<p>I'm in a situation where none of my assets are liquid and I need to pay some bills.</p>
<p>I made the mistake of taking an amount from my Roth IRA equal to what I had contributed (which does not count as an actual distribution and is not taxed). I have since found out that what I took out of my Roth will actually be counted as income on the FAFSA and/or the Profile and will increase my EFC by enough that I don't want to do it. I've been told I have 60 days to put the money back in my Roth and everything will be as if I did not take it out.</p>
<p>As I see it, my only other options are:
Borrow from my 401k or a take a HELOC on my home that I own outright.
Financially there are advantages and disadvantages to both.</p>
<p>My question is, are there any unforeseen consequences to my EFC by either borrowing from my 401k or taking out an HELOC? I would not have thought that taking my principle out of my Roth would have affected my EFC but it does. Don't want to make another mistake.</p>
<p>Borrowing from your HELOC will reduce the net market value of that home that is attached to the HELOC, so that wiill somewhat reduce that asset figure used for PROFILE. Just make sure that you don’t file FAFSA or PROFILE on a day when you have earmarked funds sitting in an account, because the apps want a snap shot of what your assets are as of that day. Payday is not a good day to file those forms. </p>
<p>Thanks cpt.
Just don’t want any surprises like I got with taking the principle out of my Roth. I really thought I was safe there. I’m glad I happened to see a post on this forum that talked about funds taken from my Roth will count as income.</p>
<p>Making sure I don’t create another problem by taking our a HELOC or borrowing against my 401k.</p>
<p>HELOC is just a credit line. Until you actually borrow, it 's not even anything that shows up on FAFSA or PROFILE. When you borrow, those schools that include primary home equity as part of your assets, usually PROFILE school, have that net home equity amount reduced by that loan. So it helps you there. No effect on FAFSA since it does’t include primary home equity values in assets.</p>
<p>Though some schools MIGHT include 401K balances as assets, again mainly PROFILE schools, most of them only do so if the amounts are truly large. I’ve never gotten a feel for what these schools feel is "large’, however. For schools that would use 401k balances, the loan against the 401K would reduce those assets. Run NPCs for the schools on your list,playing with the numbers and see what it does.</p>