An anxious dad here. My daughter is a Fall 2018 applicant. She is already gotten couple of acceptance and she is expecting to hear from few more colleges. Her top colleges has a price tag of 65k+ (of course). I am hoping she gets some fin aid and/or scholarship that helps us meet somewhere in the middle.
My EFC comes to about 30k but I dont have any liquid assets. Whatever I have to pay I am planning to raise through student and/or personal loans etc. My question here, does this low bank balance affect a college’s decision to accept my daughter?
If your daughter is a US citizen, legal permanent resident alien (green card) or falls into one of the other categories that qualifies her to file the FAFSA, she is eligible to borrow the federal student loans. These come to:
$5,500 freshman year
$6,500 sophomore year
$7,500 junior year
$7,500 senior year
Any debt beyond that will need to be a Parent Plus Loan that you borrow, or a loan that you co-sign for. You will be responsible for those PP loans, not her. You will be responsible for any co-signed loans if she can’t/won’t pay them back.
What can you afford out of pocket? Something? Nothing? If you can’t afford anything out of pocket now, what makes you think that you and your daughter will be able to pay back upwards of $120,000 in loans (assuming you do manage to borrow your full EFC for all four years)?
Can you cash out any of your non-liquid assets?
Have you given your daughter a figure that your family can actually afford to pay each year? Did you include an expected increase in costs of about 5-7% each year she is in college?
Just to clarify, I intend to pay for my daughter’s college. I think I can manage upto 20k by way of raising loans against the house etc. So thats my limit and my daughter knows this.
My question really pertains to this: Do college see the liquidity? E.g in my FAFSA application, I had mentioned that I only have 2000 as cash. Will college be looking at this as an acceptance criteria?
Can you elaborate on this please:
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Most colleges are need blind with respect to individual applicants admission.
However, they can easily deliver admission but not be affordable.
Merit scholarships are most likely found at colleges where the student is at the top of the range of applicants and admits. However, colleges vary on how they handle combined merit and need based financial aid. Many use merit to replace only student work and student (not parent) loan before reducing need based grants.
I am not sure if this helps, I did net price calculations for few colleges, and they do ask for bank balances and value of assets. So I am sure they are taking both into account. Some exclude primary home and retirement accounts. I would run net price calculator on those colleges. (google net price calculator )
I’m going to give some straight talk here. If you can’t afford a $65,000 a year plus college…your kid should,have been encouraged to apply to schools that either don’t cost that much…or where she was GUARANTEED to get merit aid.
I hope there are some schools like this on your list.
Here is your biggest issue as a parent. College is four years long. You will need to qualify for the loans you plan to take for four years…not just one. If you are taking Parent Plus Loans and you don’t have any bill paying issues…you will probably be approved. If you are taking personal loans, this might not be the case if YOU have too much debt.
Getting home equity loans is getting harder and harder.
If you can contribute $20,000…you are expecting colleges to give your daughter greater than $45,000 in aid. That’s a HUGE amount of merit aid.
Colleges/FAFSA definitely look towards liquidity more than assets. Just not in the way you think or would like. It is basically an Income approach. Very liquid as this represents your weekly paycheck. I think what your talking about is something akin to a free cash flow or maybe simply cash in the bank.
FAFSA will only count around 5% of the cash in your bank but will ask for upwards of 50% of the cash you earn weekly.
For some it is good and for others it is bad.
I suspect you have a fairly high paying job (relative to national averages. I am on the east coast so I get how relative) to produce an EFC of $30K. That is good.
If you borrow $20K against the house for this year, where will you get $20K for each of the next three years? Are you able to sell any assets or pay your portion of her tuition from monthly cash flow if you have a tuition payment plan?
You need to understand is that for need based aid you will be expected to pay AT LEAST your FAFSA EFC if not more. For Profile schools the EFC calculated will most likely be higher. So without merit aid, you are looking at 40k+ each year.
COA tends to rise every year. Unfortunately, FA usually does not. So you need to consider that in your four year plan.
Historically, college tuition and fees have increased about 5-7% each year. Some institutions have increased more rapidly than others. You need to account for that inflation in your budgeting, or you can end up in an ugly situation by senior year.
Colleges and universities do not care how much you have in savings. Institutions that are need-sensitive for admissions might care what their formula says you can afford to pay. For example at a need-sensitive institution, if they like your daughter just as much as they like another applicant who will require less aid, then your daughter will get the No letter and the cheaper student will get the Yes. Most institutions around the country are need-blind for admission and let the students who are admitted worry about whether or not the aid package was any good.
You are in a challenging situation, as you have an EFC of 30k, but evidently don’t have the flexibility in your budget to pay anything like that out of current income or savings. Since you are expecting to raise 20k each year based on home equity, a visit with your banker is in order. Find out whether or not that really is possible. And again, I have to ask, if you think you can pay down those loans some day, why can’t you pay anything out of pocket now?
If you literally can only raise 20K against your house, you need to look at your affordable instate options for university, which safety schools do you have that you can afford?
I think I am reading this differently than many posters.
The OP presumably has income and substantial non-liquid assets and he understands how his EFC of $30K was determined. He is concerned about whether or not the non-liquid nature of his assets has any bearing on the school’s admissions policies. To that, the answer is generally, no, colleges don’t look at how little cash you have when they decide whether to let you attend.
Many families actually have a situation like described above - especially those with small family businesses, or businesses where the family is a limited partner. Consider a family restaurant where the family earns a modest income, they have modest college savings but not nearly enough, but they also own a good chunk of the building which sits on valuable commercial real estate. It would be easy for the EFC to reach $30K but difficult to meet that. Typically, the NPC estimates suck for families who own a business. It can be very hard for them to get a loan against the restaurant building - even if granted, it can take time.
Once a FA offer has been provided, I would encourage the OP to put in a call to the school FA office to go over it - and especially to ask how families like theirs might expect the 4 year process to unfold, especially if there are other siblings, etc. The FA offices do not give financial advice, but they will give information and they often can re-work an offer as they understand a family situation better.
Three years into it, I’ve been surprised by how much extra cost there is beyond tuition, room and board. Such as sorority dues, parking registration, transportation to and from home during breaks, storage locker fee over the summer, lab fees, etc. Even with a child who works to cover some of her expenses, it is tough some months.