<p>The financial aid packages I have received from colleges so far have been less than spectacular (i.e., empty, pay full tuition), but this is understandable as my family has several bonds and a Dreyfus fund from my grandmother that could easily cover my first semester of college, and my parents have ~$150k of savings in the bank at the moment. My mom works as a nurse and my dad is a landlord who manages our rental properties, and their gross income is below $60,000; the business is worth ~$1 million but the mortgage on one of the properties is $4000+ a month and keeps losing money. My parents plan to use all the savings we have in the bank in order to pay it off next year -- specifically, May 1, 2009. This is, obviously, a couple weeks past the date most schools set for reapplying for financial aid -- so our savings account will have grown from this year until then, but when May 1 hits, it will be practically empty.</p>
<p>Side note: Our EFC as per the FAFSA was around $18k...</p>
<p>Questions: I have a lot.
[ul]
[<em>]Although I did not qualify for aid this year, will the loss of the money from the Dreyfus fund and savings bonds (since they will pay for this year) make financial aid from colleges possible next year?
[</em>]Will colleges take the $150k+ in the bank into consideration as a solid number and assume we will be using that to pay for my education, or would it be possible to appeal to finaid -- in other words, is that $150k simply a number on paper that can't be changed, or can we ask that our circumstances be taken into special consideration?
[<em>]Will it be possible to appeal after May 1, when the loan has been paid off?
Will we always be judged not to have need simply because we have so much money in assets?
[</em>]Does not qualifying for aid this year jeopardize my chances for receiving aid in future years?
[/ul]</p>
<p>Thanks for any help you can offer; my parents and I are very anxious about the financial aid process right now, and I would really hate to enroll in a school and then find out I can only afford it for the first year.</p>
<h1>1. You apply for financial aid each year that you are in college. Each year the school takes into consideration the income and the assets of both the family and the student.</h1>
<p>
[quote]
Will colleges take the $150k+ in the bank into consideration as a solid number and assume we will be using that to pay for my education, or would it be possible to appeal to finaid -- in other words, is that $150k simply a number on paper that can't be changed, or can we ask that our circumstances be taken into special consideration?
[/quote]
</p>
<p>Yes, the colleges think that some of this $150,000 in savings can and should be used to pay for your education. Since your parents know (or should have known) that they will be paying toward your education, if they make a choice to spend their monies on other things, the school is not going to automatically make up the money by increasing your financial aid.</p>
<p>
[quote]
Will we always be judged not to have need simply because we have so much money in assets?
[/quote]
</p>
<p>Unless you were to lose all of your assets, as long as your situation does not radically change, you can expect your financial aid to remain consitent year over year.</p>
<p>
[quote]
Will it be possible to appeal after May 1, when the loan has been paid off?
[/quote]
Unless the loan is called, in which case it must be paid off, paying off the loan will have no effect on your financial aid for that year. Paying off the loan is a choice, and schools will consider that your parents could have chosen to use that money for your education instead. They'll treat it similarly to the contributions people make in a particular year to an IRA/401K. "Earmarked" savings, unless in a specifically protected account such as an IRA/401K, are considered to be available, regardless of what the parents intend to do with the money.</p>
<p>The following year, however, the assets are gone. Once they're gone, colleges can't consider them.</p>
<p>However, the rental properties will continue to be assets and colleges will assume that some of the income is available, and that your parents can borrow against the property to come up with money to pay for your education.</p>
<p>Assets are always considered in financial aid calculations.</p>
<p>Also, please remember that, for 2008-2009, your financial aid award was based on 2007 numbers. Your aid for 2009-2010 will be based on 2008 numbers, so paying off the loan in 2009 will have no effect; your 2008 numbers will still show the assets. Loss of the assets will not affect your aid until the 2010-2011 school year.</p>
<p>You need to sit down with your parents and run the various FAFSA and CSS calculators available on the web (you can start with the ones at <a href="http://www.finaid.org)%5B/url%5D">www.finaid.org)</a>. You can change various factors as you run several estimates to see if there is a way to optimize your position vis a vis financial aid. HOWEVER, you have to remember that what is good for you for financial aid may not be what is best for your parents' tax, retirement, or other financial planning.</p>
<p>Okay, thanks folks. We've run the numbers through a calculator and figured out that the most our EFC could go down is about $10k below the prices of my dream schools, but that would be for third and fourth year and I'm afraid that they'll decide to meet it with loans. Ah...</p>
<p>A couple more things, though. In this</a> post, it says "Somehow, because the farm hasn't shown a "profit" of late (he invests his profits right back into the farm) and he still owes on it, his son has qualified for a very nice "need-based" award from the same school where my older daughter received zero." Now, it's probably bad to take this out of context because the poster was ranting about how his friend's affluent lifestyle somehow put him in the boat for aid, but my parents' business had an income of -$14,000 last year -- yes, negative -- and they owe money to the tune of about $300,000 on it. Does this really affect FA decisions? When we were plugging numbers into the online calculator, the $300k didn't seem to come into play anywhere.</p>
<p>Paying off the mortgage is next May will save us a huge amount of money, and my mom's argument is that owing $100k in student loans is better than owing $265k on the business. This might be true, but I don't know if I'll be able to handle that much debt upon graduation at the age of 22, and plus there's grad school to think about.</p>
<p>It's been a rough past couple days so far; this is not a pity parade, and so far people have been level about it...but as I look through other threads, I ask that those who only want to offer biting sarcasm and "suck it up, this is reality" stay away. Would laying out the numbers and explaining to schools that if we receive no aid or only loans for the next four years it would be necessary to go into MASSIVE debt to attend make any sense at this point? I know it's mostly because of our assets, but with the slump in the housing market, there's no way they could be sold at this point, and they're basically my dad's job.</p>
<p>Also, I wish mortgaging worked in real life like it does in Monopoly. Bah.</p>
<p>Discussing these issues with the financial aid offices couldn't hurt, and you'll get more definitive information than you will on an anonymous message board, even one as good as CC.</p>
<p>Haha, best answer right there, Chedva...I'm just hoping that people who've had experience with these things might step forward and share their stories. Plus my dad's out working today and my mom's sleeping since she just worked last night, and I don't want to call FA without having them around...so I'm mostly killing time here. ;)</p>
<p>Ir sure seems like your parents would be better off taking that $150k out of savings and paying down the mortgage- the big question is whether your Dad's business can count as one that is not listed on FAFSA- the exclusion of businesses is a new thing, so people, even in finaid offices are not completely aware of every tiny detail in how things work.</p>
<p>So, to me, the question you should be asking is whether his Real Estate business should even be listed and if not, did you even fill out this year's FAFSA correctly? If that is the case. then they should pay that $150k in 2008 so that it is not an asset for the next FAFSA, May 2009 is too late.</p>
<p>I was assuming (possibly wrongly) that the business was not listed as an asset. If it were the mortgage would have reduced the asset value anyway so paying it off would not make a difference.</p>
<p>For FAFSA treating rental properties as a small business has to meet stricter criteria. You have to provide other services.</p>
<p>
[quote]
Investments</p>
<p>Rental properties. Generally, rental properties must be reported as investment assets rather than as business assets. To be reported as a business, a rental property would have to be part of a formally recognized business. (Usually such a business would provide additional services, such as regular cleaning, linen or maid service.)
<p>Each of our rental properties is its own LLC and thus a business, and the only reason my parents are waiting until 2009 is because they'd have to pay capital gains tax if they paid it off any earlier...</p>
<p>In the end, it seems that borrowing against the properties would cost more than the student loans...joy! Oh well...at least I can feel good about my middle-class family having the guts to support me through college and being able to pay for a good chunk of it myself. Looks like that's the bottom line...</p>