<p>I was just reading a book on maximizing your chances for fin. aid. In several scenarios the author recommended parents raise their mortgage payment which would supposedly, lower their EFC. Now I know with FAFSA the value of your home is not considered as a determining factor. However, is this author correct in claiming that increasing your mortgage payment lowers your EFC and thus makes your student eligible for more fin. aid? I mean if you've got equity in your home why not remortgage, roll in some revolving debt, ie. car loans, credit cards etc. and realize more aid since you've increased your mortgage payment. Your monthly payment on your new mortgage might now equal your previous mortgage coupled with revolving debt... BUT you've just decreased your EFC. Is this too good to be true? Is your mortage payment exempt somehow?</p>
<p>Definitely NOT TRUE for FAFSA. FAFSA does not even ask or care what your mortgage payment is. In fact it does not ask about any expenses you have other than federal taxes. You are given certain living cost allowances against your income which include allowances for housing, food, medical costs etc. They are based on your family size and number in college, not on what you actually pay, and probably bare little or no resemblance to what those actual costs are. A family of 6 with 2 in college and a mortgage of $2000 a month will get the exact same living cost allowance against income as the same family with a mortgage of $500 a month. Even FICA and state taxes are not what you actually pay but are estimated in the FAFSA EFC using your earned income and tables in FAFSA.</p>
<p>I don’t know if schools that use CSSprofile would take it into account for institutional aid.</p>
<p>i think the cssprofile does look at home equity. so if you borrowed against your home it would lower that number (as well as increase your payment) but home equity line of credit loans are hard to get now. and for some the value of their homes has gone down in this market and there may not be equity to borrow from</p>
<p>Profile looks at home equity- not really figuring that if you access money from equity to pay college- your mortgage debt will then increase.
Nobody cares ( except you) what your monthly debt is, unless you have unusual debt like paying for a childs’ liver transplant.</p>
<p>I would throw that book in the trash! I can’t understand how increasing your mortgage payment will reduce your EFC, other than possibly lowering cash on hand. But there is an asset protection for the cash on hand. I guess it depends on the scenarios presented. Personally, I would suggest finding an EFC calculator & seeing how those scenarios actually play out by plugging in numbers.</p>
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<p>Right. The only way it can is in reducing assets. And all Profile schools don’t look at equity these days, so throwing more cash into the house will help at Harvard, but not at most.</p>
<p>Agreed…FAFSA EFC calculation doesn’t give a HOOT about your mortgage PAYMENT. Profile doesn’t care about your mortgage PAYMENT either. It only cares about the equity in your home…there IS a huge difference between home equity and the amount of your mortgage payment. </p>
<p>I suppose some folks with larger mortgage payments have less equity in their homes…but you know…some don’t. </p>
<p>And as noted above…even IF home equity is factored in (as it is in SOME of the schools that use the Profile) it varies considerably from school to school as to the %age of home equity considered.</p>
<p>I would say…this advice isn’t the best <em>I</em> have heard. If you increase your monthly payment, you will have less cash on hand…but the equity in your home could very well remain the same. What would be the point in that? Simply put…I could reduce my mortgage to a lesser number of years and increase my monthly payments BUT the equity in my home would remain UNCHANGED.</p>
<p>well, if you paid more than minimum mortgage payment, any extra goes to reduce principal so technically wouldn’t you be increasing your home equity since you would owe less and own more of it??</p>
<p>Profile does ask for the monthly home mortgage payment; it’s the very last question.</p>
<p>Trying to figure out a way to get around the intentions of anything to get more of anything (including financial aid) is exactly what is wrong with this country. It’s pretty hard to support programs that are intended to help people who are less fortunate when so many people are willing to just grab what they can however they can get it.</p>
<p>I agree with the previous poster and am glad that someone actually expressed that thought. The original idea may not be cheating, maybe it isn’t even clearly unethical, and may not even make financial sense; whatever it really means, it just doesn’t sit well. Like getting in to college, paying for it shouldn’t be a matters for numbers tricks or smoke and mirrors.</p>
<p>To posts #10 and #11. “Trying to figure out a way to get around the intentions of anything to get more of anything (including financial aid) is exactly what is wrong with this country.” </p>
<p>As the OP my opening remark referenced “maximizing your chances at fin. aid.” Nobody mentioned gaming the system or doing anything unethical. Reviewing your finances or allocating them differently so as to maximize your child’s ability to obtain the best education possible is not, as you put it “What is wrong with this country"
Do you sit idle and bypass deductions you might deserve on your tax return? Why shouldn’t I give as much contemplative thought to FAFSA as you do to your tax return? I would submit “what is wrong with this country” is people ascribing evil motives to others based on scant or misinterpreted remarks. So, with all due respect, please spare me your patriarchal indignation based on ever so cynical and misguided conclusions.</p>
<p>Why call it patriarchal indignation? Not to change the subject but that’s either a misuse of the term or a sexist assumption that only men are cynical. And I am sorry, but any time a person asks the question “is this too good to be true,” my cynical but nonpaternal self thinks, “yes, it probably is, and you [referring to questioners in general, not the OP] think so too.” </p>
<p>As you may or may not know, I am not usually nasty on CC, and don’t usually respond on threads once they get nasty, nor do I usually criticize people’s motives since I don’t know them. But I think this is an interesting underlying issue in a lot of ways and deserves less personal and more introspective consideration.</p>
<p>I am so speechless I’ve started to respond several times only to delete. </p>
<p>I want there to be available resources for kids who have no other available resources, not so people can shuffle around consumer debt to make it look like they have less money than they do so they can get more money (that very much takes away from other people). Whether you can do it and whether it is ethical are two different questions. Please spare me the indignance and any attempts to pass the behavior off as fiscally responsible because I dont see it as even close, even if you can get away with it. Paying taxes on money i earned and itemizing any legal deductions on that income on my taxes is not even close to the same thing - legally or ethically. And I find it surely concerning that anyone would think it is.</p>
<p>gee i thought it was a perfectly reasonable question for the op to ask. as tuitions now are averaging 30-50K per year, and everyone is in a different financial situation than perhaps a year ago, i would have thought everyone was looking at finances. if a difference in efc could mean the difference between a loan or a grant it would be worth knowing.As colleges use different methods to calculate financial aid, i think its reasonable to look at all possible scenarios
personally we qualify for no need based aid, but i am looking for schools that offer good merit aid. Definitely will consider a school based on what kind of scholarships they offer. If they dont offer enough merit aid to bring the cost down to what we can afford…, son is not applying .
The whole question of merit aid vs need based aid is another hot topic for some. my son would be mid 50% range with his gpa and act scores for the ivies but he wont get to go because they offer no merit, vs someone else, just because the family income qualifies for need based may get to go…does that make them a better candidate?
all of above is JMO …not taking sides!!</p>
<p>This debate comes up all the time on the Financial Aid forum. I responded there to a similar question:</p>
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<p>But again, from a big-picture standpoint, the marginal “assessment” of any parent cash or cash-equivalent that might be available to buy down a mortgage is only 5.6% for FAFSA. So if the parent puts $10,000 of his or her cash that’s currently in a money market fund into buying down principal on a mortgage, the net effect is a reduction of EFC of $560. Worth it? Not for me it wouldn’t be. To tie up another $10K in a depreciating asset (as so many homes in the country now are) is definitely not a smart financial move in my opinion.</p>
<p>It definitely won’t reduce your EFC as others have already said. However, it is possible that some schools using their own methods in addition to FAFSA will use the monthly housing cost in some way to come up with need. That is up to the individual school, individual financial aid officer and individual application. ANYTHING, for that matter can be taken into consideration.</p>
<p>Re ##s 10 and 11: Anyone who gets upset about people maximizing their financial aid should avoid threads that contain “EFC” in the title. No one is maximizing anything. Nothing to see here. Move along.</p>
<p>Sueinphilly makes a good point. If you just increase what you are paying on your mortgage payment now…in other words pay a higher mortgage payment…the extra will be applied to your principal. Your equity in your home will INCREASE as you will have paid more towards that principal and your financial aid will eventually be less due to the increased home equity. </p>
<p>In addition, you will have less available cash on hand to pay the college bills.</p>
<p>I don’t think increasing your mortgage payment is going to lessen your EFC.</p>
<p>I think the main thing here is to find out what author is suggesting this course of action, so we can warn others. OP?</p>