<p>My parents are considering getting a home loan of about $20,000 because we are getting behind on some bills. I am attending college next year and will fill out the FAFSA/CSS profile around November. My mom thinks that the home loan will not affect anything regarding financial aid because she says that they do not have to report it as income on their tax returns. Is she right...will my EFC be the same as it would without the home loan?</p>
<p>Just make sure the bills the money is borrowed for are paid before they file FAFSA. If the borrowed cash is sitting in the bank on the day you file FAFSA it has to be reported as an asset and then it will affect your EFC and your financial aid. So either borrow the money and spend it on the bills before filing FAFSA or borrow it after you file FAFSA. </p>
<p>Do not have it sitting in the bank when you file FAFSA.</p>
<p>When you say you attending college next year do you mean fall of '09 or Spring of '09? </p>
<p>If it's Fall, you do not want to complete the FAFSA in November. The '09 form doesn't come out until January I believe. I don't know about the CSS.</p>
<p>Swimcatsmom, or others -</p>
<p>So if I understand this right, the home equity loan would only count as an <em>asset</em> NOT as <em>income</em>?</p>
<p>Just asking because of the huge difference in what % is "assessed" for each class of money.</p>
<p>Would this be the same for a private loan, say from a relative? I am aware that interest from a private loan is probably not deductable.</p>
<p>Thanks,</p>
<p>DJD</p>
<p>No a loan would not count as income. But any amount of the loan sitting in the bank at the time of filing FAFSA would be a reportable asset.</p>
<p>Correct, the home equity loan is NOT income. As stated in previus posts, your parents should pay off their bills with that money prior to filling out the FASFA so that the money is not in the bank and counted as an asset. Then your federal EFC will not be affected. </p>
<p>The home equity loan will affect your institutional EFC if the CSS profile is used. Basically, it will reduce the amount of equity in your home by 20K which is to your advantage. Although different schools calculate home equity differently (and only a handful explain how they treat this asset), you are reducing the value of this asset and that's a good thing.</p>
<p>Sorry cross posted with swimcat..</p>
<p>Thanks everyone.</p>
<p>rrah, I mean fall of 09, but I am applying ED, so I think my financial aid forms are due somewhere around November 15th.</p>
<p>Okay, I just found out that they are also considering "refinancing with cash out". Would this be the same as a home equity loan...as long as we don't have it in the bank, it is okay?</p>
<p>Same thing - it will increase the mortgage amount, decrease the equity in the home, and as long as they pay of the bills with the "cash out" amount prior to filling out the FASFA (which by the way is not available until Jan- school financial aid form may be due earlier) it will not be an asset. The money "cashed out" is not income.</p>
<p>You're probably better off financially with respect to institutional aid if your parents use the home equity loan to pay down credit cards, car loans, or other outstanding consumer debt before you file your PROFILE. That's because (as others have explained), a home equality loan reduces your parents' assets by reducing their equity in their home, and therefore could reduce your institutional EFC. Credits cards, car loans, and other consumer debts, on the other hand, aren't taken into account for financial aid purposes, so even though these are real financial obligations which your parents need to pay, they won't reduce your institutional EFC.</p>
<p>^ correction, that's "home equity"</p>