<p>My family makes $59k a year, and according to my college's financial aid calculator, this makes my EFC around $5-6k.</p>
<p>However, we have 2 rental properties (condos). My parents put all their loans for the condos onto our house/primary residence, which the FAFSA doesn't look at. So our rental properties are clear of all debt and thus, the equity of our 2 rentals total the full market value $600k. Since schools take the 5.6% of total assets= $30k in additional EFC.</p>
<p>Is there any way for us to (legally) rearrange our assets to lower our EFC? We are not a wealthy family by any means and it'd really be a struggle to pay the expected $140k over the next 4 years. We look much richer on paper than we actually are. </p>
<p>Any help is greatly appreciated, thanks so much!!!</p>
<p>Hi somemom, thanks for the reply! My parents considered that as an option, I think the problem with that was since the rental properties are condos, not houses, the bank wouldn’t allow them to put the loans against the condos. Not 100% sure if that was the reason, though.</p>
<p>I own rental properties and it’s almost impossible to get loans for condos as rentals/second homes. It would be even harder to get them as refinance situations out of fear that the family is pulling the money out and then going to let them go back to the bank. </p>
<p>Besides, this won’t help lower your EFC for this year (are you going to college in the fall)? </p>
<p>I’m also not sure how pulling money out of one home affects FAFSA for the next year’s filing. </p>
<p>Also, what school will you be attending. It sounds like a FAFSA only school. You may not get much aid even if you lower your EFC since you’re beyond Pell.</p>
<p>Also…when you say that your family earns $59k…does that include the rental income?</p>
<p>I want to be sure I understand this. You want to figure out a way to put the $600,000 value of those condos someplace else do you can get need based aid? Are you saying you need or want need based aid so that your family can own $600,000 worth of real estate free and clear?</p>
<p>Also, not a real estate espert here but if your parents were able to refinance their primary residence for the total value of those rental properties, then the primary residence must have been valuable and paid for.</p>
<p>Federally funded (and most institutional) need based financial aid is not designed to help families maintain ownership of rental properties.</p>
<p>If you have assets you can sell (2 rental properites) to pay for college…you shouldn’t be receiving aid. It is the same as having $ in the bank.</p>
<p>BTW…$59k per year is not 'low income". That’s middle class. Also, I wonder if that is including the rental income?</p>
<p>It looks like you want to attend a school that costs $35k per year. If you can’t afford that, then go elsewhere. Start at a CC for 2 years, have your parents set some money aside during that time, then transfer to an affordable univ.</p>
<p>Your parents have high assets. People who get FA don’t have those assets.</p>
<p>mom2collegekids: I will most likely be attending Penn in the fall (both CSS and FAFSA school) I was able to get around 1000 for Pell Grant. And yes, the $59k income includes about 8k/year in rental income. </p>
<p>My parents bought the 2 condos when real estate was cheap a few years ago in hopes of having some money to live off of when they retire (from the rental income.) The bank wouldn’t allow them to take loans against the condos themselves, so they had to refinance our primary residence/house in order to pay for the condos. So it seem like we have a ton of money in the 2 free and clear rentals, but the debt from those have basically just been added to our house. There is a lot of debt left on our house but nothing left on the rentals. </p>
<p>My parents have very little in their retirement accounts, if we do end up selling one of the condos, would it be a good idea to pay off our mortgage and put the rest of the money into a retirement acct? I know on the CSS Profile it asks for retirement values. It’s too late for this year, but any other options on how we can reduce our EFC for the next 7+ years (to put both my brother and me through college) would be great.</p>
<p>Thanks so much for all the advice. I’m really not trying to game the system or anything like that, I’d just really like to avoid taking out massive loans or putting any additional burden on my family.</p>
<p>In your OP you said the rental properties added $30,000 to your EFC which is FAR above the threshold for the Pell grant. How did you get $1000 in Pell grant money with an EFC that exceeds $5600?</p>
<p>Money you put into pretax retirement accounts is added back in as income for the year of your FAFSA. There is also a dollar limit on the amount you can put into these.</p>
<p>At $8000 rental income each per year…these only rent for $350 a month or so each. Are you sure about those numbers?</p>
<p>Family A has $59k annual income, 2 kids, and the total family assets consist of a 1995 station wagon with a value of about $800.</p>
<p>Family B has $59k annual income, 2 kids, and $600k worth of real estate (unencumbered by debt).</p>
<p>Do you really think these two families should be treated the same when it comes to evaluating their ability to pay for college?</p>
<p>I’m sorry, but you look “richer on paper” because you are! The reason you don’t have lots of cash to throw around today is because your parents made the decision to invest for the future. That’s a choice. If your parents opt not to sell the condos, then they will continue to be available as a resource for your family . . . and will likely be used either to pay for your parents’ retirement or to fund your inheritance. </p>
<p>Your family can also make the choice to sell the two condos, in which case you’ll have the money you need to pay for college. In the two examples above, what choice does Family A have?</p>
<p>Wait - how did you get $1000 PELL grant. A Pell grant requires a very low EFC - I believe the cut off is around 5080 this year. If the rental properties were reported on FAFSA and upped your EFC by 30,000, you are nowhere near being eligible for any Pell grant.</p>
<p>I was able to get around 1000 for Pell Grant</p>
<p>WHat? That shouldn’t be right. What is your EFC? Do you have a sibling in college? Your family’s income plus the rental value would put your EFC too high for Pell.</p>
<p>Taking out large loans for UPenn is ridiculous.</p>
<p>I don’t think you can do what you want to do with retirement accts and selling a condo. You’d have to declare those contributions, and CSS schools look at retirement accts. </p>
<p>Are you saying that with 2 condos worth $600k, you’re only getting $8k a year total for 2 condos in rent? That’s ridiculous. One of my condos is only worth $130k, and it brings in over $15k in rent per year. Something is not right.</p>
<p>It is difficult to find anyone to lend money for condos or any real estate these days, but that is what you have to do in order to have their market value reduced by liens on them. Their value, as you report them on FAFSA and PROFILE would be what kind of money you would NET out if you sold them very quickly. Like firesale price, not what the market might bear in a year or so. If you can get that value from some reality firms or private assessment firms, since that amount is going to be lower than what a list value would be for the place, you just might be able to find some place that will give you a loan on them, and you can then pay off your house with the proceeds. If they are not saleable for much right now,so much the better for you since their reported value is that much less. </p>
<p>So the family can look around and see what they can get in terms of s a secured loan on those condos, given that the amount you are needing to cover is a quick sale value. That might be a pretty good deal for someone, especially if the interest rate you are willing to pay is up there. There’s a point where one can usually find someone who will make that deal, but yes, it will cost you in interest.</p>
<p>You have to do the numbers to see if that is even worth doing,however, since it will have a cost. Lowering your EFC may not result in much more than some interest subsidization on some governemnt loans, which is just a few hundred dollars a year. It’s not as though schools are going to be rushing to give you more aid with a lower EFC. I don’t know a single school that guarantees to meet need as defined by the FAFSA EFC. The more generous schools want additional info, like your home equity value, and the jig would be up for all the dancing around you have done.</p>
<p>Just saw that you are PELL eligible already and that your school is Penn. As you know, Penn uses PROFILE. If what you are after is the rest of the PELL money, it’s a $5600 maximum each year. Like the others, I’m not sure how you are getting any PELL at all, but do the calculations and see if it’s worth while to go through the machinations. Something is missing in the numbers you are giving us, but really given the problem you are presenting, those are what the solutions are.</p>
<p>OP…are your parents self employed? There is a hole in your story somewhere. Rental incomes seem VERY low. You say the parents bought these condos when the price was low…presumably lower than their current $300,000 each value. You say you got a partial Pell with an EFC that far exceeds the EFC threshold for Pell. Did your parents put those rental properties on the FAFSA?</p>
<p>A thought…OP, was your adjusted gross income (AGI) on your taxes below $50,000? Someone…I believe this is the threshold for the simplified needs test and the assets (including those rental properties) would not have been taken into consideration…this the $1000 Pell.</p>
<p>But there IS no simplified needs test for the Profile. The family contribution would have taken the value of the rental properties into consideration. Thus the VERY low institutional aid offered by UPenn.</p>
<p>$50k is the cut off for simplified needs. But, the OP would have to meet one of the other criteria - eligible to file a return other than 1040 (probably not due to the rental), dislocated worker, food stamps etc. Seems unlikely.</p>
I’m assuming OP is talking about the AGI, which would include $8000 from the Schedule E’s (i.e. after expenses). Our Line 17 amount is about 25% of our gross rents, although we have mortgage interest around 10% as well, which OP apparently does not.</p>
<p>Sorry, I got the 8k number from the 2012 tax return only. To clarify, yes the 8k is from the AGI line 17. I believe the reason it was low was because one of the tenants moved out in the middle of last year so we didn’t collect rent for a couple of months, plus other repairs/expenses. Not sure how much higher the rental income would be usually. </p>
<p>And I figured out the Pell Grant issue. I definitely reported the assets on the Profile. But I also went back and looked up my FAFSA – oops! I didn’t report the assets, they determined my EFC was around 4k on the FAFSA, which is why I was eligible for Pell. So once I send in my tax returns to Penn/fix the FAFSA, I won’t have the Pell anymore… </p>
<p>Ok, so from all of your replies, basically my options are: 1. take out loans to pay 2. sell condo and pay house mortgage, but what would we do with the leftover money? Would it be of any use to try to appeal Penn’s financial aid and explain my situation? Currently, Penn is giving me $24k gift aid plus around 3k work study. Cost of attendance is $62k.</p>