<p>“The one useful trick i did learn from this guy is to use the Federal housing inflation factor to figure out the market value of my house, rather than trying to use comps or a BPO.”</p>
<p>Can you tell me how to do this?</p>
<p>Thank you all for this wealth of info! You’ve given us a few things to consider!<br>
What we’ve decided to do is ask our CPA about this, as well as my husband’s Financial advisor. </p>
<p>The recommended book looks good, even more so since it’s updated/revised each year. I’ve got one similar, though the publishing date is a little old.</p>
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<p>Here’s a calculator:</p>
<p>[FinAid</a> | Calculators | Federal Housing Index Calculator](<a href=“Your Guide for College Financial Aid - Finaid”>Your Guide for College Financial Aid - Finaid)</p>
<p>I’m sure you could find the actual formula if you google around for it.</p>
<p>This calculator doesn’t factor in the real estate implosion we are going through.</p>
<p>Yeah, the value it gave me was higher than what houses are listed for in my neighborhood. Thanks for the link though.</p>
<p>notrichenough, I have never heard of that. To think that someone would actually charge $5K to put you in what I consider financial peril is scary. I hope that people aren’t falling for this.</p>
<p>
Well, to be fair, if I had done it, it would potentially lowered my EFC for private schools by $12,000 per year, x 7 years of college coming up - the savings could be considerable. Yes, there is some risk you could wind up stuck in a mortgage you can’t refi out of, but the potential reward is high.</p>
<p>The guy I talked to had built a whole business around college, it wasn’t just life insurance. He had a former admissions person giving very personalized application consulting, they filled out the FAFSA and PROFILE for you, etc. To me it wasn’t worth the price, but if you need a lot of hand-holding and like the personal attention, maybe it would be worth it to someone else. We are pretty sophisticated financially, relatively speaking, but its amazing how many people never heard of a 529 plan or have any idea how they work. Those people might benefit.</p>
<p>Well, the OP was looking at her daughter attending Biola, which on average meets less than 70% need; see:
<a href=“http://www.biola.edu/registrar/iresearch/CDS/0708_Data/CDSH.pdf[/url]”>http://www.biola.edu/registrar/iresearch/CDS/0708_Data/CDSH.pdf</a></p>
<p>So if you applied that factor to your $12K EFC reduction, then that $12K turns into a little over $8K. Of course those of us who know how financial aid works also know that Biola’s 69% figure doesn’t mean that all students get that percentage of need met – rather, it means that some students get great aid packages, and some get nothing. </p>
<p>I understand that I am mixing the experiences of 2 different posters – maybe your kid was headed off to a 100% need school – but generally you have to make these financial choices well in advance of the time you know where your kid will attend school. </p>
<p>Here’s the kicker: even doing simple paper and pencil straight line math, you would have to be able to refinance at substantially below 5.6% interest in order for the amount of EFC reduction to be greater than the impact the equity or assets have on EFC calculation. Reducing your EFC by $12K and with a plan that has you paying out an additional $12K in interest to the bank in mortgage interest is a pretty dumb move.</p>
<p>5K is way overpriced. My dad hired a company to help us with our fafsa and anything related to my school’s financial aid, for only $300 for 4 years.</p>
<p>
Well of course this would be foolish, but the analysis is not quite so simple:</p>
<p>1) By rolling all of my current mortgages (primary and HELOC) into one mortgage with $200K taken out, and extending the term from 15 years to 30, the total payment would be around the same as I am paying now.</p>
<p>2) The cash value in the whole life policy earns money. You can earn 5% or so pretty safely with a combination of low risk investments. You can also put it in the stock market for higher earnings, if you feel lucky. :)</p>
<p>3) You can just let the earnings pile up tax-deferred while your kid(s) are in college.</p>
<p>4) When the last one hits spring of their junior year, you cash in the policy and refinance, and now you have x years of earnings (minus taxes) plus the original amount to pay down the mortgage, just as if you were paying the original 15 year mortgage all along.</p>
<p>5) In the meantime, you’ve (hopefully) reaped the benefits of a $12K/year lower EFC. You don’t know exactly how many dollars this will actually put in your pocket, that is part of the risk.</p>
<p>In my case, my FAFSA EFC was around $40K (an unaffordable amount, but that’s a different story for a different thread 
). Yet, of the private schools my S got in that didn’t offer merit aid, all of which are in the lower $50’s in price, two offered no financial aid and one offered a (to me) trivial amount of like $3K in grants. Getting that $12K in FA might have made the difference between my kid going to Hopkins with some small loans, or face crippling debt. </p>
<p>Would my kid have actually gotten that $12K from Hopkins? Who knows; my financial picture is complicated and it may be that my PROFILE EFC was far higher than $50K so we still would have gotten nothing, or my kid would have been gapped, or who knows.</p>
<p>I ultimately didn’t do it for a number of reasons, but it could make sense for some people. Where I live it is not uncommon for people to have 3, 4 hundred thousand or more in equity in there house just because they were lucky enough to buy a house 15 years ago in a good neighborhood. If this can be legally shielded from college debt, why not?</p>
<p>^ Actually, the plan would make a certain amount of sense, as long as the tax savings from the mortgage would be enough to pay the cost of the life insurance. I believe there is a cap on the amount of money that can be dumped into these things relative to the face value of the insurance, isn’t there? If it did yield 5% tax deferred, that would increase it’s comparative performance considerably for someone in a high bracket. But any good financial planner know this, still not worth $5K for ideas like this!</p>
<p>
Yes, it’s a fairly complicated calculation that I don’t know how to do, but insurance value of 2x the cash value is a reasonable rule of thumb. It gets lower as you get older.</p>
<p>The insurance component is fairly cheap - almost certainly less than $1000/year if you are reasonably healthy.</p>
<p>And if there is any time of your life where you might want extra life insurance, it is when your kids are in college.</p>
<p>Tax savings - these are iffy. You can only legally deduct mortgage interest on the amount used to buy and improve your property, plus $100,000. (This is becoming an audit focus area for the IRS because so many people took large amounts of cash out of their house and are incorrectly deducting the interest). </p>
<p>I would agree that it is not worth $5K - plus, my kid wound up at the state school, so this strategy would have done nothing for me! And I don’t need someone filling out forms for me when I know I’m not getting anything - even if I mess up, it won’t make any difference!</p>