<p>I understand first home equity is off the chart when figuring family income for FAFSA. If I have $50K in bank, am I better of paying down mortgage as opposed to keeping it in the bank. The money in the bank will be part of my assets.</p>
<p>The answer is, “Yes you COULD be better off for FAFSA purposes” THe operative word is “COULD”. The ONLY guarantee that the FAFSA guarantee gives a student in terms of grants is the PELL, only IF the financials are so low that the EFC qualifies him for it. The other thing that it can do is make the Stafford Direct loans subsidized in interest. Anything else is up to the particular school that the student attends.</p>
<p>You can have a ZERO EFC from FAFSA and still get NO financial aid from a school other than the government guarantees. In order to get the full PELL grant amount, you need an EFC of zero and the maximum amount is $5550. It goes down as the EFC goes up. I don’t know of a single school, though there may be a handful, that guarantee to meet 100% of need to all students based on the FAFSA only. So you can go through all kinds of financial contortions, only to find that the school wants additional info or the PROFILE before awarding aid and that they want to know what your Home Equity is. Also, you get a certain amount of asset protection under FAFSA as a parent and asset above that are assessed 5.6% towards the. That $50K in the bank is likely to be below that asset protection amount and not be an issue anyways, and if it is it counts less than $3K towards EFC if it is not. </p>
<p>So it comes down to the rest of your financial profile AND the schools your student is considering as to what the implications, if any of that kind of change can make on college financial aid. These decisions should not be made in a vacuum, disregarding other financial implication in your family’s life. College fianancial aid is not the be all to end all in one’s life.</p>
<p>Every family has an asset protection amount on the FAFSA. Even above that amount, your assets are tapped at 5.6%. </p>
<p>FAFSA only schools do not meet your full financial need anyway. Your family contribution is MOSTLY driven by your income, not your assets. </p>
<p>Most schools using the Profile also tap home equity in their equations. </p>
<p>I would suggest running the net price calculator on the schools’ websites doing the numbers both ways (with paying the mortgage and without). You may find that you are doing these financial gymnastics with no financial gain.</p>
<p>Don’t forget to factor in any tax savings you have by deducting mortgage interest paid.</p>
<p><a href=“http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf</a></p>
<p>Run your own numbers with the above formula. You don’t want to become illiquid and realise you needed that money to pay your portion of college expenses, or family expenses.</p>
<p>For the year of 2013-2014</p>
<p>[IFAP</a> - EFC Formula Guide](<a href=“http://www.ifap.ed.gov/efcformulaguide/091312EFCFormulaGuide1314.html]IFAP”>http://www.ifap.ed.gov/efcformulaguide/091312EFCFormulaGuide1314.html)</p>
<p>FAFSA only schools don’t meet need, so that’s not your big concern.</p>
<p>If you’re married, you have about a $45k asset protection anyway. </p>
<p>What schools is your child applying to? If they’re the ones that “meet need” then they probably use CSS Profile and that DOES look at equity.</p>
<p>FAFSA EFC means little to most schools. Schools are not obligated to do ANYTHING with your EFC other than see if you qualify for any federal aid (which isn’t much). Federal grants are for low income people.</p>
<p>People have to be very careful when the do financial gymnastics. They often wrongly think they’ll get more aid. Usually they don’t get more aid, and then they sadly find out that they NEED that money that they’ve “tied up” somewhere.</p>
<p>*When to start applying for Scholarship?
I’m a high school Junior, when can you start applying for Scholarship to go to a college? Can you please provide some resources, websites to get me started? I have done some google search and I got bombarded with ton of stuff.
*</p>
<p>Are you the parent or the student? In another thread it says that you’re a student. If you’re the parent, then you need to get your own CC account. CC doesn’t permit sharing of accts.</p>
<p>If you’re the student (or parent) and you’re interested in scholarships to help pay for college, then private scholarships usually aren’t the way to go. Those are often for small amounts and ONLY for freshman year. So, they don’t help with paying for all four years.</p>
<p>The best scholarships are from COLLEGES. THose are usually for four years.</p>
<p>Beyond the great advice already given, you must think about your overall financial situation.
Why do you have $50K in the bank? Is it an emergency fund? If so, leave it. Is it all your savings? If so, leave it (and find a cheap college). Do you have any retirement savings? If not, forget paying for college and worry about retirement.
Are you planning on downsizing after the kid(s) are finished with college? If so, don’t pay more on your mortgage, because you will be reducing it later.</p>
<p>A bit of a rathole comment. </p>
<p>We paid down out mortgage early … not to lower our assets for FAFSA though. We timed the pay down so our last monthly mortgage payment was right before our oldest left for college … so we could convert our mortgage payment to a college payment without affecting our existing cash flow at all. In essence it allowed us to pay $24k per year for college without changing our life style at all. IMO it was a HUGE help for us … and when ThirdToGo actually finishes college we’ll finally realize the benny of no mortgage payment in our monthly cash flow.</p>
<p>
The amount depends completely on the age of the older parent. It can be quite a bit higher than $45k when that parent is in their 60s vs their 40s.</p>
<p>^^^</p>
<p>True. That’s why I wrote “about”. I wanted to convey the message that most/all of her $50k wouldn’t count anyway. She seemed to think that Dollar One would count against her.</p>