<p>So my parents bought a second house in our own neighborhood a few years ago to rent off and hopefully make some money off of it...a wise investment they thought because houses in our area had skyrocketed in value. Their financial adviser did not explain to them about anything about FAFSA, EFC, about how the second house is considered an asset on these, or anything about college in general.</p>
<p>Anyway, long story short...my EFC with the second house is 0. However, with the second house my EFC is $16,000. A remarkable difference. And because of the mortgage crisis, my parents are losing instead of gaining money on this second house and cannot afford to sell it as of yet because of the lease of the renter and the extremely heavy loss they will have to take.</p>
<p>My parents thought they would have to pay very little for my college education because they are immigrants and have fairly low incomes (less than $70,000 combined). </p>
<p>I know I can try other scholarships, but I know that the majority aid comes from FAFSA-related/need-based type of awards. And the second house makes our family seem much more affluent than we really are...</p>
<p>Do you have any suggestions at all for this financial dilemma? I don't even know if they can transfer the house to another family member's name or something. I have no idea. There's always loans, I guess...I don't know..</p>
<p>How is your EFC 0 with a $70k income? There is no way your FAFSA income can be 0 with that income. $70k is not really considered low income.</p>
<p>No you can't transfer the house to a relatives name. Apart from anything else there would be some massive tax penalties (if the house is put in the relatives name it is effectively being gifted to them and would be well over the tax free amount allowed as a gift so there would be taxes). Also if they have been getting rental income from the property that income will show on FAFSA and rental income with suddenly no Rental property would raise red flags. </p>
<p>It is not really a dilemma. FAFSA uses income and assets to establish the EFC. You have an asset in a 2nd house that most people do not have. You will be expected to use that asset to help pay for school.</p>
<p>Hmm. I'm missing something here. If they owe more than the house is worth than it isn't an asset. If they do not know more than the house is worth than it is. If the second, they would be expected to either sell the property or take out a Home Equity Loan or other line of credit which the house would secure.<br>
Also, with 70K in income, as pointed out above, your EFC would not be O.
Either you don't have complete information or you are entering information into the FAFSA incorrectly.</p>
<p>It makes sense that the second house is going to add alot to the EFC. It is an asset and the rent is income. Yes, it is a problem. I have several friends who have invested in rental properties and found themselves in the same predicament that you are. Unless you use pension funds to buy rental property, it does become a problem.</p>
<p>Owe on the mortgage. If the value of the home minus the amount owed is negative, there is no equity to draw from ... thus, no "asset." It is the equity that is reported.</p>
<p>And if the amount is positive? Do you simply report the difference between the home minus the amount owed on the mortgage on the EFC Calculator/FAFSA?</p>
<p>I will have to see if my parents put the right amount down for "Other real estate and investments (but NOT your home)"</p>
<p>They put down $440,000 on the form, but I'm not sure if that's what they were supposed to put down.</p>
<p>Even with a $40,000 income your FAFSA EFC would not be 0. The automatic 0 income cut off for next school year (2009-2010) is $30,000 but you would also have to be able to file a 1040a or 1040ez. Unfortunately rental income has to be reported on a 1040 so you would be ineligible for the automatic 0 EFC even if the income were low enough. You will also be ineligible for the simplified needs test (requires income below $50k and eligibility to file 1040a or 1040ez) which excludes all assets.</p>
<p>The net value of the house is the current value of the house less any mortgage (loan for purchasing the house) your parents have on the house. If the house is fully paid for then you show the current value of the house. so if the house is valued at $440,000 but they have a mortgage of say $200,000 then the net value is $240,000 ($440,000 less $200,000)</p>
<p>Federal Methodology (FM) Results
Parents' Contribution for Student = $ 0
Student's Contribution = $ 0
Total Estimated FM Contribution = $ 0</p>
<p>Institutional Methodology (IM) Results
Parents' Contribution for Student = $ 17,083
Student's Contribution = $ 1,550
Total Estimated IM Contribution = $ 18,633</p>
<p>I don't fully understand the difference between the two except the former is more a public university thing and the latter is a private university thing...</p>
<p>I've filled out every column except:</p>
<p>Parents' social security benefits received for all family members except the student<br>
Parents' social security benefits received for the student<br>
Student's social security benefits
Medical spending accounts
Child support paid
Hope Tax Credit
Student work study earnings/financial aid</p>
<p>For which I placed 0 for all of them.</p>
<p>Is adjusted gross income what AGI is on the W2/IRS form or is it the total of the parent's salary? Or both?</p>
<p>Are you doing the finaid.org EFC calculator? Check your response to the type of tax return filed. The default answer is that you are eligible to file a 1040a or 1040 ez. Change this to not eligible and resubmit.</p>
<p>Double check with your parents what tax return they filed last year - it was probably a 1040 as rental income cannot be reported on 1040a or 1040ez.</p>
<p>You will need to get a copy of your parents' 1040 (tax return) and use that to input the proper numbers. With rental income, there is no way you can properly guess-timate this. Get the 1040 & plug in the numbers ... the financial aid calculators should tell you exactly which line on the return you use for each question.</p>