Another question regarding EFC

[IceMan0824]

Before starting, let me preface this discussion by saying that I realize this is not the best source of financial advice, and I should not base financial decision on what the information I receive from anonymous sources.
I realize this, and I am only looking for a fitting discussion here. Plus, this is best advice I can get, right now, for the price. So please, discuss away.

Before matriculation to medical school(hopefully before I complete a fin aid package), I plan to move all my holdings into illiquid assets. This way, I am hoping to decrease my efc as much as possible. Is this a good idea? or am I just asking for trouble here?

Case in point. In my portfolio, I currently hold bond, stocks, mutual funds, student loan funds, and mortgage funds (ouch, I know), 401K from work (max contribution) and a Roth IRA on the side (whatever is left). Sometime around Dec - Jan, I am planning on cashing out on those liquid (in bold) assets and putting most in Roth IRA, or invest into other illiquid funds and using the remainder to reduce my liabilities.

Is this a good idea? Does these assets even factor into the calculation of efc? Does it makes sense tying up these assets into illiquid funds? Are these transfers usual done, and might cast doubt when schools review my assets?

Thank You for your time.

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[TMP-SMX]

Before starting, let me preface this discussion by saying that I realize this is not the best source of financial advice, and I should not base financial decision on what the information I receive from anonymous sources.
I realize this, and I am only looking for a fitting discussion here. Plus, this is best advice I can get, right now, for the price. So please, discuss away.

Before matriculation to medical school(hopefully before I complete a fin aid package), I plan to move all my holdings into illiquid assets. This way, I am hoping to decrease my efc as much as possible. Is this a good idea? or am I just asking for trouble here?

Case in point. In my portfolio, I currently hold bond, stocks, mutual funds, student loan funds, and mortgage funds (ouch, I know), 401K from work (max contribution) and a Roth IRA on the side (whatever is left). Sometime around Dec - Jan, I am planning on cashing out on those liquid (in bold) assets and putting most in Roth IRA, or invest into other illiquid funds and using the remainder to reduce my liabilities.

Is this a good idea? Does these assets even factor into the calculation of efc? Does it makes sense tying up these assets into illiquid funds? Are these transfers usual done, and might cast doubt when schools review my assets?

Thank You for your time.

First of all, all the EFC is about is reducing your subsidized staffords and changing them into unsubsudized. So the only loss is that they pay interest during school. Other than that, I don't know what would be the best to invest in.

 

[IceMan0824]

First of all, all the EFC is about is reducing your subsidized staffords and changing them into unsubsudized. So the only loss is that they pay interest during school. Other than that, I don't know what would be the best to invest in.

I believe that's the other way around.
Also, EFC is going to be deducted from cost of attendance and the remaining costs is the amount that aid and loans are calculated from. I've worked hard for a living, and I've put money to work for me also. Now when I matriculate, it feels like I will be penalized for being money savvy because I have investments saved away. I really don't want to have to cash them out to meet my EFC nor am I really interested in taking our private loans just to meet EFC amount.

Hence, why I am trying (in possible) to lower it.

 

[Doctor Bagel]

It might be a good idea because your retirement savings are not counted toward your EFC. One thing to note, though, is that if your earnings are below a certain amount (I think $50k/year) and if you can file a 1040ez or a form, they don't count your assets towards your EFC.

Also, as pointed out above, the EFC is only really important for schools that give you a lot of their own aid and look at the EFC. You might not get a lot of school aid anyway because of things like your parents' income and your past income. Since the need-based portion of federal financial aid is so pitiful, you have to have a really high EFC before it affects your ability to get subsidized staffords.

 

[dpmd]

Decreasing your EFC will increase the amount of subsidized stafford loans you are eligible for. This may mean the difference between 8500 per year subsidized versus 0 subsidized. If you have income, that will factor in as well as your savings. If you tie up all your savings in retirement accounts, then you will not have to report those amounts (it only matters what is true on the day you fill out your FAFSA, so you don't have to do it well in advance). However, you have to assess how transfering your assets will affect those funds (will it cost money, will you be taking a loss, etc.). Since you can get the maximum stafford of 38.5K (I think it was or will be increased to 40K, someone correct me if I am wrong) up to your cost of attendance (regardless of your EFC), it might be better to just leave your money where it is (and therefore have that safety net as well). If you go someplace where it will cost you more than the stafford amount, you can get the grad plus loan to get you up to your cost of attendance (assuming your credit isn't crap).

People seem to think that you have to pay your EFC in cash, when this is simply not true. You can borrow it with the stafford or grad plus. Consider that before you move your money around.

 

[MyNameIsDoctor]

I believe that's the other way around.
Also, EFC is going to be deducted from cost of attendance and the remaining costs is the amount that aid and loans are calculated from. I've worked hard for a living, and I've put money to work for me also. Now when I matriculate, it feels like I will be penalized for being money savvy because I have investments saved away. I really don't want to have to cash them out to meet my EFC nor am I really interested in taking our private loans just to meet EFC amount.

Hence, why I am trying (in possible) to lower it.

I totally hear you ice, I have an EFC of 12K!!!! and I'm independent of my folks and sometimes wish I never worked for my hard earned pennies and dimes.

 

[MJB]

My EFC was 34K.

The financial aid director at my school told me not to freak.

 

[Doctor Bagel]

My EFC was 34K.

The financial aid director at my school told me not to freak.

And she's right. At any private school, your total cost of attendance is going to be $50k at least. For most public schools except the super cheap ones, you're looking at a coa of $40k or so. So at a private school, you'll still get your full $8500 subsidized stafford amount. At a public school, you'll get most of it, and of course still be able to borrow everything else you need through unsubsidized staffords and gradplus loans.

It sucks that we get ridiculous efcs, but it's nice that they don't mean much.

 

[IceMan0824]

And she's right. At any private school, your total cost of attendance is going to be $50k at least. For most public schools except the super cheap ones, you're looking at a coa of $40k or so. So at a private school, you'll still get your full $8500 subsidized stafford amount. At a public school, you'll get most of it, and of course still be able to borrow everything else you need through unsubsidized staffords and gradplus loans.

It sucks that we get ridiculous efcs, but it's nice that they don't mean much.

Not that I'm complaining, though it does sound like it, but I just wanted to be eligible for all my $8500 unsubsidized. Although now with this discussion, I think I will just suck it up and leave the funds where they are. When I start drastically deviating from my investment plans and goals now, who know what I am liable to do in the future.

Thank you all for your response.

 

[kakashi74]

It might be a good idea because your retirement savings are not counted toward your EFC. One thing to note, though, is that if your earnings are below a certain amount (I think $50k/year) and if you can file a 1040ez or a form, they don't count your assets towards your EFC.

Bagel: How sure are you about this?
Can anybody else verify this?

Let's say I have $40k in my savings account, but I only made $40k last year(and I can file a 1040EZ), my assets won't be counted towards my EFC? I'm freaking out because I have a LOT of savings and I'd much rather put a downpayment on a house

 

[dpmd]

It's possible you won't get any subsidized loans (when I got back from my Army deployment my savings were about 20K plus I had earned a pretty good wage on top of my husband's salary, don't remember my EFC but I think we made about 80K that year). However, you will get your max stafford and any grad plus loan you need. If you really think about it we aren't that deserving of the subsidized loans (even though it does suck to penalize people for working). I would much rather they be strict about subsidized loans and reduce my taxes.

 

[Doctor Bagel]

Bagel: How sure are you about this?
Can anybody else verify this?

Let's say I have $40k in my savings account, but I only made $40k last year(and I can file a 1040EZ), my assets won't be counted towards my EFC? I'm freaking out because I have a LOT of savings and I'd much rather put a downpayment on a house

Yep, just double checked. Go this website and open the pdf for the EFC calculation for 2007-08. http://studentaid.ed.gov/PORTALSWebApp/students/english/publications.jsp

The information is on page 4, I think. It's the part that talks about who can use the simplified EFC formula.

 

[TMP-SMX]

Your EFC is automatically 0 if you file a 1040EZ or 1040A or you or your parents have one of those federal assistance programs, and if you made less than 20,000.

 

[dpmd]

Your EFC is automatically 0 if you file a 1040EZ or 1040A or you or your parents have one of those federal assistance programs, and if you made less than 20,000.

This is not true if you are an independent student without dependents other than a spouse (most med students). Your assets aren't counted in the calculation if you could file a 1040EZ or A AND your adjusted gross income is less than 49,999.

 

[old_boy]

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