<p>“sinking” money into the house keeps it out of other accounts, where it will be assessed toward your EFC. If you were planning to stay in your home, it doesn’t matter whether the housing market takes a dive - because your home is paid for. If anything, it removes the risk of ending up with an upside down mortgage. If you can get the house paid off, it also improves cash flow - those monthly mortgage payments are now available to meet other needs. Your housing costs are reduced to property tax, insurance, and utilities.</p>
<p>When it comes time to sell your house, and you owe more on it than the current selling price, THEN you’re stuck.</p>
<p>Why just the house? Aren’t there other accounts that you can use that aren’t tied to a volatile housing market that can shield your assets from the EFC?</p>
<p>OP, are you using the school’s stated COA to come up with your $60,000 cost or are you just adding tuition, room and board and health insurance, as you did up-thread? There will be costs over and above those three items, such as travel/transportation, books and supplies and personal items. When figuring out how much you need to come up with, make sure you’ve factored in all the costs. But if it’s just $6000, you should be able to cover that with a Stafford loan and summer earnings.</p>
<p>The way it works with a primary home is that the market value of it isn’t even taken into account on FAFSA. The form does not even ask for the info. But some schools will ask for the market value of the primary home net of mortgage outstanding and liens and use a portion of that as part of the parental assets. Most such school cap the value to the pay, so you can still be better off with a paid off house than with the same amount in assets sitting in any account. Also the market value to report is a quick sale value, not the one that is the figure one would generally get when looking up this sort of thing, and it’s net of all the expenses that go into a sale. </p>
<p>However, anytime one contemplates making financial decisions, implications to financial aid and college costs are only one category of concerns. COllege is not the be all to end all, and one can be penny wise and pound foolish trying to maximize fin aid at the cost of other issue that might have more impact. You can get yourself down to nothing and it turns out your kid gets accepted only to schools that could not care less as they don’t meet need anyways, which is the situation for the vast majority, overwhelming majority of schools in this country.</p>
<p>daniloum, if you own your home, either outright, or subject to a mortgage, you are subject to the volatile housing market - period. Paying off your mortgage does not subject you any more to that market than puting the money into something else. The only “safe” place to put your money is somewhere with guaranteed earnings. As a financial planner (yes, I’m calling you out) you should know that. </p>
<p>The only way to avoid the volatility of the housing market is to either rent (in which case, you’re really still subject, but to the volatility of the rental market, and to the whims of your landlord), or to own the home you plan on living in for the rest of your life.</p>
<p>As for shielding your assets from EFC, you’re looking at your home, and HSA, or retirement accounts. So yes, putting the money (before Senior year of HS) into a Roth IRA might be one of your best options, but that also requires you start early enough to meet the 5-year holding period. Then you can remove the money and use it for education if necessary - buy you still need to be careful because there is no guaranteed return on investment, and you may end up paying significant fees to manage that account.</p>
<p>There’s not much of anything you can do to shield current income from the EFC calculation, other than perhaps that HSA - contributions to your retirement account get added back in as untaxed income (an HSA doesn’t, but its use is restricted)</p>
<p>As cptofthehouse suggested, there are several factors to consider, and they all impact each other: college costs, retirement savings, taxes, estate planning, meeting the family’s immediate financial needs…</p>
<p>It’s very simple to shield your assets from the EFC. Just give them away Simple as that. There are a whole list of things one can do , each having risks.</p>
<p>The thing is, that is just the FAFSA EFC which is heavily income driven anyways. The most generous colleges overall, the ones that guarantee to meet need and that actually do meet large percentages of need do not use FAFSA EFC alone. All the FAFSA EFC does is make you eligible for PELL if it is low enough and for Stafford loans. You also need the number to be eligible for any federal funds, and many state ones. But the only guarantees are the PELL if low enough and for the Stafford student loans. Everything else depends upon the school Also the EFC gives the minimum amount a family has to pay before being eligible for any subsidized loans or aid. So it is a restricting agent of sorts. You have an EFC of $20K, you don’t get any federal subisidized funds like subsidized loans, work study, sub Staffords, SEOG once you get any other money that reduces that amount even if they are from outside scholarships. THat is the minimum you have to pay before getting federal goodies. </p>
<p>When you start talking about PROFILE, many schools look at the fillings in your teeth. They want to see what your income and asset looked like the year before sometimes, yes, they often want 2 years of financial data. They can take into account your business assets, add back in your business deduction, include your 401K and qualified assets, your other children’s assets, the value of your cars, truly Every Friggin’ Cent of what you own or might own. </p>
<p>Most schools do not even come close to meeting need. Not even close. Many just give out whatever federal entitlements and list some possibilities as to where you can borrow or get money, that’s it. No money from their own coffers. So a lot of gyrating and playing around with the money might be to no avail. And it might not be beneficial to a family in the long run when looking at the whole picture.</p>