<p>My D will be senior this fall.
She will apply all Need_Base private college to get Financial Aid.</p>
<p>Our Family Total income is about $48K(pre_tax)
We own a house (worth $650K) and only $ 50K morgate left.
Now we have $50K in saving account.
My question is
How can we get maximum Financial Aid ?
Pay off our morgate? or just leave $50K there.</p>
<p>Thanks for your advice.</p>
<p>There are some schools such as Princeton that does not count home equity. Most schools will use a formula that will take into consideration your assets as it relates to your income and age. If you are in your fifties they won't require too much from your savings as they know you are nearing retirement. Some private Colleges offer some generous merit awards (Lafayette College) comes to mind. UVA has a great fin aid program (need based).</p>
<p>Thank for nopoisonivy. Your info is very helpful.
We are 46 now. My D will apply Princeton ED, so we will not be worry about our home equity.
Do you know any other ivy school or better school who do not count home equity?
I heard some schools only count maximum $40K from your home equity. Is this true?</p>
<p>Have you done a FAFSA or a FAFSA worksheet? I'm guessing but I suspect that with your income and non-residence assets your EFC is less than 3K. There are asset protection allowances so only a small portion of your 50K would be considered - unless a bulk of it is in your child's name - hopefully you didn't do that. So it seems your question is how to avoid using your equity. Some (maybe all) ivies use the CSS Profile which looks at other assets (including home equity) and some have their own forms. Once you get a handle on your EFC my guess is those school s that meet 100% of demonstrated need would be your best bet. If you do some basic research you can locate some great schools that don't require CSS profile - and not worry about your home equity. Good luck to your D and her ED app - great school.</p>
<p>Your income won't hurt you. Your 50K in savings won't hurt you much or at all -- your asset protection allowance will shield most of that, and the remainder will only be assessed by a relatively small %. If your daughter has any assets in her name, they will hurt you significantly.</p>
<p>Home equity won't hurt you on the state schools and other schools that rely on the FAFSA. Private schools that require the Profile do consider home equity, however. BUT-- a large number cap the home's value at 2.4 times the parents income (which, after you substract the mortgage loan out, can result in little assessed equity).</p>
<p>Not sure about how Princeton handles home equity. Call them and ask them if the cap home value at 2.4%. If so, you're in good shape for some need-based aid.</p>
<p>Amherst and Williams although difficult to get in would offer packages similar to Princeton's. Also this link might be useful.</p>
<p><a href="http://www.oakwoodgroup.com/28elite.html%5B/url%5D">http://www.oakwoodgroup.com/28elite.html</a></p>
<p>Could someone please explain what the "asset protection allowance" is ? We had over 100K in savings (NOT IRA, not retirement funds) and my mom has to pay 14 K out of pocket for my school, when she earned less than 6K last year. This is a private LAC, not a state school. Our EFC was less than 10K. We felt like we were being penalized for having savings (and cars that are over 5 years old)...</p>
<p>Your expected family contribution includes a portion of your income and assets, and a portion of your Parents' income and assets. Your parents liquid assets (savings accounts, non-IRA mutual funds, checking accounts, cash, and the like) are assessed, while your parent's retirement (IRA, Keogh, etc) savings are not.</p>
<p>FAFSA calculates your parents liquid assets, then deducts an Asset Protection Allowance. The amount of the allowance varies depending on your older parent's age-- but in a two parent family with one parent at least 50, the asset protection allowance is about 50K. So if parents have 100K in unprotected savings, and a 50K allowance, that would leave 50K that the colleges expect to be partially available to use for college. They'll take 12% of that remainder, or in this example, about 6K per year, and include it as part of the EFC.</p>
<p>Best to get assets in retirement accounts if possible before doing the FAFSA. If any major purchases are pending, consider doing them before filling out the FAFSA. Students don't get any asset protection allowance-- they will want to take 35% of any accounts in the student's name each year. So best to keep college savings accounts in the parent's name.</p>
<p>So, yes, in a sense you're being penalized for saving. If she can put some of the remaining assets into an IRA before next years FAFSA, it will help a bit.</p>
<p>Oops-- sorry, you mentioned "mom" so you may be in a one parent family. A single parent 50 years old gets an asset protection allowance of only about 23K, leaving a larger chunk of assets for them to assess. That may be what happened in your case.</p>
<p>Im not sure if simply saying put money into retirement plan will save you money. A familys EFC is a sum of a percentage of four factors: parents income, students income, parents assets, students assets. As to parents/ students income, FAFSA looks at adjusted gross income (AGI) from 1040s from previous tax year. </p>
<p>For example, for school year 2005/06, FAFSA looks at AGI from 2004. Any money in retirement plans prior to 2004 is excluded from EFC calculation. However, I think money put into retirement plans for 2004 would not have been excluded when EFC was determined. </p>
<p>So, although it's a good thing to set aside money for retirement, funding retirement accounts for tax year 2005 where it shows up on 1040 may not help you as aid officers I think will simply add it back into your AGI.<br>
Anybody, is this right?</p>
<br>
<blockquote> <p>funding retirement accounts for tax year 2005 where it shows up on 1040 >></p> </blockquote>
<br>
<p>This would be the case only if the money put into the retirement account was earned in 2005. If the money is transferred from savings (presumably it was earned PRIOR to 2005 and taxes were already paid on it and it is in regular savings)...it would not show as income for 2005.</p>
<p>You're confusing income and assets. I was talking about reducing liquid assets by funding a retirement account, not reducing income.</p>
<p>For the Federal Methodology, funding a retirement account doesn't help in reducing your income. The formula adds any retirement funding back in after the AGI is calculated. So while funding a retirement account is a good retirement and tax strategy, it doesn't help reduce the portion of your EFC that comes from parental income.</p>
<p>But if some of that income is sitting around in a savings account (or checking or stocks or bonds) when you fill out the FAF SA, it will get assessed a second time -- as an asset.</p>
<p>When you're talking about assets (not income)-- any funds in a retirement account on the day you complete the FAFSA (or the final FAFSA revision) aren't included in your total liquid assets.</p>
<p>Taking the '05/'06 school year, for example. Contributions from a savings account to fund your retirement account any time during '04 prior to filing the FAFSA will reduce the assets that count toward the EFC. You can actually contribute again after 1/1/05 for '05 tax year, and further reduce parental assets during the baseline year when you submit your revised FAFSA with actual '04 tax info. (Or between January and April you can contribute once for '04 and once for '05, for a total of $12K in reduced assets).</p>
<p>This all assumes that you have sufficient liquid assets for assets to be an issue (more than the asset protection allowance). Doesn't matter when it was earned, and whether it's in a savings or checking account, or mutual fund, or stuffed into a pillowcase. Doesn't matter (for asset purposes) whether it's a tax deductable contribution, or not. The goal is to take it off the asset balance sheet by sheltering it as a retirement asset.</p>
<p>Best to make contributions to retirement accounts as early as possible in the calendar year, that way you shelter not only the asset, but the interest income that the asset produces during the year.</p>