Stock Options

[JumpShot]

Advertisement - Members don't see this ad

After 10 years working in high tech I'm going to med school. (Time to make my 80/hr weeks count for something.) I've got quite a bit in stocks and quite a bit more in stock options. How are stocks and stock options factored in to the financial aid / loan calculations? Should I be readjusting my assets in a particular way?

 

[JumpShot]

Just to clarify anything over 30K is quite a bit to me.

 

[mpp]

Max out your IRA(s) as these are not used in financial aid calculations. If you really need to 'hide' money you can have as much equity in your primary residence as you want. Otherwise everything is fair game to count against you as far as financial aid. I was still offered plenty of unsubsidized Stafford loans even though my EFC was higher than my school's budget.

 

[BayesianDoc]

I never include unexercised options in anything. I am assuming you exercised these options. If not hold out as long as economically possible. You get the drift.

 

[JumpShot]

No, I have not exercised the options yet. They are in ORCL, CSCO, and MSFT (as bluechip as tech stocks get). They should rise in value as the economy improves and businesses start replacing worn corporate infrastructure in the next few years. I would rather hang onto them until M4 when I'm in a lower tax bracket. Then I'll be able to use the proceeds to clobber some debt and transition to residency. Having to exercise them now would be a bummer but if they are counted as assets ....

 

[mpp]

I would agree that unexercised options are likely not assets on the FAFSA.

 

[BayesianDoc]

Unexercised options are not really yours in a sense. You have not claimed ownership to the shares that the company has granted at that share price. If you had to then my Agere System options that are at $6.00 option price when the the current share price is about 1/3 of that would in effect lower my EFC. I have never documented anything anywhere that I have these options b/c that is all they are "Options". Hope it works out for you.

 

[edmadison]

Unexcercised options (those that a purchased, not those you get from your employer) are an asset. Any options which are traded have a market value and, thus, are assets. If the strike price is well below the stock price then they have almost no value but still have some value. No question that they are an asset.

Ed

 

[Fermi]

Originally posted by edmadison
Unexcercised options (those that a purchased, not those you get from your employer) are an asset. Any options which are traded have a market value and, thus, are assets. If the strike price is well below the stock price then they have almost no value but still have some value. No question that they are an asset.

Ed

I'd agree with this in principle, but I don't know if an unexercised option can be considered a real investment asset for financial aid purposes. I had a bunch of options in MOT but I forfeited them when I left the job to go to med school. I guess that's a different story because I wasn't 100% vested. Now, if these are 100% vested options, there's a lot more merit to the view that they're liquid assets.

This is definitely a question for a financial adviser. They may be able to give you good strategies on how/when to exercise the options to give you the most income with the least tax implications. I would think that sometime in med school would be a good time to exercise because you probably won't pay any taxes on your gains: no income = bottom tax bracket - $2,000 tuition tax credit - standard deduction will probably wipe out all the taxes you'd normally have to pay on the option gains.

 

[edmadison]

You will notice from my previous post that I was referring to purchased stock options not employee stock options. I have no idea whether ESO are assets because of the tricks of vesting. I can assure you that options purchased on the market which have not expired are assets just as shares of a stock or mutual fund are.

Ed