The Eagle's Nest

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Dear Babs,

My daugh­ter is go­ing to SUNY Al­bany (out of state) in the fall, and I am wor­ried about how to pay her tu­ition. I filled out the FAFSA, and it said our ex­pected fam­ily con­tri­bu­tion is way over what I think we can af­ford. Why are they do­ing this? Is there a chance we can get around this?

—Falling Short of Expectations

Dear Falling,

Just so you know, you are def­i­nitely not the first to be told that your ex­pected fam­ily con­tri­bu­tion be more than your per­sonal bud­get will al­low. To make sure you have judged cor­rectly, cal­cu­late your fi­nan­cial need to fig­ure out what fi­nan­cial aid you will re­ally need to pay for col­lege. Take into ac­count any schol­ar­ships or loans al­ready of­fered, and es­ti­mate what cash you can pro­vide each year up front. Then see how far off your EFC is from your Real FC.

There are a few ways that FAFSA cal­cu­lates your EFC, and de­pend­ing on your sit­u­a­tion, its for­mula may work to your detriment.

FAFSA looks at all of your avail­able in­come and as­signs a per­cent­age of this in­come to your child’s col­lege funds. Avail­able in­come means any salary, prop­erty, sav­ings, or in­vest­ments that you could di­vert to your child’s ed­u­ca­tion. Sec­ond homes, in­vest­ment prop­erty, and valu­able cars all qual­ify as an as­set, but your pri­mary res­i­dence does not. There­fore, if you own a va­ca­tion home that you clearly do not want to sell, this will count against you. FAFSA does not count money in an IRA, but it does count money in a gen­eral sav­ings ac­count, or in­vest­ment funds (mu­tual funds, stocks, etc.). So if a large por­tion of your sav­ings for re­tire­ment is in these types of ac­counts, it will hurt you. FAFSA also does not take into ac­count con­sumer debt. If you owe a lot of money on your credit cards, FAFSA will not take the money re­quired to pay them off from your to­tal avail­able in­come. These poli­cies hurt a lot of middle-​​class fam­i­lies with credit card debt and mod­er­ate in­vest­ments. Al­though your mu­tual funds may be non-​​negotiable to you, to FAFSA, they are fair game.

Un­for­tu­nately, there is not a lot you can do about your EFC this year. Un­less your fi­nan­cial sit­u­a­tion has dras­ti­cally changed be­cause of a lay-​​off or los­ing sub­stan­tial sav­ings be­cause of the mar­ket. If this is the case, con­tact SUNY Albany’s Fi­nan­cial Aid De­part­ment to ex­plain your situation-​​most schools are set­ting up pro­ce­dures to deal with such sit­u­a­tions in this eco­nomic cri­sis. For next year, try and pay off your credit cards with cash you have saved in the bank. This will re­duce your debt-​​load, and re­duce the in­come you have avail­able in sav­ings. If you have any sav­ings that you have ear­marked for re­tire­ment, but that are not in an IRA or other reg­is­tered re­tire­ment ac­count, con­sider trans­fer­ring them. Do not hide assets-​​colleges in­ves­ti­gate at least a third of FAFSA claims for fraud, and you can be fined as much as 20,000 dollars.

Good luck!

Got a ques­tion for Babs? E-​​mail her at dearbabs@campuscompare.com, or log on to read more at www​.cam​pus​com​pare​.com.

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Dear Babs appears every Thursday on The Eagle's Nest