I just recorded a quick (2-1/2 minute) video about a major change to the financial aid formula. You can get instant access to it here.
Unfortunately, the change – which was recently made ‘public’ in the Congressional Federal Register reduces the Asset Protection Allowance, the amount the government ‘allows’ you to have saved without your savings negatively impacting your child’s eligibility for aid, by — wait for it – MORE THAN 75% (from $30,300 last year to $6,800 this coming year for a 48 year old- and just $3,900 for single parents).
I can’t overstate how disproportionate and dramatically this ‘tweak’ to the formula will affect middle and upper-middle income families, especially when it comes to tapping their liquid assets. What this means is that every dollar that you have saved (in a ‘liquid’ asset) that exceeds $6,300 will be penalized with a $5.65% tax in the financial aid formulas. Accordingly, when the government (and specifically about 1,200 pages of regulations spelled out by the Department of Education) determines (and reports to the colleges on your child’s list) your Expected Family Contribution (EFC), which is what they say your family can afford for one child for one year of college, the average family can expect that amount to be about $2,000 higher than it was last year. Which means that the colleges will likely reduce your offer in kind.
So, while the politicians sell to the public the incremental increase in Pell Grants (which max at $5,775 and are generally available to families with earnings below $50,000), they quietly tax the rest of us. Once again, it’s time to change the narrative.
The EFC code is muddled and full of landmines like this — and some loopholes as well. It is a number that when determined early enough can be managed. If you’ve got a child in or planning to attend college in the next few years, you simply cannot afford to put off learning what you will be expected to pay (and it will be a different number for every family, potentially for every child even within a family). I’m going to be discussing the financial aid formulas, which assets count, which don’t — and how you can determine yours – at my next two classes.
I’ve been teaching the live class for over 8 years, and parents love it. You won’t be bored, you’ll learn a ton, and you’ll realize that there are great and AFFORDABLE options for your student despite what’s happening in Congress or in the marketplace. And unlike college, our classes are free and exceedingly stress-free. You can register for the webinar here.