<p>We're thinking of buying a home because the payments would be close to what we're paying in rent. However, we'd have to cash savings bonds that would create 6000 in interest income. Would that affect our financial aid package, do you think? What would you do?</p>
<p>It will increase your taxable income, which could result in an increase in your EFC (parental income, if high enough is hit at almost 50%), but would depend on where you fit in the FAFSA equations. (If you claim mortgage interest deduction, you might not impact the amount of income tax you pay).</p>
<p>On the other hand, it would remove those assets from the FAFSA equation too. Parental assets are hit at a rate of about 5-6%. Would protecting the assets from a recurring 6% hit balance against the possible 50% hit on the interest? If you’re talking $30,000 in savings bonds, over 4 years you just about break even in terms of FAFSA.</p>
<p>If you’re looking at CSS profile, I can’t help you, because each school uses the information in their own ways.</p>
<p>If it would affect FAFSA, can you do it when it would do the least or no damage? Such as after filing FAFSA your child’s junior year? </p>
<p>Does your child attend a school that meets need? If not, it may not make much difference. </p>
<p>Would the $6k in interest income push you into an income that loses aid for your state??</p>
<p>It’s a profile school, so no idea how it would affect aid. I’ve emailed them to ask. May be best to do nothing and hang on for a few more years. Thanks for your input, guys.</p>
<p>$6k in interest income probably means that the principal is a sizable amount. You can consider getting a loan using the bonds as colateral. Perhaps a bank/credit union will allow you to match the loan’s interest rate to the bonds’ rate? You could then cash in the bonds and pay off the loan after the final year of FA.</p>
<p>This way, you lock in the value of the bonds (minus closing fees) now without receiving income until after FA calculations are finished in a few years.</p>