<p>Got asked a question and didn't know the answer: </p>
<p>If it were possible to do so (and ignoring fees, paperwork, etc), could you take a home equity loan for the day that you file your finanical aid forms and then immediately pay it back? (The idea being to reduce a major asset and thereby increase financial aid; at at the same time, avoid creating a new asset with the resulting money from the loan.) </p>
<p>I thought it was a good question -- and how would a college know that you just borrowed for a day?</p>
<p>(Please, no flames! We don't plan to do this -- I like to sleep at night and we couldn't afford the fees. But it sounds like a good idea....)</p>
<p>Huh? If you took out a loan, you'd have MORE cash & assets, minus the fees & it would seem to REDUCE your aid eligibility. Additionally, some schools require the CSS Profile, which looks at your home equity as well as all assets.<br>
My understanding is schools don't discount your debts, except if they're for education & medical expenses & certain special other categories they recognize.
My suggestion & how we're planning to do all of this is just fill out the forms to the best of our ability & see how everything works out. This will allow us to sleep at night with clear consciences & not knock ourselves out trying to "beat the system."</p>
<p>In the question posed to me, the sole purpose of the loan is to reduce home equity, thereby increasing the amount of financial aid. If the money were borrowed for a short time (a day, a week, a month), interest paid for the loan would presumably less than the increase in financial aid. If you stuffed the money under your mattress for a day (or someplace else where it wouldn't show as an asset), how would colleges know that the loan was very short-term?</p>
<p>doesn't your lender charge any points for taking out a loan?
Why would the slight amount of money that you might recoup by bringing your equity down to zero ( and your available cash up) be worth doing something that is unethical?
You have already said that the college your daughter attends gave her more aid than what was in her acceptance letter. Why are you trying to get even more ?
I don't understand people
This isn't a heart transplant here.
You can't afford college- you don't go to college or you go to one you can afford. You don't go to one of the most expensive schools in the country and then try and weasel your way into more aid that might have gone to someone who would qualify without the deceit.</p>
<p>EK: the OP said they had no intention of doing so; it was a speculative question.</p>
<p>boxmaker: wouldn't the assets from the loan be sitting in your bank account, presumably just as much counting against you as if they were still sitting in the home equity? Or am I missing something?</p>
<p>What you may be missing, garland, is that the OP suggests hiding the money under a mattress! So maybe EK is right after all - it's a "weaselly" thing to do.</p>
<p>I am also VERY suspicious of people who claim they have no intention of doing something, yet are so obsessed with finding out the answer. I think that is fairly transparent.</p>
<p>The answer to the original question is NO. You are obliged to contact the financial aid office when there is a substantial change in your situation, even if it is one day after you apply for aid. If you won the lottery the very next day, you are obliged to report that as well.</p>
<p>Also, it does not necessarily follow that a reduction in home equity immedialtely translates into an increase in aid. Even if it did, it would probably be for loans.</p>
<p>An asset is an asset whether it's in the bank or under a matress. You would be guilty of fraud against the federal government which carries some stiff penalties.</p>
<p>I may not have a lot of patience this morning
I applied for free/reduced lunch for my daughter when my husband was on strike, even though there wasn't anyway that she would actually eat the school lunch, because I wanted to see if we qualified and because the school qualifies for more funding when numbers of free and reduced lunch go up.
The office at the district is sending me letters demanding I give them more info about what we were living on ( savings) when I reported that in the last two months our income had been reduced to what I can find ( mostly picking up pennies out of the laundry- only a slight exageration) and my husband was paid for 4 days of work.
How do you prove the abscense of something?
I haven't even notified the college about our reduced income, because we are still paying the loan from last year- and the new one doesn't kick in till Jan ( after which we should be getting paychecks again)
When families need aid- then there should be options for them, but to falsely show more need than exists- I have no patience with- it doesn't matter if no one ever finds out-how do you justify it to your self?</p>
<p>For FAFSA-- this technique would show you with MORE assets (the money you took out in the loan), and therefore your EFC would increase, and your financial aid package would decrease.</p>
<p>Unless you committed fraud and stuffed it under your mattress, as you suggest. Then for FAFSA-- there would be no change in EFC or financial aid (since FAFSA doesn't consider home equity), but you'd live in fear being found out, not to mention setting a bad example for your kids.</p>
<p>The technique has equally bad results under PROFILE's institutional methodology.</p>
<p>You're trying to swim upstream, a bit.</p>
<p>Instead, consider this-- if you're about to apply for aid, and you have significant liquid assets (more than your allowance will be), consider paying your mortgage down with some of the assets. That can reduce your EFC, and increase your financial aid package. And it has the benefit of being legal.</p>
<p>Jeez, folks, please read the original post before you flame! I very clearly (I thought) stated that this was a question posed to me and since I did not know the answer, I thought I would ask here. I also clearly stated (I though) that I did not plan to do what was posed in the question. This is like asking, "How would you commit the perfect murder?" Posing the question does not mean that a crime is being planned. Perhaps Barkowitz or someone who knows the answer could respond to the question.</p>
<p>Why should folks be ENABLED & ENCOURAGED to commit fraud & worse? I can't imagine anyone wanting to HELP you &/or your friend cheat the system & folks who really NEED financial aid. Asking on behalf of someone who is trying to cheat the system is encouraging & enabling them.</p>
<p>Your're question's been answered. It won't increase your (or your friend's) chances of getting financial aid, and it might be considered a fraudulent application for aid if the cash asset wasn't disclosed.</p>
<p>In your original post (which I did read), you said:</p>
<p>"But it sounds like a good idea...."</p>
<p>And you're being told: No, it's a bad idea, for many reasons. You're just not hearing it.</p>
<p>I realize that some people are just challenged to "work" the system
but when wording is used like how would a college know that you just borrowed for a day?</p>
<p>and If you stuffed the money under your mattress for a day (or someplace else where it wouldn't show as an asset), how would colleges know that the loan was very short-term?</p>
<p>Those phrases indicate to me, that the person posing the question knows that it is wrong, otherwise why would there be the need to hide what you are doing from the college?</p>
<p>* I also clearly stated (I though) that I did not plan to do what was posed in the question*</p>
<p>That may be- you did say you didn't plan to do it- but you also thought that it was a good idea.
Knowingly giving false or misleading information on a document designed to get you more money?
When would that be a good idea?</p>
<p>The colleges can also ask applicants for LOTS of supplemental information if they believe it's appropriate. You'd be surprised at how savvy financial aid offices are--I'm sure they've been trained at checking for & catching all kinds of "tricks" to "work the system." Would that be worth jeopardizing a college ed? Possible criminal prosecution? Not to most of us, but you knew that.</p>
<p>One last time: I am NOT planning on doing this -- and have no need to do so. Since I can't get a non-judgemental response to an honest question, I'll call the financial aid folks at my kid's college and ask them. (But Barkowitz, if you're following, would love your response!)</p>
<p>Since I can't get a non-judgemental response to an honest question, I'll call the financial aid folks at my kid's college and ask them. *
* HA HA HA HA HA HA HA!!! ROTFL! **</p>
<p>You're gonna ask the college if it is ok to lie to them and cheat them? </p>
<p>And you consider the straightforward answers you got, which essentially boil down to NO, for many reasons, not just ethical/moral ones, "judgemental?"</p>
<p>Boxmaker, you made my day! I desperately needed to laugh out loud!!</p>
<p>boxmaker: Its been 4 years since I looked at school's FA form and FAFSA in great detail. We all 100 EFC. </p>
<p>I also looked at that scenario but for a different reason but still applies to you and everyone else. I assume that if you are talking that FA is student, parent loans, and work study, but not including grants or scholarships that do not need to be paid back; </p>
<p>Don't bother. Because this type of FA is available to everybody for essentially the same cost. The difference in cost will be if the interest is capitalized, deferred or subsidized. </p>
<p>Four years ago, we had to make a decision whether a student loan was cheaper than a home loan. In the last four years the answer was student loans very extremely cheap, cheaper than any home loan. TODAY the question is reverse, Is a home loan cheaper than a student loan? Today, the answer could be a wash, however, come Jan 2006, the home loan could be much cheaper than a student loan. </p>
<p>There are windows of opportunity that can benefit you with only a little bit of thought and foresight.</p>
<p>If you have other unsecured debt, it can make sense to borrow against your home in the form of a mortgage to payoff that unsecured debt. The mortgage will reduce your equity while the unsecured debt will not. This will in fact improve your position on the FAFSA and/or CSS (at least one does ask for mortgage debt as well as home value).</p>