Saving for law school a losing game? (Income v. Assets)

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
andanother
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Saving for law school a losing game? (Income v. Assets)

Postby andanother » Fri Feb 03, 2012 9:44 pm

Apologies if this has been addressed elsewhere. If it has, I could not locate it.

I have been quite thrifty in saving for law school over the past few years, but am wondering if this was a mistake. At top schools (think top five or so), am I likely to receive less need-based grant aid because of my frugality? I had thought that my savings would not be a detriment since schools would also see my salary. In other words, I had assumed that another incoming student, say Bob, with the same salary but far less savings and all else being equal, would receive similar need-based grant aid as me, because of the comparable income. But would this hypothetical Bob (who spent all their scrilla on expensive clothes and five star meals while I scrimped and saved) actually receive more need-based aid than me?

Appreciate everyone's thoughts. The sooner the better so I can start fine dining/designer shopping if responses so demand! :)

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IAFG
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Re: Saving for law school a losing game? (Income v. Assets)

Postby IAFG » Fri Feb 03, 2012 9:46 pm

Yes, it's likely that you will receive less aid at schools that legitimately give out need-based aid, which are indeed generally T6 schools.

landla
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Re: Saving for law school a losing game? (Income v. Assets)

Postby landla » Sat Feb 04, 2012 11:27 am

Unfortunately, the way that the entire US higher education system is set up, those that save are punished. While obviously there are some that don't save for reasons beyond their control (such as unemployment) and those people clearly need the aid(and I'm not trying to be inflammatory here, just factual), it does punish those that save and also need the aid.

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Tiago Splitter
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Re: Saving for law school a losing game? (Income v. Assets)

Postby Tiago Splitter » Sat Feb 04, 2012 12:44 pm

landla wrote:Unfortunately, the way that the entire US higher education system is set up, those that save are punished. While obviously there are some that don't save for reasons beyond their control (such as unemployment) and those people clearly need the aid(and I'm not trying to be inflammatory here, just factual), it does punish those that save and also need the aid.


This is true on some level, but need based aid barely makes a dent in the cost of attendance for even the poorest students at most law schools.

03121202698008
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Re: Saving for law school a losing game? (Income v. Assets)

Postby 03121202698008 » Sat Feb 04, 2012 1:28 pm

Tiago Splitter wrote:
landla wrote:Unfortunately, the way that the entire US higher education system is set up, those that save are punished. While obviously there are some that don't save for reasons beyond their control (such as unemployment) and those people clearly need the aid(and I'm not trying to be inflammatory here, just factual), it does punish those that save and also need the aid.


This is true on some level, but need based aid barely makes a dent in the cost of attendance for even the poorest students at most law schools.


This. Most students are insolvent and all are independent under FAFSA rules. Everyone would qualify for it.

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Geetar Man
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Re: Saving for law school a losing game? (Income v. Assets)

Postby Geetar Man » Sat Feb 04, 2012 1:34 pm

Pull your money out and save it at home for a while.

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dingbat
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Re: Saving for law school a losing game? (Income v. Assets)

Postby dingbat » Sat Feb 04, 2012 5:19 pm

blowhard wrote:
Tiago Splitter wrote:
landla wrote:Unfortunately, the way that the entire US higher education system is set up, those that save are punished. While obviously there are some that don't save for reasons beyond their control (such as unemployment) and those people clearly need the aid(and I'm not trying to be inflammatory here, just factual), it does punish those that save and also need the aid.


This is true on some level, but need based aid barely makes a dent in the cost of attendance for even the poorest students at most law schools.


This. Most students are insolvent and all are independent under FAFSA rules. Everyone would qualify for it.


Except that for many (most?) law schools need based aid is not based on FAFSA rules.
For example, Columbia law school includes parental income for all students*, regardless of age, when determining need.

*note: a waiver may be obtained under extraordinary circumstances

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dingbat
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Re: Saving for law school a losing game? (Income v. Assets)

Postby dingbat » Sat Feb 04, 2012 5:26 pm

andanother wrote:Apologies if this has been addressed elsewhere. If it has, I could not locate it.

I have been quite thrifty in saving for law school over the past few years, but am wondering if this was a mistake. At top schools (think top five or so), am I likely to receive less need-based grant aid because of my frugality? I had thought that my savings would not be a detriment since schools would also see my salary. In other words, I had assumed that another incoming student, say Bob, with the same salary but far less savings and all else being equal, would receive similar need-based grant aid as me, because of the comparable income. But would this hypothetical Bob (who spent all their scrilla on expensive clothes and five star meals while I scrimped and saved) actually receive more need-based aid than me?

Appreciate everyone's thoughts. The sooner the better so I can start fine dining/designer shopping if responses so demand! :)


Need based aid is based on 2 things:
1) what you have
2) what you can get

Law schools state something along the lines of that they assume that you will be saving up before starting law school.
Need based aid requires proving that you:
A) don't have the money (no savings, no equity)
B) cannot obtain the funds (parents, friends, loans)

The (official) attitude is that if you have money in the bank, the you should spend it on your tuition. If you own a home, you should take out a mortgage. Only if you are unable to raise sufficient funds, does need-based aid become a possibility.

03121202698008
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Re: Saving for law school a losing game? (Income v. Assets)

Postby 03121202698008 » Sat Feb 04, 2012 6:37 pm

dingbat wrote:
blowhard wrote:
Tiago Splitter wrote:
landla wrote:Unfortunately, the way that the entire US higher education system is set up, those that save are punished. While obviously there are some that don't save for reasons beyond their control (such as unemployment) and those people clearly need the aid(and I'm not trying to be inflammatory here, just factual), it does punish those that save and also need the aid.


This is true on some level, but need based aid barely makes a dent in the cost of attendance for even the poorest students at most law schools.


This. Most students are insolvent and all are independent under FAFSA rules. Everyone would qualify for it.


Except that for many (most?) law schools need based aid is not based on FAFSA rules.
For example, Columbia law school includes parental income for all students*, regardless of age, when determining need.

*note: a waiver may be obtained under extraordinary circumstances


Yes, this is my point. Getting need-based aid is practically impossible, at least for most. You must show that both you AND your family are poor. Having some savings is only a very small part of the reason OP won't get need-based aid.

andanother
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Re: Saving for law school a losing game? (Income v. Assets)

Postby andanother » Thu Feb 09, 2012 8:47 pm

Is 'gifting' savings to family/friends a potential solution? A way to escape the unjust penalty? Or is this unethical for some reason?

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JustE
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Re: Saving for law school a losing game? (Income v. Assets)

Postby JustE » Thu Feb 09, 2012 8:57 pm

andanother wrote:Is 'gifting' savings to family/friends a potential solution? A way to escape the unjust penalty? Or is this unethical for some reason?


Cash. You need to save cash. You can only "gift" $13k a year anyway. Even if you spread it around to several different people, it's a huge risk. Please don't do that.

You could save your money at home in a safe. I know it sounds crazy, but thats the only way around it. And even then, you will be lying on your FAFSA. They just won't be able to prove it.

Not sure if you're up for that. I'm not saying do it, but it's an option. Good luck.

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IAFG
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Re: Saving for law school a losing game? (Income v. Assets)

Postby IAFG » Thu Feb 09, 2012 9:06 pm

JustE wrote:Cash. You need to save cash. You can only "gift" $13k a year anyway.

...without it counting as gross income. If the giftee hasn't had much gross income this year (e.g. retired grandparent) this could work fine.

Brassica7
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Re: Saving for law school a losing game? (Income v. Assets)

Postby Brassica7 » Thu Feb 09, 2012 9:10 pm

I don't know about how schools calculate need based aid, but one way to lower some of the savings (other than pulling it out of the bank and hiding it in cash, which I am not recommending) is to invest it in retirement funds. If you have not yet, max out all the 401k/IRA/Roth contributions you can make. You should still be able to make back investments attributable to last year's limits, and make new ones that will count towards 2012. I don't know how much you saved, but you might be able to sock away about $34,000 this way in 401k investments. These investments will not be touched by the law schools.

Does anyone know if you can max out the 17k in a 401k and still invest in an IRA?

09042014
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Re: Saving for law school a losing game? (Income v. Assets)

Postby 09042014 » Thu Feb 09, 2012 9:15 pm

I find it hilarious that they count your income for the year before law school, when it's mandatory that you quit that job to go to school.

There shouldn't be financial aid for law school. The T3 who actually give it out, are just ripping off people by charging too much tuition then giving it back to only some students.

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bernaldiaz
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Re: Saving for law school a losing game? (Income v. Assets)

Postby bernaldiaz » Thu Feb 09, 2012 9:24 pm

JustE wrote:
andanother wrote:Is 'gifting' savings to family/friends a potential solution? A way to escape the unjust penalty? Or is this unethical for some reason?


Cash. You need to save cash. You can only "gift" $13k a year anyway. Even if you spread it around to several different people, it's a huge risk. Please don't do that.

You could save your money at home in a safe. I know it sounds crazy, but thats the only way around it. And even then, you will be lying on your FAFSA. They just won't be able to prove it.

Not sure if you're up for that. I'm not saying do it, but it's an option. Good luck.


Wouldn't they be able to see that you randomly pulled all of your money out. There'd a trace of it since you were probably earning some interest. Couldn't they catch you?

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IAFG
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Re: Saving for law school a losing game? (Income v. Assets)

Postby IAFG » Thu Feb 09, 2012 9:25 pm

bernaldiaz wrote:
JustE wrote:
andanother wrote:Is 'gifting' savings to family/friends a potential solution? A way to escape the unjust penalty? Or is this unethical for some reason?


Cash. You need to save cash. You can only "gift" $13k a year anyway. Even if you spread it around to several different people, it's a huge risk. Please don't do that.

You could save your money at home in a safe. I know it sounds crazy, but thats the only way around it. And even then, you will be lying on your FAFSA. They just won't be able to prove it.

Not sure if you're up for that. I'm not saying do it, but it's an option. Good luck.


Wouldn't they be able to see that you randomly pulled all of your money out. There'd a trace of it since you were probably earning some interest. Couldn't they catch you?

Catch you doing what? They only ask what you have right then.

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JustE
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Re: Saving for law school a losing game? (Income v. Assets)

Postby JustE » Thu Feb 09, 2012 9:32 pm

IAFG wrote:
bernaldiaz wrote:
JustE wrote:
andanother wrote:Is 'gifting' savings to family/friends a potential solution? A way to escape the unjust penalty? Or is this unethical for some reason?


Cash. You need to save cash. You can only "gift" $13k a year anyway. Even if you spread it around to several different people, it's a huge risk. Please don't do that.

You could save your money at home in a safe. I know it sounds crazy, but thats the only way around it. And even then, you will be lying on your FAFSA. They just won't be able to prove it.

Not sure if you're up for that. I'm not saying do it, but it's an option. Good luck.


Wouldn't they be able to see that you randomly pulled all of your money out. There'd a trace of it since you were probably earning some interest. Couldn't they catch you?



Catch you doing what? They only ask what you have right then.


Um. They'd just assume you blew it on women and alcohol like the rest of us.

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Nom Sawyer
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Re: Saving for law school a losing game? (Income v. Assets)

Postby Nom Sawyer » Thu Feb 09, 2012 9:46 pm

Clearly the only solution to this is to take out your 20k or 30k and buy gold bars + stash them in ur mattress. You won't even be lying on fafsa when u say you have 0 cash.

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IAFG
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Re: Saving for law school a losing game? (Income v. Assets)

Postby IAFG » Thu Feb 09, 2012 9:48 pm

Nom Sawyer wrote:Clearly the only solution to this is to take out your 20k or 30k and buy gold bars + stash them in ur mattress. You won't even be lying on fafsa when u say you have 0 cash.

This honestly occurred to me but with gold prices like they've been?

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dingbat
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Re: Saving for law school a losing game? (Income v. Assets)

Postby dingbat » Thu Feb 09, 2012 10:11 pm

IAFG wrote:
JustE wrote:Cash. You need to save cash. You can only "gift" $13k a year anyway.

...without it counting as gross income. If the giftee hasn't had much gross income this year (e.g. retired grandparent) this could work fine.


WRONG.

You may gift as much as you want.
However, above a certain limit, you would have to pay gift tax

The way it works is as follows:
You may gift to any person up to $13,000 (2012) without paying gift tax.
Note that this is $13,000 per recipient (per year), not per donor, so if you give to two different people, you may gift $26,0000 without paying gift tax.
On top of that, there is a lifetime gift tax exclusion, which is currently $5,000,000.

Any gift that is both in excess of the annual exclusion ($13,000) and that does not make use of the lifetime exclusion, is subject to 45% tax.

Generally, the gift tax is paid by the donor. However, the recipient may choose to pay the gift tax.
The tax rate is dependant on the estate tax, it is unaffected by either the donor or the recipient's income.

andanother
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Re: Saving for law school a losing game? (Income v. Assets)

Postby andanother » Thu Feb 09, 2012 10:21 pm

What the previous poster says is technically correct, and I understand that these gifts are legal and non-taxable when $13,000 or under, but in terms of law school financial aid, is such a move advisable?

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furcifer
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Re: Saving for law school a losing game? (Income v. Assets)

Postby furcifer » Fri Feb 10, 2012 2:25 am

even in untaxed wouldn't it still count as "assets"? Afterall, if one inherits a house or a vehicle that will count against you an an asset. You'd think ANY money in an account would count as assets as far as need based goes, since it still can be used towards tuition the same way regardless of how you came into it.

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NYC Law
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Re: Saving for law school a losing game? (Income v. Assets)

Postby NYC Law » Fri Feb 10, 2012 2:30 am

If you're able to save enough to make a serious dent in law school then you don't need Need-Based Financial Aid.

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furcifer
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Re: Saving for law school a losing game? (Income v. Assets)

Postby furcifer » Fri Feb 10, 2012 3:44 am

Yeah, if you are the son of a 1%er who is keen on nepotism I guess.
For the other 99% of us, best combine those saveings with a scholarship so the tuition is free and the money is just for rent and the govt will give you foodstamps in most states at that point.

Sucks, but really how many of us roll out of undergrad with a couple hundred K just burning a whole in our pocket? Summer internship/campus book store gig or not.

Of course, there is also being a Pimp/Crack dealer (warning:not advised, you will die a painful ho realted death)

NYC Law wrote:If you're able to save enough to make a serious dent in law school then you don't need Need-Based Financial Aid.

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NYC Law
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Re: Saving for law school a losing game? (Income v. Assets)

Postby NYC Law » Fri Feb 10, 2012 12:33 pm

I'm poor as shit and I didn't get need based. Unless you go to Harvard or another similar school that's good with need based you have to be pretty damn poor apparently to qualify. If you have the means to save 50k+ before you hit 30, then you aren't poor. And there are going to be plenty who need that need based money more than you do.




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