<p>Last summer, I bought a car out of cash savings, and while filling in the Fafsa and CSS Profile, I realized it reduced the amount of cash assets that I would have to enter.</p>
<p>So now I'm wondering if we should run out and buy another one--not a frivolous purchase to replace the ten-year-old vehicle I'm driving--and put in that mud room?</p>
<p>There's no need to rush since I'll have kids in college until 2019, but how much will, say, a $50,000 reduction in assets affect financial aid rewards--although I realize it's relative to your income and total assets. </p>
<p>This calls to mind the practice of older people transferring assets and spending down to qualify for Medicaid money for nursing home care.</p>
<p>I’m aware of the calculators, although I haven’t crunched the numbers. But I’m curious to know to what extent people make purchases to affect the calculation. I’m surprised that with all the other minutiae, they don’t ask about vehicles or renovations that are expensive yet will not greatly affect the market value of your home. </p>
<p>It just seems that if you can afford it, spending on luxuries–is now the time to visit China?–may be cost effective in reducing the amount you have to pay for college. Will you wind up with more money in the bank if you have three children in college and go on a spending spree.</p>
<p>Keep in mind, if you don’t have kids that have the stats and the luck to get into those few schools that meet need, you’re going to need that money to pay for college.</p>
<p>If one or two of your kids doesn’t get into a “meets need” school, you’re going to have to pay for those college years. </p>
<p>Most schools do not meet need. Most schools do not give a lot of aid. </p>
<p>It sounds like you have a decent income. If so, you may not qualify for aid or much aid based on your income. Income often drives EFC more than assets does.</p>
<p>Many people find that after these financial gymnastics that they didn’t get more aid…and they needed that money to pay for college or other things.</p>
<p>It’s not exactly like your analogy about Medicaid and nursing care. There is VERY LITTLE federal aid for college. Fed grants are for the lowish income. it’s not like the nursing home scenario at all.</p>
<p>If your kids all attend schools that meet full need, with GRANT money, AND rely on FAFSA only, then you will see an increase in aid of $560 for every $10,000 reduction in assets, assuming that your assets were greater than the FAFSA asset protection allowance. Allowances and rates are different for CSS Profile – so for example, spending the $10,000 might result in $300 increase in aid eligibility. </p>
<p>Bottom line, it’s usually not worth it at that level. There is a greater advantage for a dependent student to spend down his assets, though – if a kid has money in savings and is going to need a car and computer for college – it might make sense to buy them in December before filling out the FAFSA. Note that I said “need” – the spent money will only be compensated for with a fractional sum, so generally it’s a losing proposition to make unneeded expenditures when money is tight.</p>
<p>We received excellent grant aid for my D, but we didn’t have enough extra money for things we didn’t need … we had to pay our share. If you have enough that you can spend on things you don’t need, maybe you don’t need to receive quite as much aid? Just making an observation. With all the families on CC struggling to pay for school, threads like this on the financial aid forum are a bit out of place.</p>
As calmom points out, bear in mind that you will not receive a dollar-for-dollar increase in aid by emptying your bank accounts on your spending spree. In general, 5.6% of parental assets are considered available, so 94.4% of the money you spend on a trip to China will not be recouped by your financial aid and will not be in your bank account. While you may incrementally increase your financial aid, it will cost you far more than it will save. As others have said, it would be a very good idea to do the calculators.</p>
<p>If you are applying to CSS/Profile schools, there is a question there about the year, make and model of your vehicles, and many Profile schools consider your home equity, so there would be negligible increase in aid for those expenditures. </p>
<p>Your EFC will be far more influenced by your income than your assets.
Assuming none of the $50,000 would have been protected by the asset allowance, you might see a $2,800 increase in aid, while you would have $50,000 less in your bank account. That would be a net loss of $47,200.</p>
<p>:) Very true. And as someone who had a mud room in a previous home and does NOT have a mud room in my current home, I can attest to their usefulness - I miss my mud room! I just have these three college educations to pay for first… No cars, trips to China or mud rooms for us until they all graduate!</p>
<p>Your family contribution is largely based on your INCOME. If your income is above a certain threshold, your asset balances really won’t matter a speck. You might want to consider THAT before you spend your assets down.</p>
<p>I thought the 5.6% of assets was per year, in which case spending $50,000 would result in $2800 per year, or $12,000. Am I wrong? </p>
<p>Since the assets in 401k’s and IRA’s are not considered available, I believe that money is sheltered if put into retirement accounts up to two years before college starts (any later and the money deposited is added back into your income and considered available for EFC). I believe some plans let you withdraw or even borrow from your own 401k without a penalty to pay tuition if the money is needed… is that true?</p>
<p>^^ parentoftwo, yes, the 5.6% of assets is per year. If you wanted to figure it over 4 years, it would be $2,800 year 1, $2,643 year 2, $2,495 year 3, and $2,355 year 4 (because the $50,000 would have been reduced by the additional EFC amount each year) for a total of $10,293 over four years. You would have to then calculate how much you could have earned on the $50,000 in various investments over four years to figure the net. Even in a very basic 2% CD, the earnings would be over $4,000.</p>
<p>I agree with thumper1 that doing the calculators is important - in addition to the income issue, the $50,000 could already be protected assets.</p>
<p>My guess is the person has more than $50,000 in assets. </p>
<p>BUT here is MY question…is it REALLY worth it to spend $50,000 of your savings to get (maybe) $2800 more in need based aid? If you have that in savings…and you just contribute the $2800, you will still have over $47000 IN your savings.</p>
<p>Now…if you really need and want a car and a mudroom, fine. BUT I think your reasoning for spending that money to get more aid is misplaced.</p>
<p>I wish we had enough in the bank to even be able to consider spending to get more aid! We just have enough for what we need to live - take a vacation about once every 5 years, and have two 12 year old cars. We are grateful for the aid my D received, paying what we can, and borrowing a little to help. I would love to just get my laundry out of the musty basement…maybe by the time I am too old to manage the stairs safely…</p>
<p>maybe by the time I am too old to manage the stairs safely…</p>
<p>Im planning on staying active so I can continue to manage the stairs- still I am glad I didn’t buy a house with two sets of stairs up from the street just to get in the front door!</p>