much. Then I realized that other expenses were being reduced with my son moving out. For example, since he is living in another state and does not have a car, I was able to remove him from my car insurance policy - that saves a lot.

I would agree with you that it's frustrating -- I certainly don't like the idea of getting into so much debt -- but the main point I'm trying to make is that it is something that turned out to be manageable for me, once I sat down and did the arithmetic.

By David Hawsey on Thursday, September 27, 2001 - 09:39 am: Edit

Dear Been There:

Your posting reminded me of a little-known fact about car insurance. If your son or daughter goes to college within 100 miles of your primary residence, they will not remove the student from the policy! Ridiculous, isn't it? One of my assistants has a daughter who goes to school right here in town, 7 miles from her home. She really does not have a car, will not have her parent's car on campus, and will not be driving it at all. Her insurance company said their policy only respects those students who go "away" to college.

While I understand their rationale, it sure isn't fair, is it?

By anon mom on Wednesday, October 17, 2001 - 04:20 pm: Edit

Margmom,

I definitely feel your pain about the cost of college. But ask yourself a question. Is a college education for my child worth borrowing for (or postponing retirement?), etc. Most of us have no problems signing on the dotted line when we purchase a house or a car, yet so many people simply can't seem to understand the concept of borrowing money for an education. While it would be nice not to have to borrow, sometimes you have to. In our case, our EFC was just under 10,000. We are borrowing between 8-9,000/yr. and our son is borrowing the maximum on Stafford loans. His graduate school will be entirely on him. Our total debt will probably be around $40,000 for his undergraduate education. By the time he graduates, our payment on this loan will be between 400-500 per month. Many parents would not be willing to do this, but many have more disposable income than us and can afford it, or have saved significant amounts for their kids educations. Still more decide to go the less expensive route of a community college or state university. The decision is certainly up to each individual family, but we feel a certain amount of duty to do this for our high-achieving kid.

By Dadster on Sunday, November 04, 2001 - 06:15 pm: Edit

Hey, anon mom, you could have gotten a pretty good SUV for that kind of loan! Nice to see a family that has the right priorities!

By Howfam (Howfam) on Monday, December 23, 2002 - 06:23 pm: Edit

What about maximizing IRA contributions now in anticipation of the January 2003 FAFSA filing? I'm already maxed out at work, but often plug in the allowable max into a Roth or regular IRA, if cash flow allows. Well, this year, cash flow doesn't really allow, but moving cash from savings to Roth might make sense, since "retirement assets" aren't counted in this whole FinAid process (I think) and cash assets are counted. Am I thinking correctly? And, since one is allowed to take principal out of a Roth to pay for college, does that mean Roths are "counted?"

By Calmom (Calmom) on Monday, December 23, 2002 - 11:43 pm: Edit

No, it won't help, because the amount that you contribute to the IRA will still be counted as income for 2002, and the income is the more significant figure. If you plan to contrribute to your IRA anyway, it's fine - but if it will leave you short for cash when your kid enrolls in the fall, it's not a good idea.

Your observations are correct as far as past contributions are concerned. It really is a better idea to maximize IRA contributions in earlier years; you are correct that the FAFSA will consider the amount in an IRA as an asset; private college financial aid policies vary, some look at the retirement assets, some don't.

By Annie Hudges on Friday, January 10, 2003 - 01:50 pm: Edit

Maybe someone could answer this question for me. My husband and I did not qualify for any financial aid for school year 2002-2003 from the college our son is currently attending as a freshman. (State school) Fortunately for us, my husband's employer offered employees a one-time opportunity in June 2002 to receive some dividends accumulated in their 401K plan instead of having them re-invested. He chose this option because he knew we would use the money to help pay for college expenses, which we did - all of it. However, now we have to list this money on our 2003 FAFSA as untaxed income (we will also be listing it as dividends on our income tax return and paying taxes on it). This greatly inflates our EFC for 2003-004 because I've run the numbers both with and without the amount he received. This will not be
a recurring situtation in the future. Do you think a FAO would take this into consideration? He wants to transfer to another college in the Fall of 2003 which is going to be more expensive, but we could probably qualify for some financial aid there without this inflated EFC.

By jburns on Friday, January 24, 2003 - 11:37 pm: Edit

I work with several people in their mid-60's who have taken out second mortgages to pay for their children's education. They are tired, and only wish to retire, but can't because of college bills they are still paying after many years. The kids have graduated & are working in lucrative professions of their own- these poor guys are still paying the bills! (None of these kids have offered to pay their parents back!)
I'd like to help my kids with college, but don't want to be in the position of these guys - at retirement age, with no end in sight, because I've remortgaged everything to give my kids the best. I went through college in the 70's on low-interest loans, that I payed back myself. Is this still done? And are they through the school or banks? Are they low interest? What is the best balance for parents & kids?

By Thedad (Thedad) on Saturday, January 25, 2003 - 12:43 am: Edit

anon mom, who may be long gone...I like your attitude. Jburns, we may be in a similar position...we intend to make our expectations clear with our daughter that we expect significant help in paying back. With her...I don't anticipate any problem. Some kids...? Shrug.

By Trust on Saturday, January 25, 2003 - 12:58 pm: Edit

Some kids are like... they disregard their parents at old age. I would never do that to my parents though.

Talk to your kids, do you trust them?

By woninIL on Saturday, January 25, 2003 - 08:16 pm: Edit

Jburns, we struggle with this one too. My brother screwed around and dropped out, only to finally go back in his late 20s. His son dropped out his senior year(full ride for top 1% SATs)

My ds has the same 'laid back ' personality as those 2 and I wonder if insisting he have a financial stake in things would make him more appreciative. We insisted he pay 1/2 his car insurance as well as 200/mo towards the car itself(bought used-we paid cash)Unusual in the area we lived in at the time-most kids only paid for gas.

I am considering having him pay at least one third. He has worked junior and senior year, sometimes 40 hrs/wk during school so this is possible. He is not very social and this is his way of staying busy. Id also consider him taking out a loan to pay a share if the work thing didnt pan out

But, yeah, I feel guilty saying this. Education IS a priority in our house-we both have degrees(dh has a doctorate)but we also come from a generation and time that stressed working hard for what you want.

And, dang it, I worked for my SUV!!! I think he needs to work for his as well!

By Miss on Sunday, February 02, 2003 - 12:18 am: Edit

My parents EFC is completely inaccurate. They said my parents can afford 15,000 a year. If they could afford 15 a year, I wouldn't be applying for aid to a public school. What can I do.