<p>Looking at the college loan situation, with rates in the 7-8% range, I wonder if it is possible and makes more sense to do a refi of the mortgage instead, with rates in the 4% range, extracting out, say, $50-100K in the process. no?</p>
<p>I’m not an expert, but more often people will talk about a HELOC instead of a refi. Also good rates, but no big sum of money sitting around that would be reportable as an asset.</p>
<p>I love my son dearly, but would not risk loosing my house over his college education. What good would I be old and gray and homeless. He’s going to be responsible for his own education and I’ll help out when I can, but I’m certainly not going to be the primary source of cash for school. He can be an adult and find a school he can afford on his own. What good would I be when I’m 60 and homeless and he is having to put me up because my spouse suddenly died or I lost my job and couldn’t find another one and I couldn’t afford the refi or HELOC.</p>
<p>I totally agree with fafsa4ever. We will do what we can to get our children thru college with as little debt as possible, but we would never risk our house, or pull funds from our 401K or retirement funds. I do not ever want to have to go to my children in my old age to ask them to help support me financially. Fortunately, by being very upfront with our kids about what we can afford, refusing to co-sign loans for them, and with scholarships, savings, and extra jobs, we have no debt 1/2 way thru college with our 3rd child. We have one more to go and expect to get him out without debt also. I don’t know of any legitimate financial planner who would recommend taking out a mortgage on a house to finance college.</p>
<p>Thats what we did. Otherwise we wouldn’t be able to pay the EFC.
However we didn;t take out more than the house was worth,we still have a great deal of untapped equity & I also would have no problem moving to a less expensive area if need be.</p>
<p>'rent, since assets are always reported at NAV, it doesn’t seem that any proceeds would be reportable for FAFSA purposes…though any earnings on them would be.</p>
<p>Many years ago, I got a HELOC on our house with the thought being that it could be a backup to pay for college expenses if necessary. We still have it and am glad of it; it will be our source of last resort for funding our D’s education. At 3% and with its flexiblility, right now the HELOC is much better for us than going through the cost of refinancing and being stuck with larger payments till the end of the mortgage. It will also be a separate payment that our D can reimburse us for.</p>
<p>I second the HELOC option.</p>
<p>We have an open HELOC that we have used and then paid down to zero several times.
We don’t put an amount on there that we would be stressed paying even under the ‘worst case’ scenario, with rate rising above current lows.</p>
<p>Used it for a car many years ago, and also one semester of DS college. Interest is deductible in our situation (depends on income?) and gives us some flexibility. Bank only bills us for the outstanding interest, we pay much more to retire the balance quickly.
But the option is there to pay the lower amount if needed.</p>
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<p>Well…the colleges might not agree with you on this one. The EFC formulas rely mostly on PARENT income and assets…not student ones. In other words, the colleges expect PARENTS to be the first source of income for funding college.</p>
<p>Having said that, you (FAFSA4Ever) certainly can make the decision you will NOT fund college for your son, and you won’t be the only parent who has made this decision.</p>
<p>Re: HELOC…the guidelines for obtaining a HELOC have become tighter in the last few years. Plus housing values have dropped. Some folks who hoped to use HELOCs have found either they can’t get one or don’t have the equity they need to get the amount they need to fund college.</p>
<p>If college costs are REALLY an issue, it is my strong option that less expensive options should be considered…not taking loans to fund options that the family cannot really support. </p>
<p>The best way to SAVE money is to NOT spend it.</p>
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<p>Looking at the college loan situation, with rates in the 7-8% range, I wonder if it is possible and makes more sense to do a refi of the mortgage instead, with rates in the 4% range, extracting out, say, $50-100K in the process. no? *</p>
<p>Are you the student or the parent?</p>
<p>Are there other kids to put thru college?</p>
<p>Are the parents paying any part of college with current income/savings or is the entire parent portion coming from the refi.</p>
<p>I think this is not the way to pay for college. First of all, it’s too much to borrow…Secondly, you’ll be paying for this for 15-30 years. Crazy.</p>
<p>BTW…does the screenname suggest a major that will require med school or grad school? If so, then don’t go into debt for undergrad. That is too short-sighted.</p>
<p>Our financial guy used to say to us when we were younger save until it hurts. Now that the kids are in college he says pay til it hurts…loans is a long, long time to be paying for college…4 years of pain is a much shorter period of time and then its over. Our first one graduates this spring and I’m so very happy there are no residual costs that have to be paid for him…we’re 1/3 of the way through…fist pump. If you are very, very disciplined and can pay back the loans in an extremely short amount of time it might work, but most people are not that disciplined and that difference in rate disappears in the blink of an eye over the length of the loan.</p>
<p>Agree with the need for discipline in order not to jeopardize other life requirements, like retirement.</p>
<p>We did save from time that son was very young but still found the need to borrow short term for a few thousand each of his four years undergrad. The HELOC in place for several years before he started school gave us an option. He is now finishing grad and those HELOC amounts have been repaid. HE will have modest Staffords to repay from undergrad and grad <22T total. We will have no loans to repay.
OUR contribution was the savings in 529 plan, current income and the short term HELOC loans. Worked for our family.<br>
We have about 10 yrs till retirement and will focus on that.</p>
<p>We also went the HELOC route just before S started his first year in Sept. so it would be available if FA from his school decreased in following years. H is self-employed and his income varies each year, so we wanted the security of the HELOC as we have primarily income with which to pay the very substantial COA. Fortunately, his college has a terrific FA policy, but it’s reassuring to have the HELOC if we need it. S will have a Stafford loan each year, too.</p>
<p>Thumper1 “Well…the colleges might not agree with you on this one. The EFC formulas rely mostly on PARENT income and assets…not student ones. In other words, the colleges expect PARENTS to be the first source of income for funding college.”</p>
<p>Thumper, 1. the colleges don’t determine anything - the feds modify the formula every year, (schools have no say for federal methodology) and it’s the STUDENTS income and assets that are used (first and formost AND at a much higher rate) to calculate the STUDENT’ EFC. Again, it is the STUDENTS EFC, not the parents.</p>
<p>And if you read all the publications carefully regarding who is responsible (from the Dept of Education, not some mystery websites who write/create their own stuff) they don’t say the "parent’ say “family” and the student is a part of their family too (for their own EFC) and as such have the primary responsibility to select a school they can afford so they can pay for their own education. </p>
<p>And for the record, I DO have a college fund for my child, but he has a bit of time before he’s old enough.</p>
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<p>FAFSA…you are very much misleading folks with this comment.</p>
<p>The reality is that MOST student don’t have significant income or assets. Their PARENT’S income and assets are much more significant. The parental INCOME is the single most significant item in the FAFSA calculation (unless, of course the student is earning a LOT of money). Parent income is almost always required as a contributing factor on the FAFSA and is used in a huge way to determine the EFC. Call it what you want…yes it’s the student’s FAFSA. Yes, it’s the student’s EFC…but the reality is that PARENT income drives this amount more than any other single item on the FAFSA.</p>
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<p>P.S. FAFSA…you say on another thread that your local college is FREE. Perhaps you think this is a universal offering. I would challenge you to find a four year college residential that a STUDENT could pay for all by themselves these days.</p>
<p>Maybe when you went to college this was the case. At this point, many state public universities cost well over $20,000 a year in cost of attendance. Please tell me what kind of job you think a STUDENT might have to amass that cost themselves.</p>
<p>If the financial aid formulas didn’t EXPECT a contribution from the parents,the parent info would NOT be asked for. </p>
<p>Honestly I think you are misleading a lot of people with your information about the financial aid applications and who might or might not be expected to pay. As you say…it’s expected FAMILY contribution. The parents are also part of that FAMILY.</p>
<p>I see, day after day, kids who do all kinds of things to not report the folks income to be independent (even delay going to to school) so they don’t have to report the folks income on their fafsa thinking they are going to get all kinds of free money. And I get to talk to them when they STILL don’t qualify for Pell. ((But the hard ones are the ones who DID qualify for grants before, and now DON"T - once they stop reporting the parents income.</p>
<p>If a student is independent for financial aid purposes, then YES their income does become the single most significant item. Independent student do not even report parent income or assets.</p>
<p>The vast majority of undergrad colleges students are NOT independent for financial aid purposes. Most do not earn significant income either. They are required to put their parent income/assets on the financial aid forms.</p>
<p>Apples and oranges…obviously the independent student’s income/assets are going to be the major factor in that student’s EFC. For most dependent undergrads, the parent’s AAI would be higher than the child’s so their income/assets will be the largest contributor to the EFC. There are certainly exceptions to that where the parents have very low incomes and the students have been working…but that’s not usually the case for the majority of posters on this forum. Perhaps your local population is an anomaly.</p>
<p>The EFC for a dependent student is comprised of two parts … the parent and the student contributions. For most dependent students, the parent contribution will be the majority of the EFC. When parents are lower income, the student’s portion of the EFC can actually be reduced by the Allowance for parents’ negative Adjusted Available Income. For those who qualify for Auto 0 EFC, the student could earn a million dollars and the EFC would still be 0.</p>
<p>I would say that for a dependent student, the parent contribution is generally the biggest factor in the EFC. Independent students without dependents other than a spouse get doinked on their EFC if they have high earnings … because they are expected to contribute to their educations at a higher rate than if they had dependents. If the parent earned $20,000 the EFC may well be 0 … for the independent student without dependents, a $20,000 income would not yield a 0 EFC.</p>
<p>The bottom line is … no matter how you frame it, federal financial aid is based on the assumption that it is the family that has the primary responsibility of paying for college. If the student is dependent, the parent’s income is the driving factor - and student income/assets will play into it in most, but not all, cases. If the student is independent, that student will be expected to part with income over the protected amount & with a lot of assets.</p>
<p>Parents do not have to pay. If they do not, though, students won’t get any more money from a school (unless a dependency override is warranted & granted).</p>