How much are you contributing to a 529 plan? Or what are you doing instead?

[secondcor521]

The other thing I noticed was that transfer students don't really get anywhere near as good a deal as incoming freshmen do in terms of scholarships.

My oldest was a National Merit Scholar and got a full ride to the state land grant school.  Went there for about a year and a half.  Later applied as a transfer student to another state school.  Got accepted, but was not offered anything for being National Merit as a transfer.  Would have received quite a bit for National Merit applying as a freshman.  Worked out OK because the second state school is very inexpensive, but it still grated on me.

[MaybeBabyMustache]

The other thing I noticed was that transfer students don't really get anywhere near as good a deal as incoming freshmen do in terms of scholarships.

My oldest was a National Merit Scholar and got a full ride to the state land grant school.  Went there for about a year and a half.  Later applied as a transfer student to another state school.  Got accepted, but was not offered anything for being National Merit as a transfer.  Would have received quite a bit for National Merit applying as a freshman.  Worked out OK because the second state school is very inexpensive, but it still grated on me.

I agree with this. I applied to a bunch of schools as an incoming freshman. Opted with one school, and then decided to transfer after my freshman year. Going back to schools that I had previously received very, very generous scholarships, and the amount they could offer to transfers was about 2/3 of the original amount.

[EverythingisNew]

I saved for my kids 529s when they were toddlers but we haven’t contributed in years! We have $50k for the 10yr old, $60k and $40k for the younger two. I stopped contributing when the student loan forgiveness started, because it seems likely that things will change. I wish that I hadn’t contributed so much. We are not high income now since stepping back with work. When the kids go to college we plan to be even lower income. We will pay for our kids bachelor degrees, but I think I will take out loans and just repay those loans the minimum amount. I want to see if my kids choose to work in public service or what their path is before I repay everything. They might take a public job or join a company that has student loan aid. I worry that I am saving for something that is a “we'll take whatever you have” situation.

[AnotherEngineer]

Yes, there are so many unknowns when talking a tax or funding program over 18 years, not to mention higher ed imploding under its own weight, scholarships, kid's desires, etc. Something similar could be said for Trad and Roth IRAs, HSAs, Social Security, and long term capital gains taxes as well. It seems like you are in a good place and have not over contributed. Some things just cannot be optimized...like if the parental leave, tax credits, and first time homebuyers credits come to be 10 years too late.

[roomtempmayo]

As usual, GoCurryCracker has an analysis of this college is too expensive issue, though 10 years old. https://www.gocurrycracker.com/is-college-worth-it-with-future-tuition-predictions/

The latest tuition numbers show a generally continued upward trend, but then a inflation-adjusted decline in recent years which probably has more to do with inflation and COVID than a real change so far. See Table CP-3.

In the upper midwest, realized undergraduate tuition at private four year schools has been flat and often declining in real dollars for a decade.  Pretty much every budget meeting I've been in over recent years has included an administrator saying, "tuition is tapped out."  Given the demographic cliff and states' unwillingness to close their empty regional campuses, I don't see any reason to think schools will be able to raise undergrad tuition in real dollars any time soon.

For those looking a decade or more into the future, the other thing to consider is that the market and philanthropy over the past decade have been very good to lots of schools that used to be very tuition dependent.  It used to be just a handful of schools that could afford to forego tuition from lower income families, but that group of rich schools is rapidly growing.  When a school has <5000 undergrads and at least a billion in their endowment, the budget dynamics start to really change.  In 2000, there were maybe 15 schools in that situation, mostly Ivies and a handful of liberal arts colleges.  Today, it's more like 50 smaller teaching-focused institutions in the billionaire club, but there are lots more regional schools on the way that have something like 700-900m.  These are places that are hardly known outside their areas, but they're on the way to becoming financially independent of tuition.  Ten years from now, it seems likely that there'll be 100+ institutions that can and will opt not to take tuition money from a good chunk of their undergrad student bodies.

[AnotherEngineer]

As usual, GoCurryCracker has an analysis of this college is too expensive issue, though 10 years old. https://www.gocurrycracker.com/is-college-worth-it-with-future-tuition-predictions/

The latest tuition numbers show a generally continued upward trend, but then a inflation-adjusted decline in recent years which probably has more to do with inflation and COVID than a real change so far. See Table CP-3.

In the upper midwest, realized undergraduate tuition at private four year schools has been flat and often declining in real dollars for a decade.  Pretty much every budget meeting I've been in over recent years has included an administrator saying, "tuition is tapped out."  Given the demographic cliff and states' unwillingness to close their empty regional campuses, I don't see any reason to think schools will be able to raise undergrad tuition in real dollars any time soon.

For those looking a decade or more into the future, the other thing to consider is that the market and philanthropy over the past decade have been very good to lots of schools that used to be very tuition dependent.  It used to be just a handful of schools that could afford to forego tuition from lower income families, but that group of rich schools is rapidly growing.  When a school has <5000 undergrads and at least a billion in their endowment, the budget dynamics start to really change.  In 2000, there were maybe 15 schools in that situation, mostly Ivies and a handful of liberal arts colleges.  Today, it's more like 50 smaller teaching-focused institutions in the billionaire club, but there are lots more regional schools on the way that have something like 700-900m.  These are places that are hardly known outside their areas, but they're on the way to becoming financially independent of tuition.  Ten years from now, it seems likely that there'll be 100+ institutions that can and will opt not to take tuition money from a good chunk of their undergrad student bodies.

This is great news. I've expected the current trend in tuition to be unsustainable and all sorts of corrections to cost and attendance. I'm glad some of it is happening and hope it continues as my oldest will enter college in six years.

However, the private four year school in the upper midwest I went to has seen tuition increase by more that twice inflation for in both the last 10 years and the 20 years since I went there. It now tops $65k for just tuition. Of course they give out a lot of need based aid, though not full scholarships to everyone and are also subject to a class action lawsuit about all that.

It would also seem that if private schools have maxed out feasible tuition and are sitting on billion dollar endowments, that public schools are perhaps in a worse position than they have been in in a long time. Enrollment is down, tuition is up, and it is popular for governors to cut funding to the "elites" at universities and they don't have the same endowments. Public schools also have to compete for students with privates and their new amenities, which may increase their declining enrollments.

You seem to be in this business, so I wonder what your take on this is. Am I off base?

[midweststache]

Oh geez, now I feel way behind! We're at much more conservative numbers: currently about $15K for KIDDO1 (8) and $12K for KIDDO2 (5), which tracks since they're 3 years apart.

Honestly, if we end up with only one year fully-funded for both, I'll be OK with that. We're currently kicking in ~$20K for daycare right now, so between the 529, any scholarships the KIDDOS receive, our cash contributions (e.g. the $20K currently earmarked for daycare), and (if necessary) PT work on their end, I would hope that would cover costs. DH and I both graduated undergrad debt-free, and we'd like to set up our KIDDOS to do the same (should they end up in college).

We're not quite maxing out all our retirement vehicles (though we're so close I can taste it - I've just got to nudge up DH's 401K contributions... likely in 2025) so I'd like to get that crossed off the list before upping our contributions to the 529s.

[Sugaree]

I have an 11 year-old.  I started saving for college before he was born, but after watching my state absolutely FUBAR their pre-paid tuition plan in 2008-2010, it took me a long time to actually open a 529 with them.  This was also before I became more educated about personal finance and investing in general.  I was saving consistently, but only in a regular savings account earning next to nothing.  I know better now. 

Up until the SECURE 2.0 Act passed, I did have some concerns about overfunding a 529 so the plan had been to cover enough for a 2 year degree or the first two years of a 4 year program with the 529 and to cover the rest from other sources.  That plan has changed slightly and I've started contributing a bit more aggressively to the 529.  Currently, I contribute $100/week and would like to bump that up to $125/week in the next three years or so.  As of this morning there is right at $18k in the 529, and my models show that there should be ~$75k when he graduates HS.  That will be enough to cover 4 years of tuition at our most expensive state school assuming 5% YoY tuition increases over the next 7-11 years.  There is also a fairly significant chunk of money sitting in my brokerage account that is earmarked to buy a house/condo near whatever school he ends up at and then sell it or rent it out to other students after he graduates.  I figure that as long as I don't take a $40k bath on it when I sell it then I'll come out ahead on room and board costs.  Even better if I can find a decent 2 or 3 bedroom unit and move some roommates in to help pay the bills.  Finally, there's also a greater than zero chance that his grandparents have set up an educational trust for him.  They keep telling me that I don't need to worry about paying for college, but I understand that even the best of intentions can go astray. 

[nereo]

As usual, GoCurryCracker has an analysis of this college is too expensive issue, though 10 years old. https://www.gocurrycracker.com/is-college-worth-it-with-future-tuition-predictions/

The latest tuition numbers show a generally continued upward trend, but then a inflation-adjusted decline in recent years which probably has more to do with inflation and COVID than a real change so far. See Table CP-3.

In the upper midwest, realized undergraduate tuition at private four year schools has been flat and often declining in real dollars for a decade.  Pretty much every budget meeting I've been in over recent years has included an administrator saying, "tuition is tapped out."  Given the demographic cliff and states' unwillingness to close their empty regional campuses, I don't see any reason to think schools will be able to raise undergrad tuition in real dollars any time soon.

For those looking a decade or more into the future, the other thing to consider is that the market and philanthropy over the past decade have been very good to lots of schools that used to be very tuition dependent.  It used to be just a handful of schools that could afford to forego tuition from lower income families, but that group of rich schools is rapidly growing.  When a school has <5000 undergrads and at least a billion in their endowment, the budget dynamics start to really change.  In 2000, there were maybe 15 schools in that situation, mostly Ivies and a handful of liberal arts colleges.  Today, it's more like 50 smaller teaching-focused institutions in the billionaire club, but there are lots more regional schools on the way that have something like 700-900m.  These are places that are hardly known outside their areas, but they're on the way to becoming financially independent of tuition.  Ten years from now, it seems likely that there'll be 100+ institutions that can and will opt not to take tuition money from a good chunk of their undergrad student bodies.

This is great news. I've expected the current trend in tuition to be unsustainable and all sorts of corrections to cost and attendance. I'm glad some of it is happening and hope it continues as my oldest will enter college in six years.

However, the private four year school in the upper midwest I went to has seen tuition increase by more that twice inflation for in both the last 10 years and the 20 years since I went there. It now tops $65k for just tuition. Of course they give out a lot of need based aid, though not full scholarships to everyone and are also subject to a class action lawsuit about all that.

It would also seem that if private schools have maxed out feasible tuition and are sitting on billion dollar endowments, that public schools are perhaps in a worse position than they have been in in a long time. Enrollment is down, tuition is up, and it is popular for governors to cut funding to the "elites" at universities and they don't have the same endowments. Public schools also have to compete for students with privates and their new amenities, which may increase their declining enrollments.

You seem to be in this business, so I wonder what your take on this is. Am I off base?

I'm of two minds about certain higher education institutions waiving tuition for some students.  One one hand, it's fantastic for the family when Stanford or Harvard has a large enough endowment that they can give students an education without any tuition.  As a parent I'm glad to see this expand.  But from a systemic view, it's pushing us into territory I find uncomfortable. Certain types of schools can do this, while many can't.   FWIW I strongly believe we ought to start viewing college as a net society benefit and fund accordingly, and directly (rather than through our convoluted system of loans, grants and possible later income-based or career loan forgiveness)

Not to be too macabre, but the biggest donations to colleges and universities tend to be from estates, and there's a big intergenerational pull.  This gives schools which have been around for over a century a huge advantage in fundraising for their endowment over those that are much younger.  My alma mater graduated its first class in the late 1960s.  Seems like ages ago (and way before I was alive) but as one member of the endowment society put it, the overwhelming majority of past students are still alive, and they can count the 3rd-generation students on a single sheet of paper, all still in their 20s.

[roomtempmayo]

You seem to be in this business, so I wonder what your take on this is. Am I off base?

I'm just faculty, but at a place with meaningful shared governance and reasonable transparency about our finances.  So not really a professional on the finance side, and most of the info I get is bigger picture.

The median private school in the upper midwest discounted tuition 62% for the current class of first year students.  Some discounts are real money (i.e. endowed scholarships), and some are just write-offs.  Either way, once the dust settles, the typical undergrad is paying about $28k or $29k in tuition, which includes outside scholarships and grants, like Pell or the local Rotary Club.  That's the number - high 20k-range - that's been steady to declining in real dollars for the past decade.  Sticker prices have of course skyrocketed, but that mostly means the range of what students are paying has increased with many students paying little and a few students paying full freight.

@nereo You're right that higher ed is bifurcated financially between the "have" and the "have not" institutions, and I expect that it will get much more that way in the next decade or two.  I'll use the example of the Carolinas, since @AnotherEngineer is in NC.  Right now, Duke is pretty much the only institution in the area where undergrad tuition isn't the major budgetary item (Wake Forest looks like it has a big endowment, but its medical school is a black hole for money).  However, schools like Davidson and Furman are on their way to becoming financially independent, as are similar schools all around the country, and that's going to massively increase the number of undergraduate seats at good schools that can be decoupled from any particular revenue generation.  I expect those schools will pull away from the rest as they will present a fantastic value, alums will respond to that value with giving, and their endowments will continue to compound.

Meanwhile, the rest of undergrad higher ed, both public and private, will remain much more pay-as-you-go, with varying value propositions.  State flagships will continue to grow their market share at the expense of regional branch campuses and the poorer private schools.  This sector will be extremely transactional and face lots of pressure to unbundle every aspect of their experience. 

If this division continues, it presents an alternative thrifty path to eduction in a community college and/or state branch campus.  It's no longer going to be just a handful kids who get into Harvard/Princeton/Yale with a sweet financial package and manage to be among the lucky 3% or so of applicants accepted.  There are going to be a lot of ordinarily smart and hard working kids with good but not amazing test scores who can get into a place like Furman where the acceptance rate is 67% and pay very little in ten or twenty years.  What used to be a very rarified experience of going to a good school for very little is going to become significantly more common.

[AnotherEngineer]

If this division continues, it presents an alternative thrifty path to eduction in a community college and/or state branch campus.  It's no longer going to be just a handful kids who get into Harvard/Princeton/Yale with a sweet financial package and manage to be among the lucky 3% or so of applicants accepted.  There are going to be a lot of ordinarily smart and hard working kids with good but not amazing test scores who can get into a place like Furman where the acceptance rate is 67% and pay very little in ten or twenty years.  What used to be a very rarified experience of going to a good school for very little is going to become significantly more common.

Thanks for your insights. I agree that only the kids of Saudi sheiks are likely paying full price. 

You are on to something with private schools providing a frugal path for FIRE folks. Even 20 years ago, my expensive private school with need based aid was cheaper than the big state school and I graduated with something under $10k in debt, paid off so long ago I don't even remember.

I haven't gone full in FAFSA hacking yet as I have a few years, but I understand one wrinkle at least to need based aid is that private schools use the CCS which accounts for more parental assets so low income FIRE folks don't look as needy. That is probably a topic for another thread and their are more funding that need based. Also, if Furman becomes nearly free, you have to imagine that more people apply and that acceptance rate drops.

All said, I like what you are saying about looking at more out of the way schools (my wannabe Ivy was more than good enough for me) and consider what sort of aid package the school can put together. More reasons why putting a quarter million $ in a 529 may not be the most robust idea.

[secondcor521]

I haven't gone full in FAFSA hacking yet as I have a few years, but I understand one wrinkle at least to need based aid is that private schools use the CCS which accounts for more parental assets so low income FIRE folks don't look as needy. That is probably a topic for another thread and their are more funding that need based. Also, if Furman becomes nearly free, you have to imagine that more people apply and that acceptance rate drops.

CSS Profile is only used by a few hundred private schools, mostly competitive liberal arts places.  Many private schools use FAFSA only.  It's easy enough to check and find out what each school uses.

Also, there are ways to avoid asset reporting on the FAFSA - read up on "Exempt from asset reporting".  Although I've noticed that few of the blogs have identified all of the ways to accomplish this now after the FAFSA simplification law has passed.

[AnotherEngineer]

I haven't gone full in FAFSA hacking yet as I have a few years, but I understand one wrinkle at least to need based aid is that private schools use the CCS which accounts for more parental assets so low income FIRE folks don't look as needy. That is probably a topic for another thread and their are more funding that need based. Also, if Furman becomes nearly free, you have to imagine that more people apply and that acceptance rate drops.

CSS Profile is only used by a few hundred private schools, mostly competitive liberal arts places.  Many private schools use FAFSA only.  It's easy enough to check and find out what each school uses.

Also, there are ways to avoid asset reporting on the FAFSA - read up on "Exempt from asset reporting".  Although I've noticed that few of the blogs have identified all of the ways to accomplish this now after the FAFSA simplification law has passed.

Yes, but these competitive private schools (the ones with massive trusts) are exactly the group we are talking about. My alma mater, decidedly not a liberal arts place, requires CSS and FAFSA. Also, the trend appears to be more schools with CSS. My point was that FIRE parents may not look as "needy" to the private schools with cash than to the public schools without the scholarship capability.

I'm still six years out and given the recent FAFSA changes, who knows what the landscape will be like...a theme I keep emphasizing on this thread.

[secondcor521]

I haven't gone full in FAFSA hacking yet as I have a few years, but I understand one wrinkle at least to need based aid is that private schools use the CCS which accounts for more parental assets so low income FIRE folks don't look as needy. That is probably a topic for another thread and their are more funding that need based. Also, if Furman becomes nearly free, you have to imagine that more people apply and that acceptance rate drops.

CSS Profile is only used by a few hundred private schools, mostly competitive liberal arts places.  Many private schools use FAFSA only.  It's easy enough to check and find out what each school uses.

Also, there are ways to avoid asset reporting on the FAFSA - read up on "Exempt from asset reporting".  Although I've noticed that few of the blogs have identified all of the ways to accomplish this now after the FAFSA simplification law has passed.

Yes, but these competitive private schools (the ones with massive trusts) are exactly the group we are talking about. My alma mater, decidedly not a liberal arts place, requires CSS and FAFSA. Also, the trend appears to be more schools with CSS. My point was that FIRE parents may not look as "needy" to the private schools with cash than to the public schools without the scholarship capability.

I'm still six years out and given the recent FAFSA changes, who knows what the landscape will be like...a theme I keep emphasizing on this thread.

You shifted the goal post from "private schools" in the original part that I quoted and disagreed with to "competitive private schools".  I agree with your amended statement.

Your alma mater is why I wrote "mostly competitive liberal arts places"; there are exceptions to my general characterization and your school is apparently one of them.  A quick google shows there are about 267 CSS schools and about 4,000 private universities in the US so it's still a definite minority:

https://profile.collegeboard.org/profile/ppi/participatinginstitutions.aspx
https://nces.ed.gov/fastfacts/display.asp?id=1122

I agree with a lot of your larger points though.  All of the schools my kids went to were FAFSA schools, and it is reasonably possible for a FIRE parent to hack FAFSA in various ways.  CSS is harder to hack from what I can tell, although I didn't have to deal with it.

Parents can try all sorts of strategies to deal with their kids' college costs.  There are some tax credits available, financial aid, loans of various types, cash flowing, asking the kids to chip in, looking at pricing during the application process, merit scholarships, asking grandparents to chip in, military schools and/or ROTC, AP/CLEP/etc., economizing by living at home and/or off campus, going to summer school to get through faster, playing schools aid packages off each other, and probably others.

At the end of the day, it's a competitive economic market where the schools compete for the students and the students compete for the schools.

[charis]

...it is reasonably possible for a FIRE parent to hack FAFSA in various ways...

Care to expand on this for the newbies?  I have a kid who will be applying in a few years.

[secondcor521]

...it is reasonably possible for a FIRE parent to hack FAFSA in various ways...

Care to expand on this for the newbies?  I have a kid who will be applying in a few years.

Sure.  Thanks for asking!

For me there were several components to what I did:

0.  As background, one key thing to know is that the FAFSA rules have changed in the past year or so.  The new rules are due to a law called FAFSA Simplification, which was passed a few years ago but mostly only implemented last year.  As you read web pages and blogs, keep this in mind.  The new rules are very very roughly similar to the old rules but differ in many key details, and you don't want to be relying on outdated information because it will cost you.

My kids are all done with college, so I haven't been keeping up any more on the FAFSA news.  What I actually did was sit down with the FAFSA Simplification law and read through the whole thing.  That's a bit confusing because it's written in terms of a set of modifications or amendments to the previous law, so you have to sort of get your bearings and look up the previous law to understand the new law.

It does seem that there are very few blog articles out there that accurately describe all the loopholes and hacks contained in the new rules, but maybe I just haven't been looking for those articles.

1.  Not specifically FAFSA related, but I did a "everything" strategy.  When my kids were in junior high, I looked at all the various ways to pay for college, and between my three kids and four schools we used most if not all of them - I already listed those in my earlier post here.

2.  I did sort of plan ahead a bit.  One of the strategies I chose to do was to pay off my mortgage about the time my oldest started college.  I know there are endless discussions about whether or not to pay off the mortgage, but here was my logic:  With a paid off mortgage, I didn't need to have the income to make the mortgage payments.  Therefore, I could have (a lot) lower income.  With a lower income, my kids could qualify for more FAFSA aid, as well as various need-based scholarships.  I never did the detailed math, but it does seem like the lost leverage opportunity was offset by the additional educational benefits.

Of course you need to decide on the ethics and politics of adjusting your circumstances to meet the requirements of the various programs.  For programs with which I disagree with their system, I have decided that exploiting those systems helps expose their weaknesses and could help lead to positive change in those systems.

3.  Specifically on FAFSA, there are a few basics to know:  Retirement accounts and home equity are not included in the FAFSA parental asset formulas.  When my kids went to college, that is where the large majority of my net worth was, and so it simply was not counted in the formulas.  Knowing about the various ways to access retirement accounts before age 55/59.5 allowed me to FIRE in 2016 and still have most of my net worth sheltered from FAFSA.

4.  CSS Profile.  I didn't preclude, prevent, or otherwise influence my kids from going to a CSS Profile school if they wanted to, but thankfully they all chose FAFSA schools.  Not surprising, really, since most schools are not CSS Profile schools.  But a parent could choose to either rule CSS Profile schools out, or disincentivize them in some way.  I think kids can adapt to whatever "college deal" the parents offer, but I think the "deal" should be consistent, fair, and well communicated well in advance.  I started talking with my kids in generalities about my "deal" when they were in junior high.

5.  Roth conversions.  I was doing the Roth conversion ladder during my kids' college years.  I came across the GEN-99-10 Dear Colleague letter at some point.  The basic idea is that Roth conversions add to taxable income, which is an input to FAFSA, but are not available to be spent on college, so financial aid officers are encouraged to adjust for this:

https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/1999-03-10/gen-99-10-students-receiving-preparation-compete-and-succeed-twenty-first-century-workplace

The process is to complete the FAFSA with the Roth conversion included (easy for me because we used the "import from my tax return" feature), then make a request for professional adjustment to the schools' financial aid office.  I did this operation successfully with two different kids at two different years across multiple school years.  The process wasn't that hard, the financial aid folks knew about it, and their responses were immediate and straightforward:  "Oh, that applies?  OK, what was the amount?  OK, adjusted, done, your new aid package is $X"

6.  Exempt from asset reporting.  This is really one of the main ideas.  Normally, taxable assets like brokerage accounts and savings and checking accounts need to be reported on the FAFSA and impact the aid assessment.  The FAFSA Simplification law then provides various ways for the family (both parent and student) to be exempt from this requirement.  There are *at least* three different ways to be exempt from asset reporting under the new FAFSA Simplification rules:

a.  The easiest and probably best known is the FPL rule.  If your family's income is below 175% or 225% of FPL for your family size, then you're exempt from asset reporting.  If you have a paid off house and car, and live a simple lifestyle in a LCOL or MCOL area, then this is really pretty easy to do, especially if Roth conversions (see above) aren't included and/or if you're spending from taxable or savings.

b.  Another way is if anyone in the family is receiving certain federal benefits, such as Medicaid.  There are about nine different programs that make the family eligible - see the text of the law for the list.  I don't remember all the details now, but some of my kids were on Medicaid during some of their college careers because of the way healthcare worked in my state during that time.  Some of it was COVID-related I think.

c.  A third way is if your AGI is under a certain amount ($60K I think?) and you file a return without most of the schedules.  At least I think they still left this one in the law - a quick Google suggests it is but I'd recommend confirming that.

d.  There are others, but I didn't investigate them too closely.  What I would recommend is reading the FAFSA simplification law itself and pay attention to the details and look for opportunities that might apply to your family.  Of note, some of the rules are a bit circuitous - a student qualifies to be exempt from asset reporting if they qualify for maximum Pell, but the rules for qualifying for maximum Pell are somewhere else in the law, so it's a bit of spaghetti code.

e.  The above are summarized at https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-08-04/fafsa-simplification-act-changes-implementation-2024-25 (towards the bottom).

7.  529s.  The new FAFSA law exempts from reporting as income any qualified distributions from 529s that are owned by grandparents.  This is a change which I didn't explore too much because it came after my kids were done.  But 529s did work out well for my kids, because I got a nice state tax benefit, tax deferral, and tax free distributions if used for qualified expenses (which was pretty easy to do), and being exempt from asset reporting based on #6 above meant my 529s didn't count as assets either.

8.  Not really directly a FAFSA thing, but if your kid goes to summer school then you can get an additional Pell Grant for the summer semester.  And them finishing earlier means they start working sooner and compounding savings sooner.

9.  Another not really FAFSA thing, but AOTC is a nice and juicy tax credit that we used for most of my kids' college years.  One does need to understand how AOTC works, how it relates with LLC and 529 distributions, and some other things.  Key tips:  Learn about it, read the rules, and in particular learn about how it can often make sense to make some scholarships taxable in order to qualify for the full AOTC.  Oh, and also learn about the requirements for the refundable portion of AOTC.  And understand that most kids are in college at least five tax years but you can only claim AOTC for four, so strategize on that point.

Hope that helps.

[roomtempmayo]

What @secondcor521 said is all correct, but I'll offer the qualification that only a handful of private schools have need blind admissions anymore.  FAFSA hacking will lower their odds of getting in.

I don't think that's true in public systems, but I'm not sure.

[charis]

@secondcor521, thank you! 

[AnotherEngineer]

@secondcor521, thanks for sharing. This is truly impressive and you demonstrated your personal investment by reading the new law even though it didn't apply to you!

[secondcor521]

@secondcor521, thank you! 

You're welcome.

@secondcor521, thanks for sharing. This is truly impressive and you demonstrated your personal investment by reading the new law even though it didn't apply to you!

You're welcome.  Although I read it because I thought it would apply.  As alluded to above, it was actually passed into law a few years ago, but it got delayed.  When it originally passed, I still had two in college.  One has finished college since then, and the other one switched to starting/owning/running his own business.  So *now* they're done, but they weren't when the law was passed.

[roomtempmayo]

For those thinking about how much college really costs, new numbers just came out from The College Board confirming that the cost of higher ed is declining in real dollars.

Here's the synopsis in the Chronicle of Higher Ed (paywall): https://www.chronicle.com/article/the-cost-of-college-tuition-is-shrinking#:~:text=Across%20all%20three%20types%20of,percent%20during%20this%20same%20period.

The actual price of tuition at many of America’s colleges continued a steady, decade-long decline as the sector enters an era of shrinking high-school enrollments and greater competition, according to analysis released Monday by the College Board.

While sticker prices have continued to balloon to as large as $100,000 at some private, nonprofit universities, the average net price — the remaining cost of tuition after institutional and grant aid is deducted — for undergraduate students entering their freshman year at these institutions clocked in at $16,510 for the 2024-25 academic year, down from $19,330 in 2006-07 (adjusted for inflation to 2024 dollars). Net prices at public institutions followed similar trend lines: $2,480 was the average amount charged in 2024-25 at in-state, four-year institutions, down from $4,340 in 2012-13 (inflation adjusted); and, according to the College Board, freshmen attending two-year colleges continue to receive on average enough grant aid to cover tuition and fees, a trend that dates back to 2009-10.

Across all three types of institutions, the inflation-adjusted average of published tuition and fees peaked in 2019-20 and is anticipated to continue to decline through 2024-25, while the Consumer Price Index has increased by 23 percent during this same period.

Likewise, College Board analysts observed a 13th consecutive year of decline in undergraduate borrowing, whereas Pell Grant expenditures increased after several years of declines.

[tooqk4u22]

...it is reasonably possible for a FIRE parent to hack FAFSA in various ways...

Care to expand on this for the newbies?  I have a kid who will be applying in a few years.

Sure.  Thanks for asking!
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6.  Exempt from asset reporting.  This is really one of the main ideas.  Normally, taxable assets like brokerage accounts and savings and checking accounts need to be reported on the FAFSA and impact the aid assessment.  The FAFSA Simplification law then provides various ways for the family (both parent and student) to be exempt from this requirement.  There are *at least* three different ways to be exempt from asset reporting under the new FAFSA Simplification rules:

a.  The easiest and probably best known is the FPL rule.  If your family's income is below 175% or 225% of FPL for your family size, then you're exempt from asset reporting.  If you have a paid off house and car, and live a simple lifestyle in a LCOL or MCOL area, then this is really pretty easy to do, especially if Roth conversions (see above) aren't included and/or if you're spending from taxable or savings.

b.  Another way is if anyone in the family is receiving certain federal benefits, such as Medicaid.  There are about nine different programs that make the family eligible - see the text of the law for the list.  I don't remember all the details now, but some of my kids were on Medicaid during some of their college careers because of the way healthcare worked in my state during that time.  Some of it was COVID-related I think.

c.  A third way is if your AGI is under a certain amount ($60K I think?) and you file a return without most of the schedules.  At least I think they still left this one in the law - a quick Google suggests it is but I'd recommend confirming that.

d.  There are others, but I didn't investigate them too closely.  What I would recommend is reading the FAFSA simplification law itself and pay attention to the details and look for opportunities that might apply to your family.  Of note, some of the rules are a bit circuitous - a student qualifies to be exempt from asset reporting if they qualify for maximum Pell, but the rules for qualifying for maximum Pell are somewhere else in the law, so it's a bit of spaghetti code.

e.  The above are summarized at https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-08-04/fafsa-simplification-act-changes-implementation-2024-25 (towards the bottom).
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Hope that helps.

Wouldn't this likely be the hard one to get around for most here....hard to not have any one of the following schedules for this group that disqualify:

Schedule A - Itemized Deductions
Schedule B - Interest and Dividends
Schedule D - Cap Gains/Losses
Schedule E - Supplemental (real estate, partnerships, etc
Schedule F - P&L Farming
Schedule H - Household Employment taxes

[secondcor521]

...it is reasonably possible for a FIRE parent to hack FAFSA in various ways...

Care to expand on this for the newbies?  I have a kid who will be applying in a few years.

Sure.  Thanks for asking!
.
.
.

6.  Exempt from asset reporting.  This is really one of the main ideas.  Normally, taxable assets like brokerage accounts and savings and checking accounts need to be reported on the FAFSA and impact the aid assessment.  The FAFSA Simplification law then provides various ways for the family (both parent and student) to be exempt from this requirement.  There are *at least* three different ways to be exempt from asset reporting under the new FAFSA Simplification rules:

a.  The easiest and probably best known is the FPL rule.  If your family's income is below 175% or 225% of FPL for your family size, then you're exempt from asset reporting.  If you have a paid off house and car, and live a simple lifestyle in a LCOL or MCOL area, then this is really pretty easy to do, especially if Roth conversions (see above) aren't included and/or if you're spending from taxable or savings.

b.  Another way is if anyone in the family is receiving certain federal benefits, such as Medicaid.  There are about nine different programs that make the family eligible - see the text of the law for the list.  I don't remember all the details now, but some of my kids were on Medicaid during some of their college careers because of the way healthcare worked in my state during that time.  Some of it was COVID-related I think.

c.  A third way is if your AGI is under a certain amount ($60K I think?) and you file a return without most of the schedules.  At least I think they still left this one in the law - a quick Google suggests it is but I'd recommend confirming that.

d.  There are others, but I didn't investigate them too closely.  What I would recommend is reading the FAFSA simplification law itself and pay attention to the details and look for opportunities that might apply to your family.  Of note, some of the rules are a bit circuitous - a student qualifies to be exempt from asset reporting if they qualify for maximum Pell, but the rules for qualifying for maximum Pell are somewhere else in the law, so it's a bit of spaghetti code.

e.  The above are summarized at https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-08-04/fafsa-simplification-act-changes-implementation-2024-25 (towards the bottom).
.
.
.

Hope that helps.

Wouldn't this likely be the hard one to get around for most here....hard to not have any one of the following schedules for this group that disqualify:

Schedule A - Itemized Deductions
Schedule B - Interest and Dividends
Schedule D - Cap Gains/Losses
Schedule E - Supplemental (real estate, partnerships, etc
Schedule F - P&L Farming
Schedule H - Household Employment taxes

Yes, that way is hard.  That's why I commented in my reply that 6a is probably the easiest way, and why I listed multiple ways.  I sort of mentioned it just for completeness in case it might apply to someone.

[tooqk4u22]

Yes, that way is hard.  That's why I commented in my reply that 6a is probably the easiest way, and why I listed multiple ways.  I sort of mentioned it just for completeness in case it might apply to someone.

So it is an OR situation, not an AND situation as in if you satisfy only one of those it works as opposed to have to satisfy all of them?

Also, if you reported assets in a prior year but income situation changes downward, do you still get the benefit of not reporting (i.e. for subsequent years of school or other children heading to school at a later time).

[secondcor521]

Yes, that way is hard.  That's why I commented in my reply that 6a is probably the easiest way, and why I listed multiple ways.  I sort of mentioned it just for completeness in case it might apply to someone.

So it is an OR situation, not an AND situation as in if you satisfy only one of those it works as opposed to have to satisfy all of them?

Correct, it is an OR.  6a OR 6b OR 6c, etc.  It was clear in my head what I meant!  :)

Also, if you reported assets in a prior year but income situation changes downward, do you still get the benefit of not reporting (i.e. for subsequent years of school or other children heading to school at a later time).

If you are exempt from asset reporting in any given aid year, then for that aid year assets will be ignored and the aid will be calculated only based on the parental and student income.

If I understand the gist of your question, the FAFSA system does *not* go back to a previous year when you might have reported assets and somehow incorporate those assets from a prior year in any way that impacts the current aid year.

If there is a significant enough drop in income after submitting the FAFSA and before the aid year starts, then you can supply the new information to the financial aid offices and ask for them to adjust the aid package in response.  I never encountered that situation, so I'm not sure what would happen, especially in the corner case where the income drops from a level where asset reporting was required to a level where asset reporting was not required.

But in general, the FAFSA assumes that a family situation can change from aid year to aid year, for better or worse.  Each aid year stands alone and is independent from any other aid year.  The FAFSA you're filing now for next school year is only for that year.

The same is approximately true of financial aid offices.  They treat every school year for every student independently and will adjust the aid up or down each year based on the current year FAFSA data.

[AnotherEngineer]

For those thinking about how much college really costs, new numbers just came out from The College Board confirming that the cost of higher ed is declining in real dollars.

Here's the synopsis in the Chronicle of Higher Ed (paywall): https://www.chronicle.com/article/the-cost-of-college-tuition-is-shrinking#:~:text=Across%20all%20three%20types%20of,percent%20during%20this%20same%20period.

The actual price of tuition at many of America’s colleges continued a steady, decade-long decline as the sector enters an era of shrinking high-school enrollments and greater competition, according to analysis released Monday by the College Board.

While sticker prices have continued to balloon to as large as $100,000 at some private, nonprofit universities, the average net price — the remaining cost of tuition after institutional and grant aid is deducted — for undergraduate students entering their freshman year at these institutions clocked in at $16,510 for the 2024-25 academic year, down from $19,330 in 2006-07 (adjusted for inflation to 2024 dollars). Net prices at public institutions followed similar trend lines: $2,480 was the average amount charged in 2024-25 at in-state, four-year institutions, down from $4,340 in 2012-13 (inflation adjusted); and, according to the College Board, freshmen attending two-year colleges continue to receive on average enough grant aid to cover tuition and fees, a trend that dates back to 2009-10.

Across all three types of institutions, the inflation-adjusted average of published tuition and fees peaked in 2019-20 and is anticipated to continue to decline through 2024-25, while the Consumer Price Index has increased by 23 percent during this same period.

Likewise, College Board analysts observed a 13th consecutive year of decline in undergraduate borrowing, whereas Pell Grant expenditures increased after several years of declines.

Thanks for sharing. As I think it is appropriate to be pedantic as we talk about higher learning, the real story seems to be that college costs peaked in 2019 then COVID reduced demand and therefore prices the last few years. It is hard to say if that is a new normal, like everything after COVID.

There is some really good news in that post. I hadn't realized borrowing had been going down, though it doesn't say by how much. The widening gap between sticker and actual costs just makes the whole process more difficult however.

More reason to look at two-year schools!

[roomtempmayo]

For those thinking about how much college really costs, new numbers just came out from The College Board confirming that the cost of higher ed is declining in real dollars.

Here's the synopsis in the Chronicle of Higher Ed (paywall): https://www.chronicle.com/article/the-cost-of-college-tuition-is-shrinking#:~:text=Across%20all%20three%20types%20of,percent%20during%20this%20same%20period.

The actual price of tuition at many of America’s colleges continued a steady, decade-long decline as the sector enters an era of shrinking high-school enrollments and greater competition, according to analysis released Monday by the College Board.

While sticker prices have continued to balloon to as large as $100,000 at some private, nonprofit universities, the average net price — the remaining cost of tuition after institutional and grant aid is deducted — for undergraduate students entering their freshman year at these institutions clocked in at $16,510 for the 2024-25 academic year, down from $19,330 in 2006-07 (adjusted for inflation to 2024 dollars). Net prices at public institutions followed similar trend lines: $2,480 was the average amount charged in 2024-25 at in-state, four-year institutions, down from $4,340 in 2012-13 (inflation adjusted); and, according to the College Board, freshmen attending two-year colleges continue to receive on average enough grant aid to cover tuition and fees, a trend that dates back to 2009-10.

Across all three types of institutions, the inflation-adjusted average of published tuition and fees peaked in 2019-20 and is anticipated to continue to decline through 2024-25, while the Consumer Price Index has increased by 23 percent during this same period.

Likewise, College Board analysts observed a 13th consecutive year of decline in undergraduate borrowing, whereas Pell Grant expenditures increased after several years of declines.

Thanks for sharing. As I think it is appropriate to be pedantic as we talk about higher learning, the real story seems to be that college costs peaked in 2019 then COVID reduced demand and therefore prices the last few years. It is hard to say if that is a new normal, like everything after COVID.

There is some really good news in that post. I hadn't realized borrowing had been going down, though it doesn't say by how much. The widening gap between sticker and actual costs just makes the whole process more difficult however.

More reason to look at two-year schools!

Net tuition and fees have declined since 16-17 across institutional types, which at this point is a long term trend accelerated by Covid.  The longterm peak for private colleges and universities was 06-07, which was also peak millennial generation, and in 2024 dollars tuition was $3k more per year than it is today.  We're pushing two decades of declining real prices for undergrad tuition.

[tooqk4u22]

Yes, that way is hard.  That's why I commented in my reply that 6a is probably the easiest way, and why I listed multiple ways.  I sort of mentioned it just for completeness in case it might apply to someone.

So it is an OR situation, not an AND situation as in if you satisfy only one of those it works as opposed to have to satisfy all of them?

Correct, it is an OR.  6a OR 6b OR 6c, etc.  It was clear in my head what I meant!  :)

Also, if you reported assets in a prior year but income situation changes downward, do you still get the benefit of not reporting (i.e. for subsequent years of school or other children heading to school at a later time).

If you are exempt from asset reporting in any given aid year, then for that aid year assets will be ignored and the aid will be calculated only based on the parental and student income.

If I understand the gist of your question, the FAFSA system does *not* go back to a previous year when you might have reported assets and somehow incorporate those assets from a prior year in any way that impacts the current aid year.

If there is a significant enough drop in income after submitting the FAFSA and before the aid year starts, then you can supply the new information to the financial aid offices and ask for them to adjust the aid package in response.  I never encountered that situation, so I'm not sure what would happen, especially in the corner case where the income drops from a level where asset reporting was required to a level where asset reporting was not required.

But in general, the FAFSA assumes that a family situation can change from aid year to aid year, for better or worse.  Each aid year stands alone and is independent from any other aid year.  The FAFSA you're filing now for next school year is only for that year.

The same is approximately true of financial aid offices.  They treat every school year for every student independently and will adjust the aid up or down each year based on the current year FAFSA data.

Thanks.  FAFSA income lookback is two years, so our income will be too high but I could manage it the next couple years and 3-4 years be in a more favorable position....but then the rules will change again I am sure. I also saw that the FPL for families drops kids at 19 regardless of in college or not, so that may make it more difficult as they age up.

[secondcor521]

Yes, that way is hard.  That's why I commented in my reply that 6a is probably the easiest way, and why I listed multiple ways.  I sort of mentioned it just for completeness in case it might apply to someone.

So it is an OR situation, not an AND situation as in if you satisfy only one of those it works as opposed to have to satisfy all of them?

Correct, it is an OR.  6a OR 6b OR 6c, etc.  It was clear in my head what I meant!  :)

Also, if you reported assets in a prior year but income situation changes downward, do you still get the benefit of not reporting (i.e. for subsequent years of school or other children heading to school at a later time).

If you are exempt from asset reporting in any given aid year, then for that aid year assets will be ignored and the aid will be calculated only based on the parental and student income.

If I understand the gist of your question, the FAFSA system does *not* go back to a previous year when you might have reported assets and somehow incorporate those assets from a prior year in any way that impacts the current aid year.

If there is a significant enough drop in income after submitting the FAFSA and before the aid year starts, then you can supply the new information to the financial aid offices and ask for them to adjust the aid package in response.  I never encountered that situation, so I'm not sure what would happen, especially in the corner case where the income drops from a level where asset reporting was required to a level where asset reporting was not required.

But in general, the FAFSA assumes that a family situation can change from aid year to aid year, for better or worse.  Each aid year stands alone and is independent from any other aid year.  The FAFSA you're filing now for next school year is only for that year.

The same is approximately true of financial aid offices.  They treat every school year for every student independently and will adjust the aid up or down each year based on the current year FAFSA data.

Thanks.  FAFSA income lookback is two years, so our income will be too high but I could manage it the next couple years and 3-4 years be in a more favorable position....but then the rules will change again I am sure. I also saw that the FPL for families drops kids at 19 regardless of in college or not, so that may make it more difficult as they age up.

Regarding your last sentence:  I would encourage you to research the law directly on family size.  I don't recall the details because it has been a few years, but I think the definition of family size is what one would expect it to be and there is also a small paragraph towards the end that allows for some wiggle room of some sort if family size according to the technicalities doesn't match the common sense answer.

ETA:  When I was mentally trying to apply the new rules to my family situation, I think I would have been able to include both of my college students in my family size for each of their FAFSA applications, even though they were both over 19 at that point.  So either what you wrote/read is inaccurate, or I misread the law (also quite possible).

[tooqk4u22]

For those thinking about how much college really costs, new numbers just came out from The College Board confirming that the cost of higher ed is declining in real dollars.

Here's the synopsis in the Chronicle of Higher Ed (paywall): https://www.chronicle.com/article/the-cost-of-college-tuition-is-shrinking#:~:text=Across%20all%20three%20types%20of,percent%20during%20this%20same%20period.

The actual price of tuition at many of America’s colleges continued a steady, decade-long decline as the sector enters an era of shrinking high-school enrollments and greater competition, according to analysis released Monday by the College Board.

While sticker prices have continued to balloon to as large as $100,000 at some private, nonprofit universities, the average net price — the remaining cost of tuition after institutional and grant aid is deducted — for undergraduate students entering their freshman year at these institutions clocked in at $16,510 for the 2024-25 academic year, down from $19,330 in 2006-07 (adjusted for inflation to 2024 dollars). Net prices at public institutions followed similar trend lines: $2,480 was the average amount charged in 2024-25 at in-state, four-year institutions, down from $4,340 in 2012-13 (inflation adjusted); and, according to the College Board, freshmen attending two-year colleges continue to receive on average enough grant aid to cover tuition and fees, a trend that dates back to 2009-10.

Across all three types of institutions, the inflation-adjusted average of published tuition and fees peaked in 2019-20 and is anticipated to continue to decline through 2024-25, while the Consumer Price Index has increased by 23 percent during this same period.

Likewise, College Board analysts observed a 13th consecutive year of decline in undergraduate borrowing, whereas Pell Grant expenditures increased after several years of declines.

Thanks for sharing. As I think it is appropriate to be pedantic as we talk about higher learning, the real story seems to be that college costs peaked in 2019 then COVID reduced demand and therefore prices the last few years. It is hard to say if that is a new normal, like everything after COVID.

There is some really good news in that post. I hadn't realized borrowing had been going down, though it doesn't say by how much. The widening gap between sticker and actual costs just makes the whole process more difficult however.

More reason to look at two-year schools!

Net tuition and fees have declined since 16-17 across institutional types, which at this point is a long term trend accelerated by Covid.  The longterm peak for private colleges and universities was 06-07, which was also peak millennial generation, and in 2024 dollars tuition was $3k more per year than it is today.  We're pushing two decades of declining real prices for undergrad tuition.

I suspect there is more to it than just "Net Prices are Declining"

First, this is in "Real Terms" which is important but when inflation is up 25% in the last 3 years it is likely that the various costs (salaries, benefits, property) have not reset to full levels due to fixed contracts and cost structures, so you might see an acceleration of these costs in the next few years (not unlike new contracts for you see happening for other labor unions).

Second, I wonder how much the note about including the Higher Education Emergency Relief Fund contributes to this.....is $10 or $3000

Also, I believe the chart is just tuition - housing at many schools has increased substantially and in some cases can cost as much as or more than tuition.

Overall, its better than up 7% but I think there is more to the story or least a few more chapters to go.

I have one in college, one applying and one 3 years away - purely anecdotal and individual feeling but I don't feel like college costs have come down. 

Thanks.  FAFSA income lookback is two years, so our income will be too high but I could manage it the next couple years and 3-4 years be in a more favorable position....but then the rules will change again I am sure. I also saw that the FPL for families drops kids at 19 regardless of in college or not, so that may make it more difficult as they age up.

Regarding your last sentence:  I would encourage you to research the law directly on family size.  I don't recall the details because it has been a few years, but I think the definition of family size is what one would expect it to be and there is also a small paragraph towards the end that allows for some wiggle room of some sort if family size according to the technicalities doesn't match the common sense answer.

ETA:  When I was mentally trying to apply the new rules to my family situation, I think I would have been able to include both of my college students in my family size for each of their FAFSA applications, even though they were both over 19 at that point.  So either what you wrote/read is inaccurate, or I misread the law (also quite possible).

I may be wrong or not fully accurate as I was just basing it on some other rules for FPL in general - may not apply to FAFSA.   Didn't fully research but its on the list.

[roomtempmayo]

I have one in college, one applying and one 3 years away - purely anecdotal and individual feeling but I don't feel like college costs have come down. 

Every institution has students paying full freight, paying nothing, and everything in between.  It's a good example of a situation where personal experience, and even clusters of similarly situated people within a social group, aren't a good signal of the norm.

What I suspect you might be intuiting is that the range of prices is greater, which evidence would suggest.  If the percentage of Pell students is increasing significantly but realized tuition isn't declining by much, then there is probably also a significant number of students who are paying more than they used to in order to close the gap.  That's a reflection of the growing income gap of families sending kids to college, which takes the general growth of inequality and pours gasoline on it with diverging fertility rates.