02 Dec College financial aid for twins

Q. My twin daughters start college in the fall of 2016. They’re going to the same college, and they have access to their deceased grandparents’ educational trust fund. Each has about $140,000, which would cover costs of $30,000 to $35,000 a year. I filled out a mock FAFSA to estimate my Expected Family contribution (EFC), and I was shocked to find it was about $60,000, or 45 percent of adjusted gross income. This includes saying we have two kids in college at the same time. Is this EFC for one child or both?
— Feeling poor

A. Unfortunately, that Expected Family Contribution is for each child.

You can probably blame the high number on the trust fund.

If the trusts are owned by the students, the EFC assumes that 20 percent of that balance can be used for education each year, said Peter McKenna, a certified financial planner with Highland Financial in Riverdale.

You said each student has $140,000 in education trusts, which would result in $28,000 being included in the EFC for the first year for each student.

“Almost half the EFC relates to the trust assets and the other half is attributable to the student’s income and the parent’s income and assets,” he said. “The student element of the EFC will be calculated for each student separately whereas the parental elements will be divided by the number of children in college.”

McKenna said parental income is usually the key driver on the side of the parent contributions, and at your income level, the formula will assess between 22 and 47 percent of your after-tax income as available for education.

“Assuming $100,000 of after-tax income the EFC based on parental income would be between $22,000 and $47,000 per year,” he said.

The parental assets formula will include bank accounts, brokerage accounts and 529 accounts, but it will exclude retirement accounts and the equity in your primary residence, McKenna said.

“Approximately 6 percent of the includable parental assets are deemed available for education each year,” he said.

Still, McKenna said, your daughters are fortunate that their grandparents have provided them with this money to help with college.

“While it may appear that the assets hurt their chances for need-based financial aid, their chances of qualifying for that aid were very low from the outset,” McKenna said. “Most families that are able to survive in New Jersey earn too much to qualify for need-based aid using the FAFSA EFC calculation.”

He said the key for your family now is to determine the cost of attendance at their chosen school and to evaluate the options for meeting any shortfall between that cost and the trust assets.

It never hurts to contact the financial aid office to talk about your situation. It will be able to address your specific concerns based on the financial aid paperwork you submit. But there’s no guarantee.

You could consider a special circumstances appeal if there are factors the school should consider that are not reflected in the calculation, such as a recent job loss or unforeseen extra expenses, said Steven Sirot, co-founder of College Benefits Research Group (CBRG) in Roseland.

“They should also be sure to see if any of the colleges applied to require additional financial aid forms, such as the CSS Profile form,” Sirot said. “Many schools ask for this in addition to the FAFSA to distribute their own grants and scholarships.”

Depending on your family’s financial profile, it may show a lower — or higher — ability to pay than the FAFSA calculation, he said.

“Unfortunately, many families don’t find out until it is too late that their assets are not positioned optimally for college,” Sirot said.

The bright spot is that the grandparents saved to help fund their undergraduate education.

Just make sure to review all options before making a final decision.

“They should be sure to be proactive in budgeting for college to calculate how much could be borrowed (if any) by looking at the sources, interest rates, payment options, etc., so that the school choice fits academically, socially, and financially for the family,” Sirot said.

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This story was first posted in December 2015.