Protecting income and assests from EFC

Paying for College
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<p>If you have funds saved in non-IRA /retirement accounts(such as Bank accounts) which are excluded from EFC, is it wise to pay off home loan that way it reduces your assets for the purposes of EFC? As first home is excluded from the EFC. </p>

<p>I'm not sure if there is a cap on the amount you can invest in Roth-IRA? If there is no cap then this could be another avenue. </p>

<p>Is there any amount /assets that is excluded from non retirement accounts? Such as if your household income is let's say below 100K then first $50,000 is excluded from EFC etc.</p>

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<p>I’m not sure I understand this…regular bank accounts are NOT excluded from the EFC formula. Only the balances in IRA/TSA types of retirement accounts are excluded.</p>

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<p>Yes…there is an asset protection allowance. It is not based on your income…it is based on the age of the older parent, I believe. Someone here will be able to point you to the info. </p>

<p>The smartest thing you can do is run those numbers through one of the online financial aid calculators. Do it with the money gone…and do it with the money there. Some folks have found that there is precious little difference in the EFC. </p>

<p>Remember that your assets DO have a protection allowance, and above that are only tapped at 5.6% or so for FAFSA EFC calculation purposes. Income carries FAR more weight in the calculations than assets (unless you have a very HIGH amount of liquid assets).</p>

<p>Also, you want to make sure that your kiddos are applying to schools that are FAFSA only. Otherwise your home equity could be used in the equation as provided either by the Profile or a school financial aid form. Paying off the mortgage would increase your equity.</p>

<p>And lastly…remember that FAFSA only schools don’t meet full need anyway. You may be doing all of this and not netting a penny more need based aid.</p>

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<p>Here is the form with the calculations so you can check: <a href=“http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf&lt;/a&gt; Yes, there is an asset protection for parents which depends on age (closer to retirement has a higher asset protection).</p>

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<p>Most places will expect you to pay more than your EFC, so you may be better off to leave that money where you can get to it in order to help cover the college bills when they come due.</p>

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<p>They may not meet everyone’s full need but many of them meet need when they want to. 2 of my S’ FAFSA-only schools meet 35% and 48% of students full need respectively.</p>

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<p>You can pay off the home loan and open a home equity credit line for future tuition and emergency money.</p>

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<p>FAFSA schools don’t guarantee to meet the full need of ALL accepted students. That being the case…you have no way to predict the types of aid you will receive from these schools unless you qualify for the Pell grant.</p>

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<p>Interpretation difference here…I take this to mean that ON AVERAGE…35% of need is met…48% of need is met. That is a very low %age of need met…means that MOST students do not have need met.</p>

<p>MOST colleges have a combination of school based grants/federally funded aid that can provide full need for some number of students…but the vast majority do not meet full need. </p>

<p>What I’m saying to this OP…they might be spinning their wheels when the difference isn’t going to be there if they pay the house off.</p>

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<p>2 of my S’ FAFSA-only schools meet 35% and 48% of students full need respectively.</p>

<p>Those could be students with only $5,000 or so need, & that could be met with a $5,500 Stafford loan.</p>

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<p>Just a note, the link above does not have the updated worksheet with the reduction of the zero EFC change from the proposed $32,000 to the updated $23,000. Although it doesn’t affect the parent protection portion you might want to use the correct one.</p>

<p><a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/010512EFCFormulaGuide1213.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/010512EFCFormulaGuide1213.pdf&lt;/a&gt;&lt;/p&gt;

<p>Link to the change if anyone is interested.</p>

<p><a href=“http://www.ifap.ed.gov/efcformulaguide/010512EFCFormulaGuide1213.html[/url]”>http://www.ifap.ed.gov/efcformulaguide/010512EFCFormulaGuide1213.html&lt;/a&gt;&lt;/p&gt;

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<p>True, they could be meeting low-need students, or high-stats students, or both. But in the case of an extended family member who is attending one of the two, her full need was met and it was large. Just saying full need CAN be met at FAFSA only schools.</p>

<p>This is one of the shcools:</p>

<p>Methodology for Awarding Institutional Aid Federal Methodology</p>

<p>Freshmen--------All undergrads
Students With Need Fully Met 48% 35%
Avg Percent of Need Met 97% 97%
Avg Financial Aid Award $34,352 $33,286
Avg Need-Based Gift Award $28,299 $27,112
Avg Need-Based Loan/Work-Study $5,192 $5,736 </p>

<p>Agree that paying down a mortgage may not make much difference, it certainly pays to run the numbers.</p>