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# FAFSA Strategies

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SVP
Status: Burning mid-night oil....daily
Joined: 07 Nov 2008
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Schools: Yale SOM 2011 Alum, Kellogg, Booth, Tuck
WE 1: IB - Restructuring & Distressed M&A
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Kudos [?]: 728 [2] , given: 548

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17 Feb 2010, 21:25
2
KUDOS
PBateman wrote:
I just submitted mine but then remembered I hadn't contributed the 5k for 2009 to my Roth yet. Should it be legit to amend my FAFSA to reflect this (and maybe make my 2010 contribution now too)?

Post tax contributions to retirement plans (which ROTH IRA is, since it is funded with post tax dollars) are not reported on the FAFSA (Worksheet B for example), except to the extent that they are included in AGI.

Since Roth IRA is not even deductible on your tax return, it won't impact your AGI.

And since you have not made any contribution in taxable year 2009 (calendar yr 2009), you can't deduct it anyway even if it was qualified traditional IRA contribution.

Therefore, there is nothing to amend.
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17 Feb 2010, 21:43
nink wrote:
PBateman wrote:
I just submitted mine but then remembered I hadn't contributed the 5k for 2009 to my Roth yet. Should it be legit to amend my FAFSA to reflect this (and maybe make my 2010 contribution now too)?

Post tax contributions to retirement plans (which ROTH IRA is, since it is funded with post tax dollars) are not reported on the FAFSA (Worksheet B for example), except to the extent that they are included in AGI.

Since Roth IRA is not even deductible on your tax return, it won't impact your AGI.

And since you have not made any contribution in taxable year 2009 (calendar yr 2009), you can't deduct it anyway even if it was qualified traditional IRA contribution.

Therefore, there is nothing to amend.

Crap, then I think I have another issue. My money is currently in:

(a) checking account
(b) savings account
(c) 401(k)
(d) Roth IRA

For "Student's Total of Cash, Savings, and Checking Accounts", I have (a) + (b)

For "Student's Net Worth of Current Investments", I have (c) + (d) which I think is wrong

So, I think I should amend the latter amount to 0, and amend the former to subtract any Roth IRA contributions since I filed it.
SVP
Status: Burning mid-night oil....daily
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17 Feb 2010, 21:55
1
KUDOS
You wouldn't list 401k or IRA under "assets".

However, you would have to list any annual retirement fund contributions under "untaxed income"
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18 Feb 2010, 08:45
nink wrote:
PBateman wrote:
I just submitted mine but then remembered I hadn't contributed the 5k for 2009 to my Roth yet. Should it be legit to amend my FAFSA to reflect this (and maybe make my 2010 contribution now too)?

Post tax contributions to retirement plans (which ROTH IRA is, since it is funded with post tax dollars) are not reported on the FAFSA (Worksheet B for example), except to the extent that they are included in AGI.

Since Roth IRA is not even deductible on your tax return, it won't impact your AGI.

And since you have not made any contribution in taxable year 2009 (calendar yr 2009), you can't deduct it anyway even if it was qualified traditional IRA contribution.

Therefore, there is nothing to amend.

Hey Nink, thanks for the tax/fafsa advice. Question about your calendar yr 2009. For taxes, we're allowed to put money into our IRA until April XX, can I still do it now to lower my AIG?
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Status: Burning mid-night oil....daily
Joined: 07 Nov 2008
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18 Feb 2010, 08:53
1
KUDOS
You can contribute funds to your traditional IRA by the first deadline of a tax return, without any extensions. That means you can make a retroactive IRA contribution if you fund the account by April 15, 2010.

Easy way of saying this: If your IRA contribution is qualified for deduction on your Fed tax return, you can contribute NOW (before April 15 2010) and still lower your AGI for 2009 tax return.

(P.S. - How did I become the go to guy for tax questions in this forum?)
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18 Feb 2010, 10:12
nink wrote:
You can contribute funds to your traditional IRA by the first deadline of a tax return, without any extensions. That means you can make a retroactive IRA contribution if you fund the account by April 15, 2010.

Easy way of saying this: If your IRA contribution is qualified for deduction on your Fed tax return, you can contribute NOW (before April 15 2010) and still lower your AGI for 2009 tax return.

(P.S. - How did I become the go to guy for tax questions in this forum?)

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29 Mar 2010, 20:49
MBAgirl2010 wrote:
I ran the FAFSA estimator today and it allowed me to set a custom annual school expense (80G) instead of the predefined 20G. I also experimented with drastically different income and savings amounts and there was barely any difference in the loan amounts. In any case It showed I would be given access to the maximum size of subsidized and unsubsidized Staffort loans.

I also tried using the FAFSA estimator. I plugged in vastly different current cash savings from 10K to 100k, and I still do qualify for maximum subsidized and unsubsidized Stafford loans (I put in correct information for taxes and gave 80K as the school expense). If knocking off 90K from your savings does not make a difference from FAFSA forms, then why would people suggest strategies like maxing out IRAs or paying off loans? I have a car loan that I could pay off (but I want to keep the money in bank for incidental emergencies).
Also, my need for money is going to drastically change next year, as both my wife and I will be leaving our jobs, but unfortunately tax forms for 2009 do not reflect that. Is there a way to convey this to school, so they consider me for need based scholarship?
Current Student
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WE 1: 5 Years at Fortune 50 Company in Manufacturing
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30 Mar 2010, 09:32
passivation wrote:
MBAgirl2010 wrote:
I ran the FAFSA estimator today and it allowed me to set a custom annual school expense (80G) instead of the predefined 20G. I also experimented with drastically different income and savings amounts and there was barely any difference in the loan amounts. In any case It showed I would be given access to the maximum size of subsidized and unsubsidized Staffort loans.

I also tried using the FAFSA estimator. I plugged in vastly different current cash savings from 10K to 100k, and I still do qualify for maximum subsidized and unsubsidized Stafford loans (I put in correct information for taxes and gave 80K as the school expense). If knocking off 90K from your savings does not make a difference from FAFSA forms, then why would people suggest strategies like maxing out IRAs or paying off loans? I have a car loan that I could pay off (but I want to keep the money in bank for incidental emergencies).
Also, my need for money is going to drastically change next year, as both my wife and I will be leaving our jobs, but unfortunately tax forms for 2009 do not reflect that. Is there a way to convey this to school, so they consider me for need based scholarship?

It really doesn't affect anything in my opinion. Having student loans in the past, this is the way it's supposed to work for fin aid.

Let's say you have an EFC (expected family contribution) of 5,000.
Tuition + cost = 20,000

Then total Maximum fin aid (not including scholarships) = 15,000

However looking at the fin aid I got from school. it reads
EFC = 5,000
Cost = 70,000K

Total eligibility = 65,000
Loan = 70,000 (This normally for UG would equal up to total eligibility)

Also it used to be set in UG that sub and unsub were a function of earnings but grad studies at least for MBA seems unrelated.
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31 Mar 2010, 12:02
1
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ok i pretty much have zero assets for FAFSA purposes as they're all in retirement accounts and not considered for the net worth calculation. however my EFC was 20,000+ which seems relatively high compared to other posters in this thread that had EFC close to zero. from the post above, it appears i may be expected to contribute $20,000 toward tuition? i don't think that's right.... Current Student Joined: 05 Jan 2010 Posts: 377 Followers: 10 Kudos [?]: 91 [0], given: 3439 Re: FAFSA Strategies [#permalink] ### Show Tags 31 Mar 2010, 13:55 tuck20xx wrote: ok i pretty much have zero assets for FAFSA purposes as they're all in retirement accounts and not considered for the net worth calculation. however my EFC was 20,000+ which seems relatively high compared to other posters in this thread that had EFC close to zero. from the post above, it appears i may be expected to contribute$20,000 toward tuition? i don't think that's right....

Yeah, my EFC is high too. We should have quit working a year earlier. Your income from the previous year minus taxes paid and some adjustments for marriage status, etc. directly increases your EFC. In fact, if you're an independent without dependents of your own, your income contributes more on a per dollar basis than your assets.

http://www.ifap.ed.gov/efcformulaguide/ ... 102011.pdf
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31 Mar 2010, 15:48
Edit:
my efc

Last edited by merkin on 17 May 2010, 23:14, edited 1 time in total.
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17 May 2010, 23:02
My EFC was >25k which I was surprised by considering my cash is fairly low right now after just buying a house and spending 2 weeks in Italy. Also, my investments aren't that high either since its mostly in IRAs and 401k. On top of that I'm married and my wife is a med student so she had minimal income.

I have an investment in some land (about $9k worth of initial investment, no debt), should I have added that to my investments? I did, not sure if it was necessary and could have raised my EFC and its not exactly liquid. Also, there was a question about "money received or paid on student's behalf" from people besides your parents. We got a significant amount of money at our wedding last year (hooray for Asian people giving cash and not useless blenders and kitchen knives). I wonder if I should include that amount for that question. I didn't but maybe it would have helped my EFC since it would look like we required outside contributions... I dunno. BSchool Forum Moderator Status: Enjoying Class Joined: 06 Dec 2009 Posts: 235 Schools: Booth Followers: 4 Kudos [?]: 79 [0], given: 23 Re: FAFSA Strategies [#permalink] ### Show Tags 20 Jun 2010, 14:07 So I've read through the post and it seems that reducing cash levels doesn't have much of the desired effect of reducing your expected contribution. Is the key to minimizing EFC simply reducing the AGI reported on your tax returns? If this is the case then you could reduce AGI several ways (maximizing 401k, capital losses, etc). _________________ If you find this post useful, please give me a kudos. Thanks! [JB's Guide to Dressing for Interviews] [Did you use a Admissions Consultant? Provide some feedback here!] GMAT Club Premium Membership - big benefits and savings Current Student Affiliations: CPA, CFA Joined: 30 Jul 2008 Posts: 172 Location: East Coast Schools: Darden Class of 2012 WE 1: Big 4 Accounting Followers: 1 Kudos [?]: 9 [1] , given: 4 Re: FAFSA Strategies [#permalink] ### Show Tags 21 Jun 2010, 06:37 1 This post received KUDOS I don't think it matters much. As noted above I had efc of 20k+ and qualified for the maximum Posted from my mobile device Intern Joined: 20 Jan 2012 Posts: 7 Location: United States Concentration: Entrepreneurship GMAT 1: 740 Q49 V42 GPA: 3.5 WE: Engineering (Other) Followers: 0 Kudos [?]: 5 [0], given: 1 Re: FAFSA Strategies [#permalink] ### Show Tags 28 Jan 2012, 15:41 Is there a more recent forum for this discussion? I think it's a good topic and very relevant this time of year, but I couldn't find a recent thread. Anyway, I wanted to make 2 quick points. 1. Since Stafford tops out at$20,500, I don't think it matters how much finagling you do with your assets on the fafsa4caster (find on fafsa homepage) as long as your school's cost (tuition + books, living, etc.) minus your EFC is greater than $20,500. Ex: MBA cost =$130,000
EFC from fafsa4caster = $30,470 (based on$80K AGI (adjusted gross income), $40K assets, single)$130,000 - $30,470 =$99,530 <-- This is how much you'll need in loans, scholarships, work-study, etc.

I believe the way the system works, as longs as the difference between MBA cost and EFC is greater than $20,500, your should be eligible for the full (unsubsidized) Stafford loan amount of$20,500. And since this will be the case for most people, the whole debate about "hiding" money from your savings account and assets becomes moot. More-so because assets are only about 20% of the FAFSA EFC equation; the other 80% is calculated base on your AGI. The rest of the needed money for MBA cost can come from grad PLUS loans, or private loans.

2. If you are concerned with legit ways to reduce your assets for EFC purposes, one option (after paying down undergrad loans, etc.) is to pay ahead a credit card. If, like me, you use your credit card almost exclusively for monthly purchases, you rack up a bill somewhere between $500-$2000 per month. Instead of paying it down month by month, you could pay, say $10K to the card, giving you a large credit, which you could leave on the card as you make purchases for the next few months, not having to worry about making any payments on it, and having effectively (and legitimately) reduced your assets for FAFSA purchases . I hope this post finds its way to relevance for some people, either here or on a new thread. Thanks! *One note: The above was intended to address Stafford unsubsidized loans. I don't know how much need must be demonstrated to receive subsidized Stafford loans, especially for grad students, but I think they are hard to come by. _________________ "You know, you can just call me Mike". Senior Manager Status: schools I listed were for the evening programs, not FT Joined: 16 Aug 2011 Posts: 389 Location: United States (VA) GMAT 1: 640 Q47 V32 GMAT 2: 640 Q43 V34 GMAT 3: 660 Q43 V38 GPA: 3.1 WE: Research (Other) Followers: 3 Kudos [?]: 46 [0], given: 50 Re: FAFSA Strategies [#permalink] ### Show Tags 28 Jan 2012, 19:33 MikeBolton wrote: The above was intended to address Stafford unsubsidized loans. I don't know how much need must be demonstrated to receive subsidized Stafford loans, especially for grad students, but I think they are hard to come by.[/i] I think I saw somewhere that incoming 2012 students can't get subsidized loans and our origination fees will be 4%, etc.. Director Status: Go Blue! Joined: 03 Jun 2010 Posts: 685 Location: United States (MO) Concentration: Nonprofit, General Management Schools: Michigan (Ross) - Class of 2015 GMAT 1: 740 Q47 V45 GRE 1: 336 Q169 V167 GPA: 3.22 WE: Information Technology (Manufacturing) Followers: 17 Kudos [?]: 147 [0], given: 249 Re: FAFSA Strategies [#permalink] ### Show Tags 28 Jan 2012, 20:17 I believe that is correct, subsidized stafford loans were just taken away for graduate students from what I heard. Senior Manager Joined: 20 Jun 2010 Posts: 488 Concentration: Strategy, Economics Schools: Chicago (Booth) - Class of 2014 Followers: 14 Kudos [?]: 79 [0], given: 27 Re: FAFSA Strategies [#permalink] ### Show Tags 29 Jan 2012, 11:01 MikeBolton wrote: 2. If you are concerned with legit ways to reduce your assets for EFC purposes, one option (after paying down undergrad loans, etc.) is to pay ahead a credit card. If, like me, you use your credit card almost exclusively for monthly purchases, you rack up a bill somewhere between$500-$2000 per month. Instead of paying it down month by month, you could pay, say$10K to the card, giving you a large credit, which you could leave on the card as you make purchases for the next few months, not having to worry about making any payments on it, and having effectively (and legitimately) reduced your assets for FAFSA purchases .

lol, something like this crossed my mine. But then I reduced my savings by 10-20K, filled out the FAFSA again, and my EFC was still really high.

Right now my EFC is about 60% of my entire savings. But from reading other posts, it seems that the EFC number is intended more for undergrads, not grad students. FAFSA seems to interpret your current income as an indicator of what you (or your family) will be earning while you're attending school. But for most all of us, our income during the school year will be $0. I really want to take out the maximum amount so that I can keep my savings as a safety net until I graduate and have a job lined up. Then as soon as I secure a job, I'll immediately unload my savings to pay down a large portion of my loans. Is anyone else thinking this way? _________________ Intern Joined: 20 Jan 2012 Posts: 7 Location: United States Concentration: Entrepreneurship GMAT 1: 740 Q49 V42 GPA: 3.5 WE: Engineering (Other) Followers: 0 Kudos [?]: 5 [0], given: 1 Re: FAFSA Strategies [#permalink] ### Show Tags 29 Jan 2012, 15:17 MDF wrote: MikeBolton wrote: 2. If you are concerned with legit ways to reduce your assets for EFC purposes, one option (after paying down undergrad loans, etc.) is to pay ahead a credit card. If, like me, you use your credit card almost exclusively for monthly purchases, you rack up a bill somewhere between$500-$2000 per month. Instead of paying it down month by month, you could pay, say$10K to the card, giving you a large credit, which you could leave on the card as you make purchases for the next few months, not having to worry about making any payments on it, and having effectively (and legitimately) reduced your assets for FAFSA purchases .

lol, something like this crossed my mine. But then I reduced my savings by 10-20K, filled out the FAFSA again, and my EFC was still really high.

Right now my EFC is about 60% of my entire savings. But from reading other posts, it seems that the EFC number is intended more for undergrads, not grad students. FAFSA seems to interpret your current income as an indicator of what you (or your family) will be earning while you're attending school. But for most all of us, our income during the school year will be $0. I really want to take out the maximum amount so that I can keep my savings as a safety net until I graduate and have a job lined up. Then as soon as I secure a job, I'll immediately unload my savings to pay down a large portion of my loans. Is anyone else thinking this way? Upon further deliberation and a conversation with someone about the issue, I actually think FAFSA will check your credit and see the large credit on a credit card if you did pay a large amount to a card ahead of time. So actually, point 2 might not be viable after all. And I don't think FAFSA interprets your current income as what you'll have throughout the program, necessarily - especially since they ask how many people in your household and how many will be attending school (you answer "1" for both of these and it's fairly obvious there will be no additional income for FT students). Since you have to reapply to FAFSA each year, things will equalize because the second year you will report an income close to$0 and will have spent most (or all) of your savings on the first year. So my interpretation is the first year you apply, FAFSA expects you to pretty much use all your savings (60% in your case), but the second year, you should be eligible for much more money (though after you max out the Stafford $20,500 it will have to come from Grad PLUS or private loans). Any members on the site that have finished an MBA and can comment on this thought? _________________ "You know, you can just call me Mike". Senior Manager Status: schools I listed were for the evening programs, not FT Joined: 16 Aug 2011 Posts: 389 Location: United States (VA) GMAT 1: 640 Q47 V32 GMAT 2: 640 Q43 V34 GMAT 3: 660 Q43 V38 GPA: 3.1 WE: Research (Other) Followers: 3 Kudos [?]: 46 [0], given: 50 Re: FAFSA Strategies [#permalink] ### Show Tags 29 Jan 2012, 16:31 MikeBolton wrote: Upon further deliberation and a conversation with someone about the issue, I actually think FAFSA will check your credit and see the large credit on a credit card if you did pay a large amount to a card ahead of time. So actually, point 2 might not be viable after all. And I don't think FAFSA interprets your current income as what you'll have throughout the program, necessarily - especially since they ask how many people in your household and how many will be attending school (you answer "1" for both of these and it's fairly obvious there will be no additional income for FT students). Since you have to reapply to FAFSA each year, things will equalize because the second year you will report an income close to$0 and will have spent most (or all) of your savings on the first year. So my interpretation is the first year you apply, FAFSA expects you to pretty much use all your savings (60% in your case), but the second year, you should be eligible for much more money (though after you max out the Stafford \$20,500 it will have to come from Grad PLUS or private loans). Any members on the site that have finished an MBA and can comment on this thought?

FAFSA doesn't check your credit. It only creates your EFC based on last year's tax return which is 2011. So if you made 100K last year, your EFC for the 1st year of business school will reflect on your 2011 salary which is 100K. It will hurt you for need based aid, assuming you're in a full time program which most of us here are. I learned this the hard way freshman year in college when my dad got a big bonus at work before christmas during 12th grade.

The only credit check is for GradPLUS and it will basically make sure you don't have any of these:

1. Any debt that is 90 days late or more.
2. Any bankruptcy in the last 5 years (discharged or not)
3. Any debt that has not been paid and written off or put in collections in the last five years.

No FICO scores, are used for GradPLUS checking.
Re: FAFSA Strategies   [#permalink] 29 Jan 2012, 16:31

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