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SEPP Distributions & The FAFSA

(Q.) My husband took a buyout several years ago, and we were advised to take SEPPs payments from the pension to help get us through his subsequent time of no employment. The trick was, we had to keep taking payments till he turned 59.5. These payments represent half our income, and make us look far more well off than we are. Now my husband is turning 59.5, and thanks to the economic downturn we’ve been told we MUST lower the amount we take out or it will all be gone when we’re actually ready to retire! Is there any way we can explain to a school that these payments artificially inflate our income—we actually earn only 50K a year between us—and that the situation is about to change? There’s no way we can stop the SEPPs payments, live on 50K, and still contribute to our daughter’s education.

helpareaderseries(A.) Financial Aid Offices do have latitude to utilize professional judgment to make adjustments to your FAFSA. They usually have a process/form that you need to complete for them to consider your request (and yes more information is better than none)

In the case of atypical extra income, you will want to talk to the financial aid director at the school your student is most interested in and see if they have a way to review special circumstances. Assuming they do, you can explain your inflated income situation and how it is about to have a drastic change in the current year (assuming you discontinue your SEPP withdrawals).

They may not be able to do a lot but they certainly can’t do anything if you don’t talk with them.

Hope this helps…

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