Does $25K in assets mean anything in reference to the CSS profile? For example, if I used a CD to payoff a car loan, I reduced my assets by $25K for financial aid purposes.
So to give a little background, a car loan is normally what is called consumer debt, and under what is called the Institutional Methodology, consumer debt is not normally used to offset assets. However, you can report it as a special circumstance and see if you can get an adjustment. See here for more:
https://secure-media.collegeboard.org/digitalServices/pdf/highered/consumer-debt.pd
But absent such circumstances, you might well be able to reduce your EFC by using an assessable asset to pay off a car loan.
However, you would want to evaluate that holistically. Selling assets can have tax implications. Selling assets can have opportunity costs. And so on.
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Are you thinking it would be good to spend $25,000 on a new car in hopes that reducing your savings would net your kid more need based aid?
If so, I would suggest you not get a car unless you were planning to do so anyway.
Need based financial aid is based largely on parent income. That $25,000 would add under $2000 to your family contribution. Is that really worth it?
The smarter thing to do is look at the net price calculators on the college websites for colleges under consideration. Results should be considered an estimate only. You can run the NPC with and without that $25,000 in your savings and see what the net cost difference estimate might be for each college under consideration.
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Thanks, this will be the first time I’ve completed the FAFSA or CSS. I don’t think $25K in assets would make much of a difference in need based aid, but I always try to legally/ethically reduce my costs.
Many colleges ask what cars the family owns in their specific questions on the CSS Profile…year, make, model, current value.
So it’s a wash for the schools who ask about your cars…cash balance (CD) decreases $25K but your car asset balance increases $25K (although each year the car’s value will decline)
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I didn’t realize they delve into your assets that much
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@Mwfan1921 some colleges do ask for the values of your cars, but there is no evidence they use this in their need based aid calculations.
We only had one college out of about 35 (multiple kids) ask about our cars.
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We already have the cars with loans, just considering paying them off early. I have run the NPC but it is for the previous year, not sure when the new one will be available. The CSS profile will be due Nov 15. Just looking for options to better my position.
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I note for this to matter in the OP’s scenario, they would also have to ask about car loan information, either directly or by implication (such as by asking about net asset value). But obviously that could happen.
Generally if it’s in the college’s CSS Profile questions they are using it in their EFC formula (car questions are not a baseline CSS question…at least they didn’t use to be, it’s been many years since CB made the baseline CSS profile EFC formula public)
Some colleges ask these extra questions to try to stop people from gaming this system, in this case to prevent people from paying $X to buy an expensive new car in order to reduce their cash balance on CSS filing day.
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Also, many colleges assess parent assets at about 5.6 percent of their value, so 25k will likely “lose” you $1,400 a year. CSS Profile schools can use a higher percentage but none of my kids’ schools did.
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Exactly…is any financial gymnastics worth saving about $1400 to you? And might not net you a dime more in need based aid depending on your other financials?
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Completely agree; I’m just trying to understand the process better. I’ve been searching the internet and haven’t found a very good tutorial, I’ve found a few decent ones.
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Just to add some context, I note the single largest common example of this is potentially paying down or off a mortgage with assessable assets.
Just like with the above conversation, you first have to determine whether the college in question will assess net home equity, and if so how. The answer could be it will assess it the same as other parental assets, in which case this wouldn’t help. But with many CSS colleges, and all FAFSA colleges, this could actually make a difference.
Again, selling assets to pay down a mortgage early is not a decision to make lightly, and you should consider it holistically. But I am noting this to indicate to the OP this kind of conversation is not uncommon, and some families do make changes in their financial position to help with financial aid calculations. As usual, there is nothing unethical about that, but you have to be careful to make sure the benefits actually do outweigh the costs.
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THIS.
I will quote another poster but I’m sure I won’t get it exactly right so I will tag that poster too.
Don’t do anything financially that you wouldn’t be doing anyway. Don’t just do things for financial aid purposes. @blossom could you please elaborate!
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Our S24 is an only child, we told him he could attend any school he can get in.
An article in Money magazine 20 years ago stuck with me. A HS student wanted to attend Brown, her father said you can go but you’re spending your inheritance. I told my son similar words, and we would probably won’t help much with a masters degree.
He wants to ED to a private and we are all for it. Just learning the ins and outs of CSS
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@PL3 your student is so lucky that you can give him the gift of an undergraduate education. That is very special.
We did the same and also bowed out on tuition for grad or professional school. We figured we did our share.
Looking forward to hearing about your son’s journey on this forum someplace!
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Our goal was for him to not have any student loans, at least for undergrad
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