Hello,
Our daughter will be attending her first year at college this fall. We are selling our house and would like to rent for a year, just to get our bearings. Unfortunately we’ve been told that we cannot have the money in the bank for next years FAFSA. Does anyone know what the latest we could file FAFSA, for the 2019-2020 school year, so that I can plan to have this cash reinvested into another house by then? Or I’m all ears to other, creative solutions to this problem.
There’s nothing that says you can’t have the money in the bank for next year’s FAFSA. There’s a good chance that doing so will have an impact on the EFC, but that might not matter anyway. It all depends on your daughter’s specific situation.
You of course can have the money in the bank. It will be an asset that will be assessed at 5.64%. So, for example, if you walk away from your home sale with $100k in cash and put that in the bank, you would be “expected” to use $5,640 of that for college costs.
You can minimize your cash on hand by paying off any consumer debt, maximizing contributions to retirement accounts (as long as it’s not a CSS school), and contributing a reasonable amount to a sibling’s 529 plan. Perhaps gift the maximum allowable to grandparents.
But the real question is, how much financial aid does she get now that is based solely on Fafsa? Does she get a pell grant? She can still take the Stafford loans no matter the amount of your assets.
As for the deadline, there are federal, state, and school deadlines. Federal deadline is usually June 30 of the END of the school year. So, for the year in question, it would be June 30, 2020. If your child gets state aid based on Fafsa, that deadline is earlier. The school’s deadline typically is earlier still. Check here for state deadline (not sure they have it available for 2019-20 year yet). https://fafsa.ed.gov/deadlines.htm
Check the school website for school deadline.
-While retirement account balances are reported on Profile, it’s highly unlikely that those balances will negatively impact an institutional EFC.
-A 529 account for a sibling that is owned by a parent must be reported on FAFSA as a parent asset.
-A bona fide gift from a parent to a grandparent would reduce FAFSA and Profile reportable assets, but it would also reduce the amount of proceeds from the sale of the house that would be available to reinvest in a new house. (Also, there is no such thing as a “maximum allowable” gift amount; there is an annual exclusion amount that defines the size of a gift to any one person above which the gift amount reduces the lifetime estate exemption.)
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That’s what I meant.
What if it’s owned by the minor sibling? I know that for FA determination all 529s are considered a parental asset. Is a 529 owned by minor sib considered cash available for older sib’s college? Or is it protected?
A 529 account owned by a sibling would not be reported on FAFSA or Profile. For institutional need-based financial aid, a student-owned 529 may be considered a student asset, and not a parent asset (unlike the FAFSA policy where such an account would always be considered a parent asset). It all depends on each school’s policy, which usually is not readily apparent.
If your house does not sell, close escrow, by October 1, then file FAFSA on October 1
I’m told the market is so hot that it will sell at the open house with multiple offers. I was also told to sell by Sept 1 bc of school and parents wanting to be settled by then in the new house.
Only child
Thank you. How could I find out more specific info about this?
CSS school, only child going out of state for college. I’m a single mom with no help from dad. The house is my only asset. I do have some debt (vehicle) but will still have substantial money from the sale. Over $150k. I do not want to use this for college as I’ve already invested nearly $100k in private boarding high school (using up my retirement) and I am done. I need to sell now bc of many factors and the timing is right within the market but I’d like to not be pushed into having to reinvest it immediately. I have no experience with this, didn’t go to college myself and have just been a blue collar scrim and saver all my life. Now that I’m in my mid 50’s I need to slow down a bit.
What are you asking about?
If your child is starting school this year (so you have already filed once) you should have a good idea about the type of aid she is receiving, and you can run the NPCs as if you had $150k in the bank and see if there is much difference. We can’t know if $150k in the bank will change things because we don’t know your income, which school she’s going to, and if you’ve received nothing from federal aid (Pell, SEOG, subsidized loans), if the school gives generous aid based on the FAFSA. The money may make no difference at all if she’s not receiving a lot of aid based on the EFC, either from the school or from the government.
If she’ll be a second year student for this FAFSA, often you can wait pretty far into the spring to file. See what the deadline is for her school. Talk to the FA people and tell them your situation.
Yes, of course that all makes sense without knowing the specifics. The feeling I get from the school isn’t wanting to help me and share that specific info so that’s why I reached out. The only thing they’d say is “it will change things”. Well, ok…lol
Thank you for taking the time to respond.
Any reason you cannot rent our current home and rent another home for your self for now? I don’t know if that helps or not, but a consideration
It feels overwhelimg to me to even attempt that, I need the cash for other things and from what I’m told the market is wicked hot and now is the time to sell so those are my reasons.
if she’d rent out her home and rent another, the entire home would be an asset because it is not her primary residence. Only the primary residence is excluded as an asset on FAFSA.
I guess I wonder…are you selling your home with the intention of buying another home…or are you selling your home because now is the best time to make the most profit?
The next FAFSA becomes available on October 1. If you have profit from your house sitting in your bank account when you file your FAFSA and Profile forms, you must include this as an asset. Period.
Now…since your kiddo is a returning student, he or she can file that FAFSA later than October. Probably even into the first quarter of 2019. You would need to check your kids college website to see the deadline for returning students to file.
BUT…does your kiddo get SEOG or federal work study? Those have limited funding per college campus and are awarded on a first come first served basis. So…if you file later, you run the risk of not getting those awards.
Really…if you plan to buy another house with the proceeds from the sale of house one…you probably want to do it…now. Concurrent with selling your present home. I mean…really…where do you plan to live when your house sells??