<p>hi guys. i am receiving fafsa right now, getting about 13k from them a year. my parents own a house which is almost paid off and they can take out a home equity loan against their home at 3% int rate and they are thinknig about buying a foreclosed property, a condo for about 90,000. they would finance the whole thing through the home equity loan.</p>
<p>will this in any way affect my fafsa? they are scared that if they make this "investment" that i might not be eligible for fafsa anymore!? is that true? should they stay away from purchasing this condo?</p>
<p>thank you all so much. this is very important for me and thank god i found this website :)!</p>
<p>First of all, you’re not getting anything from FAFSA. FAFSA is only an application for financial aid. What type of aid are you actually getting - Pell, ACG/SMART, Stafford/Perkins loans, work study, state aid, institutional grant/scholarships? This should be spelled out in detail on your award letter - if you can find and post this info you’ll get better responses.</p>
<p>FAFSA disregards equity in your primary home but will require reporting equity in any other property your parents own. So, it will likely raise your EFC and may affect your financial aid, depending on what you’re actually being offered. Parents do have an asset protection allowance, which is based on the age of the older parent, but if they have any other assets, outside of a home and retirement accounts, this may not be enough to shield much of the equity they’ll have in the new property.</p>
<p>sk8ermom is right – you are NOT getting any money from FAFSA. FAFSA is only a way of establishing your eligibility for specific Federal aid programs such as Pell grants, Stafford loans, work-study, etc. Depending on the particular programs that your $13,000 is coming from, it is very likely that your parents’ proposed investment would have some impact.</p>
<p>I am getting Pell, state aid and other aid, and i do not have to repay any of them. I am also getting about 10,000 in scholarships.</p>
<p>So, it will count against the EFC, even though they will be tapping into the home equity line of credit on their existing house and purchasing a new one? Shouldn’t those two cancel each other out…as we’ll owe 90,000 to our home equity and the condo will be purchased for the same 90,000?</p>
<p>I am so sorry, I dont know anything about this stuff but my parents told me to research and let me them know what I dig up!</p>
<p>Federal Pell Grant Accepted $2,650.00 $2,650.00
State of IL MAP Grant (Est) Accepted $1,987.20 $2,484.00 $4,471.20
Excellence Grant Accepted $752.00 $752.00</p>
<p>Need based financial aid does not take into consideration debt, only assets. If purchased, the condo would be an asset and if owned free and clear would likely increase your efc significantly. Advise your parents to consult an accountant who is familiar with financial aid before making this decision.</p>
<p>No, they do not “cancel” each other because FAFSA never asks anything about your primary home. They do require you to report the net asset value of other property. So, if your folks took a mortgage to buy that property instead of using home equity, the NAV would be much lower. Here’s a link to the formula guide so you can see how it works in detail:</p>
<p>It’s very likely this new asset would result in the loss of Pell grants but you can run an EFC estimate online to see and post what your new EFC would be. Idk if your state aid is based on FAFSA, but that may go too. If the Excellence Grant is need-based it may change, sounds like a school-based award. Merit based scholarships should be unaffected.</p>
<p>Ok thank you all for your help! it seems as if I will not be going this route.</p>
<p>What would happen if my parents loaned the money to a friend to buy this condo for them? Would that work? I think they will have to charge interest on that 90,000 loan at like 1% rate, so increasing the earnings by 900 bucks, would that have an impact? I can’t see it having impact, correct?</p>
<p>The condo would be in the friend’s name and your parent’s home would be mortagaged? Not a good idea, imo. What is the purpose of buying this condo?</p>
<p>It is a good deal. They want to eventually give it to me when I finish college.</p>
<p>When I said a friend, I meant my dads brother. It is safe. He won’t screw them over or anything, but I read that my parents would have to charge him some minimal interest because IRS wants it that way.</p>