Source
r/Fire•
Asynchronous2e

FIRE and College Planning - changes to Simplified Needs Test for real estate FIRE'd parents

I'm FIRE'd and not active in this space anymore, but for real estate investors and others who have planned to fund college with need-based aid by keeping their income low, this information is essential. The rules of the FAFSA for college financial aid are being completely overhauled for students starting or continuing college in the 2024-2025 school year.

Interesting changes to the FAFSA EFC (now SAI) Simplified Needs Test (SNT) are coming. The rules for the SNT - which governs when assets don't need to be reported (and are not considered) - are now more stringent, and the federal programs to automatically show need have changed.

The means-tested federal benefits no longer include free & reduced lunch but now include federal housing assistance (SSI, SNAP, TANF, WIC, and Medicaid remain the same).

The old IRS Schedule 1 rule is discarded in favor of the following: You are NOT eligible for the Simplified Needs Test if you file any of the following schedules: A (itemized deductions), B (interest/dividends >$1,500), C (business gain or loss IF greater than $10,000), D (capital gain/loss), E (real estate gain/loss), F (farming), or H (household employee taxes paid by taxpayer). For my FIRE (financial independence retire early) friends, that schedule E rule is going to be a huge blow.

This information comes from the California Student Aid Commission: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.csac.ca.gov/.../summary_of_changes_for_the...
I am NOT an accountant and am not giving legal advice, just information.

Posted Apr 16, 2023, 6:27 PM UTC

168
OlsenOut•

It’s almost like they made the system work more closely to how it should…

12
Asynchronous2eOP•

Absolutely. This closes SO many loopholes and is only part of big changes - in how divorced parents are treated (no longer a benefit for rich people like me to divorce), how business owners and farmers are treated (because, after all, businesses and farms are assets!). But it's going to be devastating to some who had planned on the old formula, and with very - really no - notice. The tax year this all takes effect is 2022, which has already ended. Interesting times...

4
FoeDoeRoe•

Can I give a wholehearted "fuck you" to high networth people planning on getting fin aid for their kids? Because they deserve it.

6
charleswj•

Do you hate when those people qualify just this one benefit or all benefits they're entitled to?

-2
Zphr45, FIRE'd 2015, Friendly Janitor•

Anyone can also qualify for maximum aid and exemption from all asset reporting via the new primary AGI/FPL auto-max rule. All you need to do is report an AGI of under 175% of your household FPL for two-parent households or under 225% of FPL for single-parent households. Very simple just like the ACA.

Hit the AGI/FPL target and the vast majority of the FAFSA can be skipped while getting a $0 SAI and a max Pell grant.

3
Asynchronous2eOP•

I hope you're right and I'm wrong! Your way works better for me.

0
Zphr45, FIRE'd 2015, Friendly Janitor•

We're both right. The AGI/FPL rule comes first, then the SNT, then full testing. The AGI/FPL path is a new addition.

Goes into effect this fall, though DOE is still bitching about being rushed after being given an extra year. If you're concerned or would like to check it out for yourself, then I can link you a copy of the FAFSA Simplification Act and give you the page citations to look on. Or just look around online for FAFSA and FPL.

4
throwaway40763651•

As someone with two kids in college I am shocked at how many smart people think they’ll be eligible for lots of aid. I think folks must run the calculators and see the “expected family contribution” and think they’ll get grants for the balance. That’s….not how it works.

1