<p>The value of our home has skyrocketed in the past year or two. (Went up another 25% from 2004 to 2005). Of course, our taxes also are going up accordingly although our income is not. As an additional whammy, it's killing us for need-based financial aid. We are very concerned about the impact of our ever-increasing home value onour EFC.</p>
<p>We've decided to go the home equity route to come up with this year's EFC of around $20K. Option A is to borrow only what we need. Option B is to borrow more than we need for EFC ($60K) and use the additional money to pay off other non-deductible debts (money we borrowed from family, etc.)</p>
<p>Option B would seem preferable because it offsets the problem of rising home equity with respect to EFC calculations. However, I am concerned that borrowing $40K more than we "need" will raise a red flag with the financial aid office. (After all, we would be reducing our major asset.) Will the college assume that the additional $40K is still somehow available for future EFC calculations? Would we have to "justify" how we spend the additional money so that the college doesn't assume it is still available to us? (I.e., that we hid in the mattress specifically to reduce our assets.)</p>
<p>we also just refinanced-our home from purchase price 22 years ago at $72,000 has increased to being assessed at $370,000. Same house- no sig changes.
What I have seen- money that is put into 401K type accounts- is assumed to be available for tuition- but money that you borrowed is not- afterall you still have to pay it back.
As long as you can make the payments for the additional debt- I would go with the larger loan.</p>
<p>I don't think your use of a home equity loan to pay off other debts would raise a red flag at all. This would be a pretty common use of such funds. Even if it did raise a red flag, you would just say, "I consolidated some other loans into a home equity loan. Anything else?"</p>
<p>If I may suggest that you may explore the possibilites of borrowing more money in a home equity loan and in conjunction with student loans either/and/or PLUS. </p>
<p>Your problem is cash flow and the financing of the college, not your ability to pay the cost of college. </p>
<p>Suggestion 1 > (B)Take a higher home equity loan. Don't worry about the change in assets. FAFSA and the college "Expects" that you use the assets help pay for college.
Suggestion 2. Instead of borrowing more than you need in the Home Loan, Borrow the excess from a student loan. The student loan money will be paid directly to the school, use part of the HE loan to pay the balance, and the remainder to payoff credit cards and other family loans. </p>
<p>The net result in this methodogy is that even though you are borrowing the same amount of $$, you will further perserve the borrowing power of the home, trading high interest credit card debt for lower interest debt which also can be tax deductible and possibly deferred. </p>
<p>The gotcha clause> Depending on your credit, the student loan (PLUS) interest rate may not be as advantageous as a home equity loan, assuming that you do go directly into repayment status on the student loan. Conversely, the home loan may also be more expensive than a student loan.</p>
<p>In brevity, Both programs singly or together are very attractive and can attain the same objective. Determining which will cost you least or more will be your job to determine with an loan agent.</p>
<p>emeraldkity4, in your post above you say that you've seen that 401K money is "available" for tuition. Do you mean ongoing contributions or the whole balance? From the calculators I've seen, the 401K retirement investments are specically excluded from assets. On the income side, they do ask how much was contributed. Can anyone confirm this, please?</p>
<p>ongoing contribution
money that is put into your account for 2004- "could" theoretically be available for tuition. Of course then you wouldn't have any retirement-
They don't count your total account just the money that you put into it the year for FAFSA.</p>
<p>Do I have to report my parent's financial assets (common stocks) on the FAFSA besides their annual income? My parents is currently making less than $45,000 a year but ahs financial assets in excess of $600,000.</p>