Quick financial aid question

[SnailRBT]

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My parents put $40k (of their salary) each year into their 401K retirement savings account, which is tax-deferred. When I applied for need-based finaid, my school counted this $40k as regular income, which greatly reduced my eligibility for need-based aid. Could somebody tell me if this is standard procedure when schools determine your EFC and financial need? Thanks!

 

[joe6102]

My parents put $40k (of their salary) each year into their 401K retirement savings account, which is tax-deferred. When I applied for need-based finaid, my school counted this $40k as regular income, which greatly reduced my eligibility for need-based aid. Could somebody tell me if this is standard procedure when schools determine your EFC and financial need? Thanks!

If they are saving 40k each year, they can afford to pay for your med school. The (flawed) system worked.

 

[oneaat]

My parents put $40k (of their salary) each year into their 401K retirement savings account, which is tax-deferred. When I applied for need-based finaid, my school counted this $40k as regular income, which greatly reduced my eligibility for need-based aid. Could somebody tell me if this is standard procedure when schools determine your EFC and financial need? Thanks!

yes, this is totally normal. the EFC is based on what your parents can AFFORD to pay. theoretically, they could take the 40K and give it to you each year. they have chosen to put it into retirement savings, but that's how the CHOSE to use their INCOME. i'm in pretty much the same situation, and looking at six-figure loans, so i feel your pain. but think of it this way - once you finally do get through school, you'll never have to worry about financially taking care of your parents. that will be a potentially huge burden you won't carry 🙂

 

[UserNameNeeded]

As much as I am envious of this guy's parents being able to save over $40,000 a year when mine can't even save $400, our parents are in their 40s or 50s at least and this is a critical time for them to be saving for their retirement. There's nothing sadder than broke old folk. (Okay, maybe there is sadder stuff, but I'm only talking about in America.)

 

[LO281OK]

yes, this is totally normal. the EFC is based on what your parents can AFFORD to pay. theoretically, they could take the 40K and give it to you each year. they have chosen to put it into retirement savings, but that's how the CHOSE to use their INCOME. i'm in pretty much the same situation, and looking at six-figure loans, so i feel your pain. but think of it this way - once you finally do get through school, you'll never have to worry about financially taking care of your parents. that will be a potentially huge
burden you won't carry 🙂

Exactly. The GROSS INCOME is what counts rather than adjusted gross or after deductions (some variation of this to account for children, etc). Otherwise things like home mortgages, deductible retirement savings and others tax shelters that seem to advantage the rich more than the poor would serve to level the playing field. Thus, is adjusted incomes were used, two 5-member families one with $50K/year gross and one with $225K/year gross could look similar on paper, but their lifestyles would look very different.

Could you imagine the upper-middle class family saying, "But I HAD to pay $2800/mo for our mortgage, $1400/mo for our cars and put $40K in my tax-sheltered retirement this year! Why should that count as income?" Now the OPs parents might be saving half their income to come up with $40K/year (I had some friends who did this to buy a house without a mortgage - against my advice) and therefore not be like the family I described, but like the previous poster said it is their choice.

I point the reason out so strongly bc my mother has been a breakfast waitress for as long as I can remember and I gaurantee she has saved $0 for retirement. She is embarassed everytime I ask for her tax returns to file for finaid, but I tell her that it is the only way she can realistically provide anything toward my education. I look forward to being able to make retirement possible for her. 👍