Just In Case

Case Studies That Teach Valuable Lessons

Preparing financial aid forms does not have to be frightening but can be challenging if families do not plan. Here are a few case studies of mine to illustrate what I mean.

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This Wasn’t Music to His Ears

An aspiring student convinced his divorced dad that he wanted to attend a private college that offered a very intense program to study music. There wasn’t much discussion about finances or responsibility, as the dad did not want to disappoint his son, with whom he shared custody with his ex-wife. She was financially out of the picture. Dad had no savings besides a large tax-sheltered from which he took a full distribution to pay for college. Dad assumed the student was doing well until he was expelled from college. His son did not update him about his grades or disciplinary actions during the school year until it was too late. Dad was left with minimal savings, and the student had to make it alone.  Lesson learned. Families must discuss careers and finances before committing to college to avoid emotional and costly decisions.

Don’t Bank On It

A new client decided to take out a home equity loan so he would have cash on hand to pay for college before submitting the FAFSA. I explained that borrowing such a large amount in advance inflated his assets on the FAFSA and decreased his eligibility for financial aid. Lesson Learned: He should have realized that the FAFSA recognizes holdings at the time it is prepared and submitted.

Good Son Was Too Interested in Helping Mom

While assisting a family with their FAFSA, I realized that the parent had a moderate income that would qualify him for some aid. However, his tax return showed high-interest income. He explained that his mother was moving to an assisted living facility and asked him to conceal most of her assets by allowing him to invest them in his name. This could significantly reduce her payments. The issue was that the money was in an account under her son’s name and Social Security number. He maintained that it wasn’t his money, even though it was invested in his name and Social Security number. The  Lesson learned: You cannot have your cake and eat it too.