<p>So, if the above is true…even without the asset’s value counting, the rental income plus job income gives you an EFC of about $38k. I’m not sure why you did the EFC without including the rental income at a minimum. </p>
<p>But, as Vballmom says, your EFC is $62k so you’ll need to make plans based on that. </p>
<p>What are your son’s stats? What kind of schools would your children be applying to? Please realize that most schools wouldn’t give you anything anyway…even with an EFC of $38k or less.</p>
<p>With an EFC of $20K or so, you are not going to qualify for any federally funded need based aid, or state funded need based aid. An EFC of $20K or so will just about pay for a public university in your state…especially if you add the Stafford loan to that. </p>
<p>There are some private schools that will meet your full need, but these use the Profile or a school form which scrutinizes your assets and business holdings thoroughly. As noted, business expenses/losses are treated differently by different schools. </p>
<p>You have $500,000 in real estate assets that are not your primary home. I"m sorry…but need based aid is for folks without such assets. Please considier how fortunate you are. There are folks who TRULY have financial need…and do NOT have these kinds of assets.</p>
I have not said that we are not fortunate and all that. We are new to this whole process, and all the schools (even the most expensive ones) tell you not to let the cost prevent you from applying. But if we know we can’t afford School X, why would we bother applying there? It seems like an utter waste of time, money, not to mention getting the kid’s hopes up for nothing. And the fact that we have these assets doesn’t necessarily make them accessible to us to sell or borrow against.</p>
<p>Sylvan, you are very wise to be looking into these college finance questions now. Yes…have your kiddo apply to schools…especially those where merit aid might be available and would reduce the costs without considering your financial need. This could make attendance at a school possible for your kiddos at a cost similar to your state university. I don’t know your state…but also check your state U’s. These can be a terrific financial deal for some students too.</p>
<p>We live in Western New York. Unfortunately, our son is considering a religious studies major, and the only state school with anything approaching that is Geneseo, which has a rather weak minor through the philosophy department. He liked the campus when we visited, but it is quite competitive (36% acceptance?) to get into. Our other choices are mainly Catholic schools, which seem to run around $25K for tuition, but quite a few have merit aid.</p>
<p>Son liked Cornell too, and I personally loved U of Rochester, but both seem unlikely financially.</p>
<p>Well…just remember that in addition to the tuition costs…there is housing/board. DD will graduate from a Jesuit school in June…Cost of attendance approaches $50K per year. Many of these schools do offer merit aid to attract high performing students. Hopefully your son will garner such an award. There are Catholic colleges that meet full need (Georgetown, BC) which are competitive for admissions…but I don’t think they give merit aid.</p>
<p>The bottom line to colleges is that you have assets you could liquidate if you wanted to. They don’t care if it provides your income or is your retirement. Until it’s gone and not providing income, they count it. Many, many families are in this boat. Their children choose state schools or ones with merit aid. </p>
<p>You are absolutely right to come to grips with this before your kids apply.</p>
<p>sylvan most of us here have gone through the 5 stages of grief regarding our EFCs and sympathize with you. You’re very early in the process. When you get to Stage 5 (acceptance) you might find that there are a large number of colleges that meet your son’s interests, offer merit aid, and are within reach financially for you. Cast a wide net - you might be pleasantly surprised at what you and your son might discover. </p>
<p>As thumper, redroses and others have said, you’re wise to begin this process now when your son is a junior.</p>
<p>*and all the schools (even the most expensive ones) tell you not to let the cost prevent you from applying. *</p>
<p>You’re wise to ignore schools that say that. They say that because they want the applications. It’s their job to get as many applicants as possible. </p>
<p>Since you have a high EFC, you need a strategy and that strategy will largely be based on your child’s stats.</p>
<p>If your child has Cornell-quality stats, then all is not lost. There are many schools that will give him generous merit scholarships. </p>
<p>You say that he’s interested in Religious Studies. Does he plan on becoming a minister or priest? If so, there are church-associated colleges that will likely give him generous merit. For Catholic schools, mid-tiers and lower will likely be quite generous with merit money. Schools like UDayton, St Louis U, Spring Hill, Seattle U, etc…to name a few. I would avoid the top tier Catholics - like Georgetown, ND, Villa Nova, Fordham, etc, because they either don’t give merit or won’t give enough. Marist is no longer Catholic, but it probably still has a religious studies dept and it gives good merit for good stats. </p>
<p>As Thumper mentioned, you can’t just look at tuition. Room, board, books, fees, & misc costs can add another $15k to costs. Many privates, including Catholic ones, are costing $40-50k plus per year. </p>
<p>How much can your family contribute each year?
what are your son’s stats? With that we can make better recommendations.
What is his career goal with his major?</p>
<p>This issue is becoming a common one as home equity programs are being closed out. Families that have poor credit or diminished job incomes are not as able to borrow against their homes. They also may not be able to get much for their houses right now. </p>
<p>The good news is that the value of such an asset has greatly diminished. Houses that are over a million dollars in this area are not selling because there is now a moratorium on jumbo mortgages. So that brings down the equity value in a house greatly. Perhaps enough so that you really don’t have much or even any equity in the house. We have friends who just sold their house, and they lost money on the sale even with the tax credits that are around now. So their house on an asset statement had no equity. </p>
<p>Anyone who owns property and is using the rental income from it as their living expenses with the equity in the property as their retirement plan, has been at a disadvantage in the financial aid process. It puts you in a real dilemma. To sell or borrow against the property drops your family income as well as lowering your retirement. Quite unfair since if that money were in a company pension plan, it wouldn’t even have to be reported .</p>
<p>There’s no moratorium on jumbo mortgages, they’re just harder to get. They’re not bought by Freddie Mac and Fannie Mae, and not insured by the FHA, so the market is limited to the volume of loans that banks are willing and able to keep on their books. But even this has begun to loosen up recently.</p>
<p>As I suggested above, if this rental property were truly a retirement investment, it could have been purchased within an IRA. </p>
<p>Both home equity (of the family’s primary home) and IRAs are excluded from FAFSA reporting.</p>
<p>I do agree that home equity loans and lines of credit are nearly impossible to obtain, even with stellar credit. People who already have them risk having them pulled out from under them with little warning.</p>
<p>Sylvan, you have an asset which is produces income and currently is not liquid. You cannot borrow against it – but you can take an unsecured PLUS loan for whatever amount you might have borrowed if you could. So the financial aid system helps you out by providing another avenue for borrowing. </p>
<p>Whether it is a good idea to borrow or not is a different question – but the point is that if you could afford to borrow against the property (and make payments on that loan), then you can afford to borrow a similar amount with a PLUS loan. </p>
<p>Whether the jointly held property is liquid or not, your ownership interest in the property puts you in a better financial position than someone who does not own similar property.</p>
This is a pretty sophisticated strategy, and has numerous pitfalls- the biggest being that it can be extremely difficult to finance properties held in an IRA, and whatever %age is financed is not shielded by the IRA.</p>
<p>And if you need the income now, as well as when you are retired, this strategy doesn’t work.</p>
<p>Some ideas:</p>
<ul>
<li><p>defer maintenance and do whatever you can to increase/maximize cash flow. This won’t lower your EFC but will provide more cash to pay for college</p></li>
<li><p>accelerate repairs and improvements, this will reduce cash flow and improve your EFC. Be aggressive (although don’t cheat) on your taxes; for example, deduct re-shingling a roof as a repair instead of depreciating as an improvement (there is case law to support this).</p></li>
</ul>
<p>Your brother-in-law may not care for these strategies.</p>
<ul>
<li><p>Wrap a business structure around it. Assets in a family business with less than 100 employees are not counted on FAFSA (although they will be for private schools that use the CSS Profile). This is tricky and will likely require professional help.</p></li>
<li><p>Get a third party to give an estimate of the value, perhaps you are over-estimating its value. In my area, rental property values have been HAMMERED in the last few years; 40-50% drops are not uncommon, particularly if there are a lot of foreclosures nearby.</p></li>
</ul>
<p>Sadly though, none of this may be enough to lower your EFC enough to get any need-based aid.</p>
<p>Thanks for the financial advice, n. They started buying these properties in 1987. Some of them were originally nearly 100% leveraged. They have done like-kind exchanges with some of them. It all gets pretty complicated, and we don’t know much about fancy strategies, although the idea of the family business assets is interesting, since they do provide some of our income at this point. </p>
<p>In our area, rental property values are determined largely by CAP rates, the standard being around 9.5 or 10%. There’s really no way to defer maintenance when you are talking about the scale involved. It puts you into a whole 'nother ball park.</p>
<p>Our son has a modest 91 average right now. He hasn’t taken the SAT yet, but on the practice tests he is getting around 1250 CR/M and 1980 total, so he is not in superstar territory.</p>
<p>Based on his current gpa (unweighted?) and projected test scores, he’s probably looking a bit too high with Geneseo, Cornell, and UofR and, within that group, I believe only UofR offers merit aid anyway. I would suggest schools like LeMoyne in Syracuse - Jesuit, offers religious studies, COA is under $40K/year, and he’s likely to get a decent ($15K/year) merit scholarship. I know several students at LeMoyne who love it there and many students move off campus after soph year since rentals are both abundant and fairly cheap.</p>
<p>For SUNY’s, you might look at Fredonia and New Paltz - both have religious studies departments, and at least offer that as minors, and he should be right around the mid-range for admissions there. Fredonia offers some merit scholarships that he may qualify for, though I believe they’re also based on EC’s. Some of the SUNY’s are good about letting kids design their own majors, so that’s another possibility worth investigating. It’s also a good idea to look at schools with a broader range of programs since, as we all know, incoming students often don’t really know what they’ll like once they’re actually in college. Maybe a good anthropology/cultural studies program would be a back-up plan for him?</p>
<p>sylvan, with regard to school choices (not with finances in mind)…does your school use Naviance (in the guidance department)? Using that can give you a guestimate on your youngsters possibility of acceptance at a school.</p>
Not trying to give advice, just throwing out some things we looked at when the EFC anvil landed on our heads last year. :)</p>
<p>In the areas we have our rentals, values are driven more by the quantity of foreclosures nearby and how much deferred maintenance there is. You can find decent small buildings (4 units or less) with CAP rates in the 20’s and GRM’s in the 50’s. Financing is a challenge, though.</p>
<p>The effect of our rentals on our FAFSA EFC was not super-bad for us because the crashing RE market wiped out a lot of our equity on paper, but we got slayed on the CSS Profile. It put private schools that didn’t offer merit aid out of reach without crazy amounts of loans, and that was a bitter pill to swallow.</p>
<p>Our son has a modest 91 average right now. He hasn’t taken the SAT yet, but on the practice tests he is getting around 1250 CR/M and 1980 total, so he is not in superstar territory. *</p>
<p>Based on his current gpa (unweighted?) and projected test scores, he’s probably looking a bit too high with Geneseo, Cornell, and UofR and, within that group, I believe only UofR offers merit aid anyway. I would suggest schools like LeMoyne in Syracuse - Jesuit, offers religious studies, COA is under $40K/year, and he’s likely to get a decent ($15K/year) merit scholarship. I know several students at LeMoyne who love it there and many students move off campus after soph year since rentals are both abundant and fairly cheap.</p>
<p>Yes, he should still apply to Geneseo. He should also apply to Le Moyne and a few other Jesuit and Catholic schools that are good schools, but not highly ranked. </p>
<p>The other schools you mentioned will not probably be doable because they will expect you to be full-pay and won’t likely give merit for his stats. </p>
<p>However, in the meantime, have him practice more for his SAT, and also take the ACT (some do better on that). At this point, your only hope is that he go instate public or get scores high enough to get big merit at some mid or lower tier privates. </p>
<p>Keep in mind that many privates are costing between $40-55k per year, so a $10k per year merit scholarship isn’t going to make these schools affordable. You would need to find schools that would give him a lot more.</p>
When you say lower tier, do you mean “not top 20”, or do you mean Tier 3/Tier 4 schools? Everything we are considering so far is Tier 1 (or in the now vanished Tier 2) - is that a mistake do you think?</p>
<p>He is practicing every day for the SAT, which he will take in June. He is dismayed by all this practicing, which doesn’t seem to be helping anything.</p>