Financial-aid-filter: Is saving money for suckers?
February 19, 2008 12:32 PM   Subscribe

I worked hard when I was single and saved a bunch of money. Now I'm married with kids, not able to save much, and I want to send my child to private school. Private school says OK, but no tuition assistance for you. My friends have no savings, but otherwise similar situation, and were granted a huge tuition break. What gives?

More practically, how can I convince the school to provide financial assistance, this year or next? Buy a Porsche then tell them I have no savings? :-) Pay down my mortgage? Transfer my savings to a 529 plan in the child's name?
posted by anonymous to Work & Money (23 answers total) 2 users marked this as a favorite
What gives?

You have more money than the other people. You are less in need of financial aid.

You ask if saving money is for suckers. Is buying your own house for suckers because you might be able to get into a homeless shelter for free? Is buying your own food for suckers because you might be able to get some at a soup kitchen for free?

In order to figure out how to game the system, you would need to provide more details about it. Did they ask you for the value of your home or cars? If so, then your first two ideas wouldn't work.
posted by grouse at 12:44 PM on February 19, 2008 [1 favorite]

I think it is quite common for institutions like Universities and Private Schools to expect you to use your savings to pay for your schooling. In Ontario, you need to list all your assets when applying for student loans: cars, blocks of gold, etc. If you bought a Porche the Ontario government would expect you to sell it, and use that money for tuition before harassing them for more.

You can probably game the system if you try hard enough. I knew kids who got student loans and invested the money because they didn't actually need it.
posted by chunking express at 12:49 PM on February 19, 2008

And are you sure that the only reason your friends are getting tuition breaks because they have no savings?
posted by chunking express at 12:50 PM on February 19, 2008

It depends what a "sucker" is to you.

If a sucker is someone who has the ability to pay for things themselves; doesn't have to rely on other people/assistance, then yes.

It may not seem fair that people who spend their money unwisely are those who get benefits and assistance, but unfortunately that's how it works a lot of the time in many different realms.

What were you saving the money for? Wasn't it for a situation like this....?
posted by PinkButterfly at 12:54 PM on February 19, 2008

This is pretty much how financial aid works: they look at your savings and your salary.

IANAFP (financial planner), but "hiding" income would probably help, although it is unethical. (Which isn't to say that it's not commonplace.) I don't know how it works on the private school level, but when it comes to college, many schools expect the student to pitch in and look heavily at their income as well.

That said, look at it from your kid's perspective. Even if you pay the full amount, it's an incredible investment that will pay huge dividends in his life. Don't blow the money on a Porsche, nor do anything that might jeopardize your ability to pay in the future if they don't kick in aid.
posted by fogster at 1:00 PM on February 19, 2008

More practically, how can I convince the school to provide financial assistance, this year or next?

Really, you should ask the school's financial aid office, as they're the only ones who can give you the right answer. You can also ask them what strikes you had against you this year that kept them from providing aid. They may have super-restrictive aid, to be given to only the neediest families. While you think your friends' situation is similar to yours, it really may not be - people really hate to talk about deep dark secret financial stuff to their friends, so you may not have the whole story there.

The money you were able to save before the kid came along - you still have it? If so, then of course the school's going to take that into acount. The private primary school is going to do this, the private secondary school is going to do this, and the public or private university is going to this. Might as well get used to it.

It may not seem fair that people who spend their money unwisely are those who get benefits and assistance, but unfortunately that's how it works a lot of the time in many different realms.

We have no idea why the friends weren't able to have much savings, so stop with the "irresponsible spenders shouldn't get help" line, okay?

posted by rtha at 1:00 PM on February 19, 2008 [1 favorite]

account, dammit.
posted by rtha at 1:01 PM on February 19, 2008

Is this saved money in any particular type of account? I would imagine that savings in a retirement vehicle (401k, IRA or Roth IRA) are treated differently from a savings account, CD or brokerage account. That was certainly the case for colleges and financial aid when I was looking. Schools are much less likely to expect that you would cash out your retirement to pay for your kid's school than they are to expect that you would cash out a savings bond.

Of course, if you put it in a retirement account in order to get better financial aid for school, you won't have access to it until you're 65. In my opinion, that's not a bad thing anyway--if you're holding on to it in case of dire emergency, putting it in a retirement account both gives you some peace of mind about your future, as well as puts it somewhere that you could get a hold of it if you absolutely, positively had to (albeit with penalties).

All in all, it seems like the financial aid office of this private school should be able to give you better information about what types of assets they consider when looking at need-based aid. It may be that they don't count savings in 529s or mortgages towards your expected financial contribution, but definitely don't make the decision to dump all your savings into either of those without knowing whether it will help.
posted by iminurmefi at 1:02 PM on February 19, 2008

when it comes to college, many schools expect the student to pitch in and look heavily at their income as well... Add: therefore, make sure you know what you're doing before moving money into the kid's name, as it may actually reduce the amount of aid you get.
posted by fogster at 1:02 PM on February 19, 2008

It's easy to get bent out of shape when our own good choices seem to result in us getting less than others. I knew someone who rationalized lying on her student aid forms because if she didn't get that aid she's be unable to afford school at all. Not that she'd have to radically alter her lifestyle - she really wouldn't have been able to go. To which I responded "that still doesn't make it okay."

You need to recognize that the school is apportioning aid based on need and not only do you have less need than the people you're talking about but the amount of aid they have to hand out is finite. Perhaps even with this savings there's things in your life that make using it problematic, like my friend's situation. Doesn't matter. They have to decide somehow how to hand that out and when they rank people from best off to worst off, you come out better than your buddies.

The best way I can suggest you deal with this is to remind yourself of that finite aid pool and recognize that they're not making a claim that you've got money flying out of your lower posterior orifice and that paying in full would be painless, but rather that the people worse off than you have gone through all the aid before it gets to you.

If that doesn't help, then consider the fact that savings return rates blow now anyway and you've been making income on those savings till now, so this is as good a time as any to spend. (so it's a reach, what do you want?)
posted by phearlez at 1:08 PM on February 19, 2008 [4 favorites]

The best way I can suggest you deal with this is to remind yourself of that finite aid pool and recognize that they're not making a claim that you've got money flying out of your lower posterior orifice and that paying in full would be painless, but rather that the people worse off than you have gone through all the aid before it gets to you.

I had this big long answer-turned-tirade going, because I sympathize with anonymous. But really? phearlez nailed it. Best answer. End of thread. Srsly.
posted by somanyamys at 1:33 PM on February 19, 2008

iminurmefi has it right. Savings and other assets have to be in specific retirement or otherwise inaccessible accounts (such as certain trusts), in order to be considered differently for financial aid. And the rules will differ by school. Some private scholarships also consider these factors when dishing out scholarships.
Consult a financial planner that has a specialty of college planning. You may be able to start a 529 plan and forward fund it to the max (probably four years worth, but that would require consulting a 529 expert).
You may also be able to gift some money to your children (Gift to Minors Act) and that may be considered as a different income source. Again a college financial planner would know.
posted by Gungho at 1:38 PM on February 19, 2008 [1 favorite]

basically, you're succumbing to the welfare-queen myth, that all people who require assistance do so because they mishandled their finances. did they have a medical emergency that forced them into bankruptcy? is it a single parent with no financial foundation? i'm going to assume that you have no idea why most people are poor, and that you're simply bitter that you're not getting a "free ride." your friends have managed to get under the wire because the system has no way to gauge whether one's current financial situation is the result of their profligacy or some legitimate cause.

besides, whether the parents screwed up is irrelevant. you're talking about assistance for children who need the opportunity to do better in life than their parents have, and should not be made to pay for the mistakes they may or may not have made. your children have something that's infinitely more valuable than a private-school education, anyway: the example of hard-working responsible parents who can pull their own weight.

and this is the answer to your question: suck it up. you did well with your money and now it's time to take pride in that by paying for your childrens' education - which is presumably why you saved in the first place, no? you will not rip off the school's financial aid system and deprive other children of opportunities that your children could have without it, because that would be the wrong thing to do.
posted by klanawa at 2:08 PM on February 19, 2008 [1 favorite]

You do not mention what documentation you provided to the school in question, but looking at a FAFSA worksheet might give you a better idea of the calculus that is employed in determining financial aid in colleges and universities.
posted by Andy's Gross Wart at 3:01 PM on February 19, 2008

Many private elementary schools will provide need-blind tuition discounts in exchange for volunteer work. Ask the school's admission office if they have such a program available to you.

Also, I wouldn't be surprised if the friends you mentioned will be giving up a significant chunk of their free time to perform volunteer work for the school as part of the agreement to receive tuition assistance.
posted by jamaro at 3:17 PM on February 19, 2008

I understand the poster's frustration: people who work harder typically are expected to absorb more costs as a result of their success. Income tax is a perfect example. I suspect that people who accuse you of succumbing to the welfare-queen myth have never had much money to begin with, and do not appreciate just how hard it is to make and save money.

If there is financial aid for your children, it makes perfect sense to figure out how to access it - you won't be depriving anyone of anything - in fact, if you choose not to try to access financial aid it means you will be depriving your own children.

Anyway, don't give up on accessing financial aid: often it means figuring out the right way of asking for it, as jamaro notes above.
posted by KokuRyu at 3:40 PM on February 19, 2008

You're right, people in the middle income areas tend to get screwed as it most highly correlates work with reward. Someone pulling in $500,000+ a year probably isn't working 5x as hard as someone pulling in $100,000 but I bet the correlation is much higher in the 40-90,000 range. Ergo someone who put in the extra hours and who was financially prudent can very well be in, say, the 80,000 range and someone who didn't could be in the 70,000 range and that 10,000 a year plus savings is all the difference on some financial aid algorithms.

So yes, some get who don't deserve and some get it who do. Every system will have inefficiencies. Please see a financial planner so that you can most wisely protect your assets from taxes and things like this. There's no reason for you to feel as if the system is "getting you," and there is no reason for us to think that you can afford this. I'm somewhat appalled by the posters assuming that some formula used in financial aid a gift from God. It is just a formula and it has its flaws. The trick is to be savvy so you can protect your assets as to not be hit by the formula.

Is this cheating? Absolutely not. If you lie on the application that is one thing, placing your money in investment vehicles that more accurately reflect your ability to pay tuition is just that. The system assumes you'll be using all tax advantages and shelters that you can. That's how the system has to be designed to be at all fair. So the trick is to do as it tells you. There may not be a world of difference to you if you have $50,000 in a savings account, but it does matter in situations like this whether it is in a general savings account or an IRA.

I don't know why we are expecting that the poster thinks he's trying to get a free ride here, anymore than anyone else who is trying to get financial aid. These kinds of things are good ad weeding out the very needy from the ones who definitely could spare it. It is the middle ground that things get kind of murky.
posted by geoff. at 3:52 PM on February 19, 2008 [1 favorite]

Of course I should point out again it is fundamentally futile to differentiate between someone who is "hard working" and someone who is not solely based on income. That's not what financial aid is about. They're trying to determine if you can afford the tuition while still maintaining a certain predetermined acceptable lifestyle.
posted by geoff. at 3:56 PM on February 19, 2008

We're in the same trap -- middle income, good savings, and 31K tuition for 9th grade. We know many good and deserving families who pay 10-15K for the same school thanks to generous aid policies.

Sadly, we also know a family in a 2M home with properties overseas (including housekeeping staff) who pay 10K. The secret, the mother confided in me, is to get multinationals to pay you in your overseas accounts. Darn -- I should have thought of that!

I try not to let one bad apple, etc., but I have stopped watering their plants when they are in Europe!
posted by mozhet at 7:36 PM on February 19, 2008

My friends have no savings, but otherwise similar situation

That's a huge assumption. Was it really a similar situation? Same job? Same opportunities? Same advantages? I know it's awfully tempting to think that they just blew all their cash on plasma TVs and yacht races, but how do you know? Most people I know tend to want to keep any financial misfortunes or lost opportunities to themselves, not share it with the world, so I doubt you're completely privy to the life story of their checkbooks.
posted by Civil_Disobedient at 7:53 PM on February 19, 2008

Tuition assistance is not aid to you; it's aid to your children. Children who go to private school need to get the money to pay for it from somewhere, and the two most common sources of funding are their parents and aid from the school. Your children do not need aid; they have parents who have some money to pay for private school for them. Your friends' children need aid, because for whatever reason, their parents have less money and can't pay for private school tuition for them. Therefore, the tuition assistance goes to your friends' children, rather than to yours, on the basis of need.

Practically, the easiest way for your children to qualify for more aid is for you to become less good at providing for them. If your children become more needy, they will qualify for more assistance. However, putting them in that position will necessitate taking away from them some of the security that you've been able to give them thus far in their lives. I think that you don't want to do that.
posted by decathecting at 9:27 PM on February 19, 2008

Would you be bothered if nobody got financial aid? You saved money for this type of thing. Be happy for the people who can't afford it but are offered the same opportunity. It's like buying an item at regular price and then getting bent out of shape when it goes on sale. It seemed fair to you originally. Don't let someone else's good fortune get to you, fair or not.

Full Disclosure: I'm back in school full-time and am getting some gov't aid in the form of WIC and MediCaid for the kids. When I'm done with the PhD I'll be paying real taxes again, and I know others in similar situations will benefit from my taxes like I am now.
posted by monkeymadness at 3:57 AM on February 20, 2008

If this money is for retirement or college, then put it into tax-sheltered retirement or college accounts and the school will probably honor that and reassess your need for financial aid (This happened to us with my son's college-- they didn't care that our huge savings account was meant to last 2 kids through all 8 cumulative years of college. We had it, they counted, it all went to the first one and we're back at ground zero. Good news is-- the money's gone and now #2 really DOES need financial aid. Can I find a silver lining, or what?)

If you keep the money liquid, the school is going to consider it a usable asset and will count it toward your ability to pay. Don't dismiss the quality of public education if you really can't afford the private school and they won't give you aid. Read this.
posted by nax at 10:22 AM on February 20, 2008

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