Viewer - It's Only Money live chat: Questions and answers about financial aid, college planning

It's Only Money live chat: Questions and answers about financial aid, college planning

Monday December 3, 2012

11:55

The Oregonian:

Welcome to our live chat on financial aid. It's Only Money columnist Brent Hunsberger and personal financial specialist Susan Yang will join us at noon. Until then, feel free to submit your questions and comments. Expect a short delay between the time you submit and the time you see the post in the chat.

Monday December 3, 2012 11:55 The Oregonian

12:01

itsonlymoney:

HI folks,

Thanks for joining us. We've been slowed a bit by technical difficulties. Here's Susan Yang's profile http://susanyangcpa.com/SavingForCollege. She specializes in helping families plan for college.

Monday December 3, 2012 12:01 itsonlymoney

12:02

itsonlymoney:

I'm going to start with a question e-mailed in by a reader who couldn't join the chat:

wggent asked: "When a grandparent (owner) has a 529 plan account, for a grandchild student beneficiary, how does that effect the FASFA reporting.?
I understand the 529 account is "shielded" (does not count) as the student asset, but what about funds used from the account to pay for tuition?
e.g. if funds were withdrawn from the account during one year, does it get reported on FAFSA for the next FAFSA year filing?"

Monday December 3, 2012 12:02 itsonlymoney

12:03

Susan Yang:

Hi there, I am here, welcome.

Monday December 3, 2012 12:03 Susan Yang

12:05

itsonlymoney:

wggent - it depends.

Monday December 3, 2012 12:05 itsonlymoney

12:06

itsonlymoney:

wggent - Normally, yes, the money used to pay tuition would be reported as the student's income on the FAFSA the following year, according to Susan.

Monday December 3, 2012 12:06 itsonlymoney

12:06

[Comment From KerryKerry: ]

We don't make a lot of money, but we are solidly in the middle class. We have, over the years, saved a cushion in our savings and checking accounts for a safety net. OUr son is going to college in 2 years. Will the money in savings and checking be counted? How can we protect it. Should we quickly invest it in our retirement? We are willing to use some of it for college, but not all of it.

Monday December 3, 2012 12:06 Kerry

12:07

itsonlymoney:

wggent - One way around that is to pay the tuition directly to the institution; don't give it to the student or the parents.

Monday December 3, 2012 12:07 itsonlymoney

12:08

The Oregonian:

Kerry, Susan will have a response for you shortly. In the meantime, here's one for Brent:

Monday December 3, 2012 12:08 The Oregonian

12:08

[Comment From GuestGuest: ]

What is the best place to save/invest money for our student as well as ourselves? We are interested in keeping our EFC low.

Monday December 3, 2012 12:08 Guest

12:08

itsonlymoney:

Guest - The best place to save for both your student and yourself is in a Roth IRA.

Monday December 3, 2012 12:08 itsonlymoney

12:08

Susan Yang:

Depending on your age, there is a certain amount of that money that will be protected. for a couple at age of 50, about $45k can will not be assessesed.

Monday December 3, 2012 12:08 Susan Yang

12:09

itsonlymoney:

Guest - If you take a distribution from Roth IRAs to pay for education before you're age 59.5 AND you've had the money in the Roth for 5 years, you don't have to pay a 10 percent penalty.

Monday December 3, 2012 12:09 itsonlymoney

12:09

Susan Yang:

To preserve some cash for college bills, you may want put the money into a Roth account,

Monday December 3, 2012 12:09 Susan Yang

12:10

itsonlymoney:

Guest - That's not the case with a traditional IRA.

Monday December 3, 2012 12:10 itsonlymoney

12:10

The Oregonian:

Here's a question for Susan from Mike:

Monday December 3, 2012 12:10 The Oregonian

12:10

[Comment From MikeMike: ]

Does the PROFILE usually give a higher expected family contribution than the FAFSA?

Monday December 3, 2012 12:10 Mike

12:11

itsonlymoney:

Guest -- What's more, if you don't use the money for education, you simply hold on to it for yourself in retirement. And generally speaking, you should be saving for retirement before saving for college. You or your student can always borrow to pay for college. It's not as easy to borrow to finance your retirement.

Monday December 3, 2012 12:11 itsonlymoney

12:11

itsonlymoney:

Guest -- Lastly, any money you contribute to a Roth can always be withdrawn tax- and penalty-free.

Monday December 3, 2012 12:11 itsonlymoney

12:12

Susan Yang:

Mike, it depends on several factors: your home equity, your medical expenses over 3% of your AGI, whether you have spent money on private K-12.

Monday December 3, 2012 12:12 Susan Yang

12:13

The Oregonian:

Brent, this one's for you:

Monday December 3, 2012 12:13 The Oregonian

12:13

[Comment From twoforonetwoforone: ]

My husband (59) is sole income for our family. He has a 401K plan and a Roth. If I understand correctly, we can shelter part of his 401K in the EFC formula. Would it be wise to move part of that 401K over to our Roth since we don't have to add Roth contributions to the income we report on the FAFSA?

Monday December 3, 2012 12:13 twoforone

12:13

Susan Yang:

Mike - so the answer varies, based on each family's finances, I have seen many Profile EFC lower than FAFSA.

Monday December 3, 2012 12:13 Susan Yang

12:13

itsonlymoney:

twoforone - Susan can correct me if I'm wrong, but the FAFSA or EFC formula doesn't assess either type of plan -- the 401k or the Roth. So, it doesn't really matter.

Monday December 3, 2012 12:13 itsonlymoney

12:13

[Comment From KerryKerry: ]

So 45k in checking and savings will not be included in the ability to pay?

Monday December 3, 2012 12:13 Kerry

12:14

Susan Yang:

Kerry - it that is all you have outside your retirement accounts.

Monday December 3, 2012 12:14 Susan Yang

12:14

itsonlymoney:

twoforone -- If I didn't understand the question correctly, let me know.

Monday December 3, 2012 12:14 itsonlymoney

12:14

The Oregonian:

Brent: here's a question from Guest for you.

Monday December 3, 2012 12:14 The Oregonian

12:14

[Comment From GuestGuest: ]

If my student is already in college does it make sense to put money in a 529 account before december 31st and then take it out next year to pay tuition?

Monday December 3, 2012 12:14 Guest

12:15

itsonlymoney:

Guest -- Yes, absolutely. Perfectly OK. Claim your state tax deduction, too.

Monday December 3, 2012 12:15 itsonlymoney

12:15

Susan Yang:

Kerry - of course we talking about FAFSA only. Profile will assess your home equity like cash in the bank by most colleges.

Monday December 3, 2012 12:15 Susan Yang

12:15

The Oregonian:

Susan, a question about timing from Ann:

Monday December 3, 2012 12:15 The Oregonian

12:16

[Comment From AnnAnn: ]

Can you explain the time line for submitting the FAFSA form? Should you be all ready to push the submit button on January 1?

Monday December 3, 2012 12:16 Ann

12:16

itsonlymoney:

Guest -- Remember, for 2012, the total allowable annual state tax deduction for contributions is $4,345 for taxpayers who file a joint return and $2,170 for all others.

Monday December 3, 2012 12:16 itsonlymoney

12:16

[Comment From GuestGuest: ]

Will it impact my tax credit?

Monday December 3, 2012 12:16 Guest

12:17

Susan Yang:

Ann - Yes, FAFSA should be ready on 1-1-2013.

Monday December 3, 2012 12:17 Susan Yang

12:17

The Oregonian:

This has been a running start, but we're caught up with questions in the queue. What else do you want to know?

Monday December 3, 2012 12:17 The Oregonian

12:18

Susan Yang:

Ann - so it is a good idea to have all your financial numbers organized now, as if you were filing the taxes today.

Monday December 3, 2012 12:18 Susan Yang

12:18

itsonlymoney:

Guest -- Also, you can carry forward your contribution as a deduction for up to 5 years. That means a couple can contribute $21,725 by Dec. 31 (5 x $4,345) and claim a $4,345 deduction each of the next five tax years.

Monday December 3, 2012 12:18 itsonlymoney

12:19

itsonlymoney:

twoforone -- Susan will add to my previous answer

Monday December 3, 2012 12:19 itsonlymoney

12:20

[Comment From AnnAnn: ]

Will do, thank you for your help.

Monday December 3, 2012 12:20 Ann

12:20

The Oregonian:

Brent, here's a question from Mike for you.

Monday December 3, 2012 12:20 The Oregonian

12:20

[Comment From MikeMike: ]

How helpful do you think schools' net price calculators are in helping families figure out how much those schools will cost?

Monday December 3, 2012 12:20 Mike

12:21

Susan Yang:

Hi twoforone - if you have alreay have the money in 401K, you may not want to convert it to Roth because the converted amount will be taxable income in your AGI and that will reduce your AGI.

Monday December 3, 2012 12:21 Susan Yang

12:21

itsonlymoney:

Mike -- The net price calculators really vary. Some schools used a calculator created by the federal government. They're not very accurate.

Monday December 3, 2012 12:21 itsonlymoney

12:21

The Oregonian:

Susan, question from Angel for you.

Monday December 3, 2012 12:21 The Oregonian

12:21

[Comment From AngelAngel: ]

when filling out FASA do I only put the taxes of the parent who put me as their dependent or would i have to put the information of both of my parents?

Monday December 3, 2012 12:21 Angel

12:22

itsonlymoney:

Mike -- Other schools used third-party vendors, and others created their own. Generally speaking, the more questions the calculator asks, the better the estimate they spew out.

Monday December 3, 2012 12:22 itsonlymoney

12:22

Susan Yang:

Angel, if you are a dependent, you need to report your income as well as your parents'.

Monday December 3, 2012 12:22 Susan Yang

12:23

Susan Yang:

Angel - it is the parent with whom you live the most time. It does not matter who claims you as a dependent for tax purpose.

Monday December 3, 2012 12:23 Susan Yang

12:23

itsonlymoney:

Mike -- Here's the federal net price calculator template (the one that's the least accurate): http://nces.ed.gov/ipeds/netpricecalculator/

Monday December 3, 2012 12:23 itsonlymoney

12:24

The Oregonian:

Susan, here's another for you, this time about investment property.

Monday December 3, 2012 12:24 The Oregonian

12:24

[Comment From guestguest: ]

Does the FAFSA discriminate against self-employed parents with investment properties such as rentals?

Monday December 3, 2012 12:24 guest

12:24

[Comment From AngelAngel: ]

okay thank you very much.

Monday December 3, 2012 12:24 Angel

12:24

Susan Yang:

Investment properties such as rental are assessable assets, treated same as cash in the back.

Monday December 3, 2012 12:24 Susan Yang

12:25

itsonlymoney:

Mike -- The College Board's calculator is better: http://studentnpc.collegeboard.org/

Here's what I've written about the calculators: http://www.oregonlive.com/finance/index.ssf/2012/11/help_mapping_out_your_college.html

Monday December 3, 2012 12:25 itsonlymoney

12:25

The Oregonian:

Brent, ORnative has a question about life insurance policies.

Monday December 3, 2012 12:25 The Oregonian

12:25

[Comment From ORnativeORnative: ]

How effective is a life insurance policy used for funding a child's college education? Is it as good as a 529 fund? My son says there are tax advantages, and you can't lose any of your principle money invested in the life insurance account.... what are the pros & cons of this?

Monday December 3, 2012 12:25 ORnative

12:26

Susan Yang:

Investment properties - with CSS Profile for, you can appeal to the college telling the about the challenge of getting cash out of non-liquid assets. I have seen some colleges remove rentals from their EFC calculation for that reason.

Monday December 3, 2012 12:26 Susan Yang

12:26

itsonlymoney:

ORnative - I wrote about using life insurance as a college planning tool earlier this year: http://www.oregonlive.com/finance/index.ssf/2012/08/insurance_and_annuities_arent.html

Monday December 3, 2012 12:26 itsonlymoney

12:27

The Oregonian:

Susan, a question for you about reverse mortgages.

Monday December 3, 2012 12:27 The Oregonian

12:27

[Comment From GuestGuest: ]

What are your thoughts on reverse mortgages? Is it generally a good idea for older folks? If not, why not?

Monday December 3, 2012 12:27 Guest

12:27

itsonlymoney:

ORnative - As I said then - "Insurance can work as a financial planning tool for parents of young children or for those who have built or suddenly inherited significant assets. But insurance and annuities make little sense for parents of high schoolers."

Monday December 3, 2012 12:27 itsonlymoney

12:28

itsonlymoney:

ORnative - I think you can do better on your own with an Oregon College Savings Plan and its state tax credit (provided you're an Oregon resident) or with a Roth IRA. You just need to be sure you're disciplined at saving and generally understand the risks of the funds in which you invest.

Monday December 3, 2012 12:28 itsonlymoney

12:28

The Oregonian:

And another question from twoforone -- about twins.

Monday December 3, 2012 12:28 The Oregonian

12:28

[Comment From twoforonetwoforone: ]

Will the FAFSA take into consideration twins entering college when the EFC is calculated?

Monday December 3, 2012 12:28 twoforone

12:29

itsonlymoney:

twoforone - Yes, absolutely, it does. And not just twins. It considers other children in your family and their ages.

Monday December 3, 2012 12:29 itsonlymoney

12:29

Susan Yang:

Reverse mortgage - I'd suggest you find out if the college assesses home equity first. A FAFSA college does not assess home equity, so there is no good reason for that move.

Monday December 3, 2012 12:29 Susan Yang

12:30

[Comment From ORnativeORnative: ]

My son lives in CA

Monday December 3, 2012 12:30 ORnative

12:30

itsonlymoney:

ORnative -- It doesn't matter where your son lives or goes to school. The tax break is for Oregon residents, so if you live here, you can take it when you contribute to the Oregon College Savings Plan.

Monday December 3, 2012 12:30 itsonlymoney

12:30

The Oregonian:

And a question about online university for Susan.

Monday December 3, 2012 12:30 The Oregonian

12:30

[Comment From starmestarme: ]

I go to an online university and for some reason I only get half of my pell grant will I ever get the full thing? my academic years are different than regular fafsa i guess

Monday December 3, 2012 12:30 starme

12:31

[Comment From ORnativeORnative: ]

thanks for your help...

Monday December 3, 2012 12:31 ORnative

12:31

The Oregonian:

We're caught up again. What other questions or comments do you have?

Monday December 3, 2012 12:31 The Oregonian

12:32

Susan Yang:

strame - The best way is the contact the financial aid office, because Pell Grants are administered by colleges.

Monday December 3, 2012 12:32 Susan Yang

12:32

itsonlymoney:

On the reverse mortgage question, the CSS Profile will look at home equity. CSS Profile is used by about 400 colleges nationwide, most of them private or elite schools. However, that doesn't mean you should do a reverse mortgage.

Monday December 3, 2012 12:32 itsonlymoney

12:33

[Comment From starmestarme: ]

well i qualified for my full pell in june and the university had me do my 2013 fafsa and then i had to ask them and they gave me another half in oct called it my second disbursement but i got half twice

Monday December 3, 2012 12:33 starme

12:33

itsonlymoney:

Reverse mortgage -- I'd think long and hard about using them to pay for a college education. That is risky. A home equity loan would be a safer way -- and probably less expensive, too.

Monday December 3, 2012 12:33 itsonlymoney

12:33

The Oregonian:

Readers, a question for the group. What catches families and students off-guard when they're figuring out how to pay for college?

Monday December 3, 2012 12:33 The Oregonian

12:34

[Comment From ORnativeORnative: ]

I'm asking questions about a way to fund my granddaughters college education, not my sons...they live in CA.

Monday December 3, 2012 12:34 ORnative

12:35

itsonlymoney:

ORnative -- Still doesn't matter. What I said before applies whether it's your grandchildren or children.

Monday December 3, 2012 12:35 itsonlymoney

12:35

[Comment From starmestarme: ]

I talked my ear off to them but still do not understand I know the pell runs from july to july and fafsa , well I am not too sure about that but I applied for both 2011 2012 AND 20122013

Monday December 3, 2012 12:35 starme

12:35

[Comment From ORnativeORnative: ]

ok...thanks....

Monday December 3, 2012 12:35 ORnative

12:36

The Oregonian:

STARME: Why don't you email Brent here at The ORegonian. He can get you and Susan in touch for more info: bhunsberger@oregonian.com

Monday December 3, 2012 12:36 The Oregonian

12:36

[Comment From AnnAnn: ]

Answer to Oregonian question about paying for college: the cost of room, board and books. Especially at private colleges, very expensive.

Monday December 3, 2012 12:36 Ann

12:36

[Comment From starmestarme: ]

OK COOL THANKS

Monday December 3, 2012 12:36 starme

12:36

Susan Yang:

Off-guard issues: Pay attention to due dates, what forms colleges ask for. Read a copy of FAFSA and Profile forms now so that you are ready.

Monday December 3, 2012 12:36 Susan Yang

12:37

itsonlymoney:

ORnative - One interesting thing about college savings (529) accounts - If the child you set it up for doesn't go to college, the account can be transferred to another family member, even a cousin or aunt.

Monday December 3, 2012 12:37 itsonlymoney

12:37

Susan Yang:

off-guard issues: many parents confuse number in the household with number of tax exemptions they claim.

Monday December 3, 2012 12:37 Susan Yang

12:38

itsonlymoney:

Thanks for all the excellent questions!

Monday December 3, 2012 12:38 itsonlymoney

12:38

The Oregonian:

Folks, we have Brent and Susan with us for about 5 more minutes. What else would you like to ask?

Monday December 3, 2012 12:38 The Oregonian

12:38

[Comment From MikeMike: ]

Another off-guard issue -- the disconnect between the EFC that results from the FAFSA and what families will really need to contribute.

Monday December 3, 2012 12:38 Mike

12:39

The Oregonian:

Ann and Mike, thanks for your thoughts.

Monday December 3, 2012 12:39 The Oregonian

12:39

[Comment From twoforonetwoforone: ]

Thank you for your helpful articles and live chats.

Monday December 3, 2012 12:39 twoforone

12:40

The Oregonian:

Susan, could you elaborate on Mike's comment about EFC and FAFSA?

Monday December 3, 2012 12:40 The Oregonian

12:41

The Oregonian:

Brent, here's one for you about medical expenses.

Monday December 3, 2012 12:41 The Oregonian

12:41

[Comment From guestguest: ]

Do many colleges take into account extra medical expenses not covered by insurance?

Monday December 3, 2012 12:41 guest

12:43

Susan Yang:

Mike - that is a very good one. The difference between cost of attendance and your EFC is your need. One should not count on the college to take care of the gap, or to meet 100% of that need.

Monday December 3, 2012 12:43 Susan Yang

12:43

The Oregonian:

Susan, a question about gifts.

Monday December 3, 2012 12:43 The Oregonian

12:43

[Comment From GuestGuest: ]

When asked on FAFSA the total in checking and savings do you have to include the Money in savings that came from inheritance or gifting?

Monday December 3, 2012 12:43 Guest

12:44

itsonlymoney:

Guest on medical expenses - FAFSA does not take unreimbursed medical expenses into account, unfortunately. The CSS Profile, however, reduces your EFC (expected family contribution) by the amount of unreimbursed expenses above 3 percent of AGI. As I said above, some 400 colleges use CSS Profile.

Monday December 3, 2012 12:44 itsonlymoney

12:45

Susan Yang:

Money from inheritance - if you have already received the money, i.e. the money now is under your name, it is reportable.

Monday December 3, 2012 12:45 Susan Yang

12:45

itsonlymoney:

Guest - If you have high medical expenses and are applying to a college that only uses the FAFSA, try appealing to the college for some sort of leeway or hardship.

Monday December 3, 2012 12:45 itsonlymoney

12:45

The Oregonian:

Last call, folks. Anymore questions?

Monday December 3, 2012 12:45 The Oregonian

12:46

The Oregonian:

And Brent and Susan, any last pieces of advice for families figuring this out.

Monday December 3, 2012 12:46 The Oregonian

12:46

[Comment From Paula BishopPaula Bishop: ]

Great job!

Monday December 3, 2012 12:46 Paula Bishop

12:46

itsonlymoney:

When you're filling out these financial-aid applications, follow directions very closely. That's about as important as anything else you can do -- that, and meeting the deadlines, of course!

Monday December 3, 2012 12:46 itsonlymoney

12:47

itsonlymoney:

Also, you can find my recent columns on planning for college and applying for financial aid here:

http://bitly.com/bundles/onlymoney/e

You'll see both Susan and Paula Bishop quoted in many of them!

Monday December 3, 2012 12:47 itsonlymoney

12:48

Susan Yang:

It is always advisable to call the college financial aid office if you have any questions. When in doubt, call them.

And don't forget to tell about your special circumstances when you apply and remember you can always appeal the aid packages.

Monday December 3, 2012 12:48 Susan Yang

12:48

The Oregonian:

Thanks everyone for joining today's chat. Keep up with Brent's reporting on paying for college and financial planning at It's Only Money -- www.oregonlive.com/finance.

Monday December 3, 2012 12:48 The Oregonian

12:49