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FAFSA Strategies

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29 Jan 2009, 13:54
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With FAFSA deadlines coming up, wanted to get an idea of the strategies any of you are employing. I know there's a knowledge vault of this stuff started by Kryzak from last year, but just thought I'd start one for 2009. Specifically, I'm thinking of:

1) Paying down any existing undergrad loans. With about $10K outstanding, paying it thru my existing cash reserves will lower my cash balance to report. Also, since I won't have any income for 2 years, the tax benefits of interest deductions on these loans will be moot (and weren't much to begin with, seeing as how I had a really low rate on these loans). 2) Maxing out contributions to IRAs. Since IRA balances aren't factored into your net worth calculation, I'm thinking it would be beneficial to move cash to IRA's to lower cash and net worth balances. Also, my understanding is that you can take money out of the IRA at any time without an early withdrawal penalty if it's used to pay down educational expenses. So, it's not like I won't be able to access this money at any time. 3) I know this is a really shady tactic, but I've read (Montauk's book being one) that one may want to transfer cash to your parents for a couple years to have less funds tied to your name for FAFSA purposes. Now, I'm really unsure as to whether or not this is even legal, and wouldn't want to risk doing so if it isn't. But, not sure if many students do this or not and if schools really care.... Thoughts on any of these strategies? SVP Status: Burning mid-night oil....daily Joined: 07 Nov 2008 Posts: 2400 Schools: Yale SOM 2011 Alum, Kellogg, Booth, Tuck WE 1: IB - Restructuring & Distressed M&A Followers: 78 Kudos [?]: 733 [2] , given: 548 Re: FAFSA Strategies [#permalink] Show Tags 17 Feb 2010, 20:25 2 This post received 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. _________________ SVP Joined: 05 Aug 2007 Posts: 1502 Schools: NYU Stern '11 Followers: 15 Kudos [?]: 211 [1] , given: 22 Re: FAFSA Strategies [#permalink] Show Tags 29 Jan 2009, 19:25 1 This post received KUDOS Play around with various scenarios and see how they affect financial aid eligibility before you submit your FAFSA through the FAFSA4Caster. http://www.fafsa4caster.ed.gov/ For the most part, most of us are only going to be offered unsubsidized Stafford loans, and since they're NOT need-based it doesn't quite matter if you "shield" a few thousand bucks in an IRA or in your Mom's checking account or wherever. I personally find all this strategizing to be an ethical grey area. ryguy904's suggestion on the Roth IRAs is a good one though. You can technically withdraw principal without penalty and additional taxes at any time, and withdraw earnings for educational expenses without penalty, too. VP Joined: 09 Dec 2008 Posts: 1221 Schools: Kellogg Class of 2011 Followers: 21 Kudos [?]: 243 [1] , given: 17 Re: FAFSA Strategies [#permalink] Show Tags 30 Jan 2009, 06:06 1 This post received KUDOS rca215 wrote: I thought Roth IRAs can't be utilized if you make over a certain amount of money, something around$90K/year, unless I'm mistaken.

You are correct. Generally, the income limits are:

- $114,000 for single -$166,000 for married

Source: http://www.irs.gov/publications/p590/ch02.html#d0e9252
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30 Jan 2009, 06:59
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solaris1 wrote:
For the most part, most of us are only going to be offered unsubsidized Stafford loans, and since they're NOT need-based it doesn't quite matter if you "shield" a few thousand bucks in an IRA or in your Mom's checking account or wherever. I personally find all this strategizing to be an ethical grey area.

I'm in agreement with solaris1 and a little confused as to why people are doing all this strategery (as W would put it). You're not going to get free money like undergrad. The only purpose of filling out the fafsa is for the unsubsidized loans which aren't need based. Why on earth would anybody be feel they needed money from the government for a graduate degree???
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17 Feb 2009, 05:41
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pguard wrote:
if your unsubisidized portion is only $20,500, where do you go for the remainder of the funds? Have any of the international students identified resourses for loans yet? All the schools say they're confident the loans will be available but I haven't seen any programs yet. The way I understand it these are the loan options, in order of most to least attractive: 1. subsidized Stafford - subsidized (interest doesn't accrue until you graduate), low interest rate, max amount of$8,500
2. unsubsidized Stafford - unsubsidized, low interest rate, max amount of $20,500 3. federal Grad PLUS loans - higher interest rate, no maximum amount. See the following: http://www.salliemae.com/get_student_lo ... grad_plus/ 4. Miscellaneous - some schools offer other funding options. For example, Kellogg allows you to apply for Northwestern student loans. I don't think everyone qualifies, but I don't know much about that though. 5. Outside sources - private lenders that you find on your own. I don't think you have to start paying on any of these options until you graduate. Current Student Joined: 27 Feb 2008 Posts: 299 Schools: Kellogg Class of 2011 Followers: 3 Kudos [?]: 70 [1] , given: 15 Re: FAFSA Strategies [#permalink] Show Tags 23 Feb 2009, 10:06 1 This post received KUDOS FYI, I finally decided to take a look at the EFC (Expected Family Contribution) calculation. Only 20% of the student's assets contribute to total EFC. Therefore, you could only potentially knock$2000 off your EFC by maximizing your Roth IRA ($5K for 2008 and$5K for 2009)...I guess everybody has to make the decision if it is worth it to them personally. See below (page 21 for people with no dependants):

http://studentaid.ed.gov/students/attac ... update.pdf
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23 Feb 2009, 10:20
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bb wrote:
Great thread! I organized info spread across several posts and put it into a mini-guide in the blog to show it off - great reference information.

I tried to give everyone a credit, but forgive me if I missed you - was not intentional.

http://gmatclub.com/blog/2009/02/guide- ... ss-school/

bb, you may want to modify the financial aid guide slightly. Step 2 should have some sort of disclaimer in it about being set up for undergrad only. Also, I would add the link that I provided in the previous post to Step 2...I think it is more helpful in determining EFC. Then the student can compare that number to projected cost from their respective programs.
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03 Feb 2010, 01:09
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Expert's post
Us Department of Education posted a Video on how to fill out the FAFSA Application: http://www.ed.gov/blog/2010/01/tips-for ... the-fafsa/
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17 Feb 2010, 16:46
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You can add multiple schools (up to 10)-I just turned mine in today. Added the school that I will likely be going to, but also the school that waitlisted me and the one that I applied to in Round 2.

Ross gave me a 3/1 deadline and I won't hear from Booth or Sloan until after that, so I just went ahead and added their names.
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17 Feb 2010, 17:38
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This is from my understanding. People are welcome to contridict me if they would like. But:

2) for graduate programs it really doesn't matter (and definitely not for MBA/LAW/MED Program) when we file since we will qualify only for the grad plus and other loans. We don't qualify for grants (apparently we're not impoverish enough).

3) most schools that do need the fafsa only require it to be filled out before you submit it to the school financial aid department, which coincides with a mid-may time frame I believe.
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17 Feb 2010, 20:55
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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, 07:53
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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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31 Mar 2010, 11:02
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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....
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21 Jun 2010, 05:37
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I don't think it matters much. As noted above I had efc of 20k+ and qualified for the maximum

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01 Mar 2013, 13:15
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mbaconsultinghopeful wrote:
Hi all,

I didn't see any recent FAFSA discussion and wanted to ask a couple questions for those who may know:

1) Are MBA students receiving any grants through FAFSA (not just loans)?
2) For those of us who saved money and have it in cash, is it legal to transfer it elsewhere before submitting the form? I understand it's an ethical "grey area," but really not any different than using cash to pay off a mortgage or spending the money.

Thanks!

Hi,

1. Federal grants are only applicable to undergrad students (such as pell seog), unfortunately grad students will only qualify for unsubsidized loans (6.8% fixed interest rate) and, if you can pass the credit check, PLUS loan(7.9% fixed interest rate).
2. None of the grad loans are need based so there is no need to transfer your money around. Sub loans were eliminated for grad students in 2012. The only possible factor may be in institutional scholarships, but that would vary by school.
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29 Jan 2009, 13:58
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29 Jan 2009, 15:08
Hard deadlines aren't for a while (I'm not sure the exact date) but most schools are recommending you get them in by the end of February. Sooner the better...
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29 Jan 2009, 15:11
Not until June, at least for federal aid:

http://www.fafsa.ed.gov/before003a.htm
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29 Jan 2009, 15:14
mbamatric wrote:
Hard deadlines aren't for a while (I'm not sure the exact date) but most schools are recommending you get them in by the end of February. Sooner the better...

What about R2 applicants who won't get a decision until March?
Re: FAFSA Strategies   [#permalink] 29 Jan 2009, 15:14

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