<p>Hello all, without going into specifics, my family's income is less than the financial aid we will be receiving. I wish this weren't the case, but the main reason for this is that we have a large sum of assets. My question is whether selling our current house and moving into a new house would be a suitable way to help pay for college. Also, does this aid seem reasonable or should I appeal/ask for more aid. Thank you for the help, I have just discovered this site and it truly is a wonderful tool for all students.</p>
<p>Every person’s experience is different…and what they value. We would <em>not</em> sell our house to put our kids through college…but we have neighbors who sold their house to send their daughter to MIT and good friends who sold their beautiful 1920s Craftsman bungalow to send their daughter to Georgetown. In each case, of course, they moved into much more modest dwellings. it wasn’t that they received more financial aid because of it but simply that it freed up a lot of money. </p>
<p>Not enough information. Will there be a profit when you sell,this old house? If so, that will add to your assets.</p>
<p>Will you have a mortgage in the new, less expensive house? Does your college use home equity in their aid calculations?</p>
<p>Does your family plan to use the profit from the sale of the house to fund your college education? Or are they looking to reduce their monthly mortgage payment to free up money to pay your costs.</p>
<p>How much more do you need? Is it more than $20,000 for the year? $10,000? What?</p>
<p>Is this college really affordable for you?</p>
<p>@SouthernHope: </p>
<p>I am aware that the financial aid will not change, I was wondering whether or not this would be different than say filing for a student loan and then paying that off when the time comes.</p>
<p>@thumper1:</p>
<p>I don’t believe so if you are talking about the change in price from the date of purchase to the date of selling. </p>
<p>I’m not too sure of real estate terms and such but I don’t believe so as the current house is paid off and the new house will be less expensive than the current one. Yes, the college uses home equity in aid calculations.</p>
<p>I believe the reason is partly due to the profit gained and also freeing up money. In addition, the current house is taxed significantly due to the area it is in and the new one will be less.</p>
<p>Somewhere around $10,000. And affordable, not exactly, of course, I am just an 18 year old student so I do not have real world experience when dealing with large sums of money such as this but I hope that it is a good investment for the future in terms of payoff.</p>
<p>If the Net Price Calculator at your college’s website gave you a good prediction for the aid that you have received, and you believe that NPC to be reliable, then your parents should run it for as many different scenarios as they can imagine, and see what the numbers show.</p>
<p>If your aid isn’t very good, you also should consider taking a gap year, working and saving some money and helping your family sort out its financial plans, and re-consider your college list.</p>
<p>OK…given that your house is paid off…if you buy a less expensive house, there will be extra money left over…maybe. That profit from the sale of the first house will increase your assets. </p>
<p>For FAFSA purposes, the equity in your primary residence isn’t even counted. So the value if your residence isn’t included in the calculations. BUT the money made which would be in some account presumably IS an asset. Your assets on FAFSA would increase.</p>
<p>However, there are costs associated with buying and selling a house…those could easily gobble up many thousands of dollars…depending on the price of your house, and the %age the realtor charges for commission. Plus there are legal fees which must be paid as well.</p>
<p>I’m not convinced selling the house is going to net you anything in terms of financial aid.</p>
<p>And I’m not convinced selling is actually guaranteed to net you the money you need to pay the college bills.</p>
<p>As Thumper said, to answer your question, a lot more information is needed. The quickest way to find out the impact on possible financial aid from your college, is to play around with the NPC for your school, adding info for the house sale in various scenarios. IF the school does guarantee to meet full need, those numbers could be quite relevant.</p>
<p>We know folks who sold their home, used the proceeds to pay off a lot of their loans, moved to a rental, was able to stash what was left of the money from the sale in HSAs, IRAs, etc so that their assets were greatly reduced, and due to the money they had placed in the house, the realized gains were low too. So they were able to get financial aid the year after. But the gains from selling the house in that year are treated as income, so they did not qualify a bit the year of the sale. They prepaid their rental for 3 years which took care of some of their gain which did not sit as assets the following year, however.</p>
<p>So, they did qualify for a bit more financial aid, plus, they had less in expenses, so were able to pay quite a bit more towards college expenses. How much they netted out in total, I don’t know, but not as much as one would think in terms of financial aid even at at school that met full need. I believe the last year of the DD’s college, another kid also went which was what netted them substantial aid. </p>
<p>College financial aid is usually not the be all to end all of financial situations, and the whole financial picture of a family should be taken into account when making drastic decisions. I can tell you that when we did our numbers, to move to another house, unless it’s a drastic downsize would result in enough expenses that it would take a year or so before the financial dust settled enough to realize much in gains. Yes, there would be some, but in our case, it would not result in any financial aid eligibility, YOu need to play with the numbers to see what the outcomes are. The biggest end result is that if the annual cost to live in a new house is less, that is additional that is available for college, and of course if the there is money gotten out of the sale from the home equity, but sometimes that could have been available as loan. Though housing prices are slowly rising again, many people are still underwater with their mortgages. Several of our friends are not going to be netting much after selling their homes, after paying off mortgage, credit line, sale expenses, cost of moving to another home.</p>
<p>What about getting a HELOC (Home Equity Line of Credit) on this house? That is what we had to do to afford the private school. The fafsa-only schools coa was about 8K less than the privates that use CSSProfile because of our home equity. </p>
<p>We got one where you pay interest-only for 10 years, and then pay off the principal for 10 years. If you borrow 10K to pay the bill this year, you will pay $25/month (at current rate) for 10 years. After 10 years you pay about $100/month to pay back. The interest rates are low on HELOC (ours is at prime) because you are using your home’s equity to secure the loan.</p>
<p>Also, about contributing to IRAs with proceeds from house sale or heloc or anything during collge years: I believe any untaxed contributions are added back as income, because contributions are considered money that is discretionary and could be used for tuition. IRA contributions during th profile years would increase your COA. So it would not make sense to take money from your house and put it in an ira during college yeas. Someone who really knows about these things - please correct me if I’m wrong about this… Lesson I learned this year: we should have paid a financial planner 18 years ago!! </p>
<p>Cardamom, though you are correct that contributions to IRAs along with other such qualified plans are added back to income, it does not mean that it does not make sense to do this, and could be very important to many people. Though the contribution is not deducted from your income for financial aid purposes, it still is for state and federal tax purposes, and that money is not usually included in family assets whereas any non qualified savings/investments are. Nor are any gains, including interest, dividends, sale gains included in ones income once the money is in the investment acounts. For those who don’t have pension plans, and fewer of us do these days, most financial planners feel it is critical that we put away what we can for our retirement and that it is more important to do this than pay for our kids’ college in many cases. </p>
<p>“IRA contributions during th profile years would increase your COA.” The only increase that IRA contributions would make is that you would be paying less taxes when you make such a contribution so you would have less income taxes being subtracted from your income figure. In most every case, the net result, when you take into account that you are owing less in state and federal income tax when you contribute to such plans, is that you make out. College costs and financial aid should not be looked at in a vacuum but along with other ramifications. It’s still a good thing to contribute to IRAs and 401Ks and the such even though you do not get that deduction from your income for FAFSA and PROFILE purposes.</p>
<p>If you sell a house and end up with money that you stick into an investment/ bank account, you could end up with a larger asset value than if that money stayed in the house. First of all, when you report home equity for most PROFILE purposes, you report a net quick sale amount, not what you can expect to get for your house if you put it on the market for a year. So what you end up getting may well be as much or more than the values you could be reporting for net market value of a home. </p>
<p>Also, many PROFILE schools do cap the Home Equity values, often at 1.2X, 2.4X or at AGI levels. No such cap is put on other assets. So someone with relatively low income living in a house worth a lot, may only get the house assessed at far less than the money that person might get if selling the house. In addition to all of that, most schools do not use PROFILE or additional fin aid apps, but use FAFSA only which does not ask for home equity values at all. You sell the house, you have the money in an account and your FAFSA EFC sure will go up, over that money sitting as a primary home equity amount. </p>
<p>And as others have mentioned, it’s only a very small number of schools that will meet full need anyways. Regardless of how low you get that EFC, it very often doesn’t help when you are dealing with schools that simply do not meet need. </p>
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<p>From the PROFILE instructions:</p>
<p>“If your parents own a home, enter how much the home is worth. Use the price they could reasonably expect to receive for their home if it were sold today.”</p>
<p>This is simply the current appraised value of the property. There is no distinction made between a “net quick sale” (whatever that is) and a sale made if you “put it on the market for a year.”</p>
<p>The price one could reasonably expect to receive for a home if it were sold today, can be interpreted in many ways, and from what I have read, many people put too high a value on that figure. Google the subject and you will see what I mean. I know many, many people who have put quick sale values for their homes around here and not heard of a single issue about that–I specifically asked some GCs about that as well as a fin aid counselor. There is no benefit to giving a high value for your home that I can see. If a school has issue with that value, let them bring up the issue. </p>
<p>It’s the current appraised value. Granted, appraisals are somewhat subjective and may vary depending on who’s doing them, but it is what it is. A “quick sale” implies that the seller is under some kind of duress, which will likely lower the sale price below fair market value - a condition not contemplated by PROFILE. The fact that you know many, many people that have done this does not mean this is the right way to do it. And I doubt that either the schools or CSS have the capability or motivation to routinely verify reported values.</p>
<p>As I said, look it up Many financial advisors are saying that people over assessing their houses on PROFILE is something to avoid. Don’t take my word for it, but to over assess means less aid. I am not in the business, but those who told me so do deal with this a lot in their jobs. To underassess means an inquiry an perhaps an increase in the value reported. Though I would not underassess deliberately, I would certainly look for a low assessment to report that has some official backing that can be cited. Quick sale does not always mean duress either. Just means the person wants to sell the the danged thing quickly. At our bank and in our area and in my MIL’s, it means a 3 month turnaround as opposed to a season. </p>
<p>I don’t need to look it up, thank you. Assessment is a tax value term, and the Profile instructions explicitly say not to use assessed value. Appraised value is what needs to be used, and an appraised value, unless otherwise stated, is based on fair market value which does not take into consideration the seller’s desire “to sell the danged thing quickly.” Under ordinary circumstances, a seller’s prime desire is to get maximum value as opposed to the quickest sale. A transaction in which the seller needs to sell quickly is tilted in favor of the buyer, and this is not the kind of transaction that Profile has in mind when asking for home value.</p>
<p>I looked it up and researched it on line quite extensively and asked around, asked some college counselors and a service one of my kids’ school uses for assistance in fin aid as well as some realtors who have provided market values for a number of purposes. And my posts reflect my conclusions from that research.</p>
<p>If you have to sell your house to be able to go to a specific college, in my mind, it isnt worth it. CC for two years and then transfer in.</p>