How do you figure out what a property is worth as far as an asset on FAFSA if it is inherited and a joint ownership with other adults? Or just a property that is jointly owned with someone not in your household? It is not liquid at all. We can not sell it. We own a percent of it, not a specific portion.
It would be your percentage of the fair market value. You can use zillow or a similar valuation tool to determine its current market value.
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Okay that is what I thought, but we are not in control of the property to sell it. That doesn’t really seem to be the same value as outright owning it.
I dont think this matters. We had a family real estate property that was in an irrevocable trust. We declined to be part of it. One reason was that our share (and our heirs share) of the value of that property was always going to be there for financial aid purposes. We didn’t want to worry about that for future generations.
Plus…we had no interest in being owners of property with anyone else (but I guess that ship sailed for you).
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Financially speaking, unless it’s a superfund site which requires millions of dollars to remediate (or similar) it’s always more advantageous to own something than not to have it. So compare your situation to someone with similar earnings and assets except you own a percentage of a piece of property and they don’t. Clearly, you are better off.
Presumably you could sell your portion to one of the other heirs, no? Borrow against your equity in the property? It doesn’t need to be immediately liquid to have value.
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Yes, you are right, it makes us better off. We could sell to the other heirs, but they can set that price or not let us. We are not in control of that. Secondly, no I don’t think we can borrow against a property that is not 100% ours. If we default and lose the property that would not be right if the other owners did not sign off on the loan. People with retirement accounts can also loan against them or certain life insurance policies, but that is not counted. I think that is great, but it is more liquid than what we have. Half of our taxable income is what FAFSA feels we can use for college. That may be tough. I paid my own way through, and our other 3 kids have. Hopefully he can at least get access to aid that he can pay back if needed.
Seems counterintuitive, but financial aid determinations are not necessarily based on the funds you have access to immediately. They are based on your income and assets (discounting certain assets). Doesn’t matter that you can’t cash in your share of the house or that it was inherited. What matters is that you have that asset, which means that, all other things being equal, you have more than the next guy. And you have more than you would have had otherwise.
Yes, that is true. We are probably in an unusual place. All things are not equal as we do not have hardly anything in retirement accounts, but that doesn’t matter. If all other things are equal in what they look at, yes we have the real estate.
@kaw given your sort of complicated finances, perhaps your student can seek places where merit aid is guaranteed. Merit aid is not based on financials and is usually guaranteed for all four years as long as a certain academic bar is met at college.
But to your question…you need the total value of the shared property…and then your “share” is determined. And yes, it can really affect need based aid…if you qualify for it.
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He is. We are expected to pay almost half of our taxable yearly income to go to a state school. He has earned their highest merit scholarship and is looking for more, but after that is deducted and the government loans, that still leaves about half of our taxable yearly income to pay. Yay for people who can have thousands or more in their 401ks (which was not an option at my husband’s work until for the first many years). They will be able to retire and have help with college costs. All we have is our real estate (jointly owned) and the max we could put away once we had a 401k option - which isn’t much. So, if you had the cash and option for a 401K, that is who is truly ahead in this system. We do not take car loans, we pay cash and drive 20+ year old vehicles with 200k + miles on them. We are very frugal. We will continue to look. I realize that the land does make us better off than some I am very grateful for it, but I can guarantee that we are not better off than many people our age that have money put away that isn’t an “asset”.
Maybe the question is, what next? Where do you go for loans? What are some of the best loan options? He is not looking at an expensive college (a North Dakota state college), but there isn’t such a thing as a cheap college. We do not live near enough to a college for him to commute. He will need $16K a year in outside loans at this point. That is what is left after their highest auto merit scholarship and federal loans offered.
He can’t get an additional $16K in loans per year on his own. Sounds like all told the student and family are looking at taking out the $27K in undergrad student loans, plus another $64K in loans (minimum since costs are likely to increase during the undergrad years), for a total of $91K…is that correct?
Summary of options include parents taking $64K+ in parent plus loans, co-signing private loans for the student if you can find someone willing to lend to him even with a co-signer…and co-signing basically has the same financial impact as if the parents have the loans directly, choose a less expensive 4 year school, take a gap year to work and save money, do ROTC, or join the military.
Everyone’s calculus and priorities will be different, but IMO leaving a ND public college with nearly $100K in debt is not a good financial option.
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We don’t know enough about this student to give realistic help.
What can the family contribute annually?
Is there a community college to four year option available?
What are the student stats? Were there any colleges anywhere that might have come in at the family price point with merit aid?
I don’t know about your state…but are there any less costly public universities?
We did look at a few other schools and community colleges and the costs were not much different and did not offer the degree he had (all seemed about 2K in difference. The community colleges are about 45 minutes away and he could possibly commute, but he has a lot of his generals already from taking them in high school. The degree he has chosen will still take typical 4 years due to having to take some classes before others, etc.
They said they gave the max allowed Federal loans for a year($5500). So we need to come up with $15,424each year in our own loans or however we can find to pay. So, $61,600 for 4 years. Most schools we have looked at are pretty close to those amounts.
sorry about this all with no flex on the inherited asset.
A few things to note college years: your kid can work on campus and during the summers; if your kid can move off campus after freshman year, that might help with living costs; and dont forget about about the $2500 tax credit of AOTC if your income is less than 160K a year. (if it is, that’s an extra 10K back to you).
Not sure if your 15K you need includes the full cost of attendance or not, but that COA often is padded with living expenses and travel, we’ve found our older kids’ costs were 2-3K less than what was planned for. SO look closely at that Cost of Attendance, and what you really need to spend.
Yes, that will be his plan I think to move off with room mates after freshman year(mandatory to live on campus and its almost half the cost of attending). That is what his siblings did. Of course whatever he makes and saves to pay the next year will be reported to FAFSA and could decrease what he gets. He will be working, too. We barely make one third of 160K.
@kelsmom what impact does student earnings have. Isn’t there some amount where this doesn’t really impact aid?
To @kaw more important is what is in his bank account when he applies for aid next year. That asset will add 20% of the value to the family contribution. But if he earned that money…he will still have 80% that can be used to cover college expenses.
but remember - the potential decrease in federal aid based on his earnings is way less of a percentage than what his earnings would be! eg: 5K in earnings for a college kid for the year is way better than 1K in federal aid . . .
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Students are not penalized for the first $7600 in earnings. After that, they are expected to contribute 50%.
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@kaw read this response. Will your student really earn more than $7600 a year? And if so…it’s only the income more than that that will be assessed at 50% towards family contribution.
But as I said…if he has $7600 in the bank the day he files his FAFSA, 20% of that will be added to his family contribution as an asset. But 80% will still be there to contribute towards college costs.
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Thank you for the actual numbers. I doubt he will make that much, but needs 2x that much. Earning income is always best and he will be. Yes, I was talking about how the saved money in his account to pay the second semester next year can effect the next year. Don’t they look at earnings AND savings? So if he saves up money to pay for the second semester, that is cash they see and counts differently than earnings, correct?