<p>Suppose I had a brokerage account invested in a mutual fund. For argument's sake, there is $50k in the account. I also have a HELOC and owe $40k on that. As far as tax implications, I would have a net gain on the selling of the fund of about $10k. Would it make sense to sell the mutual fund and pay off the HELOC prior to filling out the FAFSA? The thing is, our income is real close to the threshold for not qualifying for any need-based aid. Some NPCs that I've run indicate a small need-based component, others show us getting no aid. So would lowering our assets by $50k make any difference in the aid calculations?</p>
<p>Have you tried the NPCs both ways? First you need to know how much the $10k gain would affect AGI which depends on your total income/tax bracket. Income is assessed more than assets for finaid. Is this for a student starting or continuing college in fall 2014 or sometime later? Profile schools could perhaps tap more of the $10k than fafsa after getting the more detailed financial info. Do you have other liquid assets that give you some financial flexibility?</p>
<p>Thanks, Annoyingdad. Yes, I’ve tried several both ways, and it made a very small difference in one case only. This is for my oldest, who will be entering college next fall, which is why I posted, since many CC parents have already been thru the FA process, and I have not. Liquidating the stock fund would not cause any financial hardship. I’m leaning towards NOT doing this, but I thought I’d throw it out there to see if there was something I was overlooking. Thanks again.</p>
<p>The HELOC would reduce the market value of your house, would it not? WHere it would make a difference to pay off that HELOC is at a school that caps the market value of your home or does not take it into account what so ever.</p>
<p>Thanks, cpt. How the heck do you know which schools do it that way? I thought FAFSA doesn’t look at home equity, CSS Profile does, and them some schools have their own financial aid forms, which may or may not include home equity. Is that right?</p>
<p>Yup. That’s about right.</p>
<p>Which is why you need to run the calculators multiple ways at the places that aren’t FAFSA only.</p>
<p>Need based financial aid is based largely on income…as you are seeing when you run the NPC both ways. I think you need to decide if it might not be better to have the money for other uses while your kids are in college.</p>
<p>Thanks, happy mom. And Thumper, selling mutual funds would bump up my income (although for 2014 if I sold after Jan 1), so again, I believe I am over-thinking this and will likely stand pat. Thanks to all for you input. This site is invaluable.</p>
<p>You don’t know how each school counts the home equity value for financial aid purposes without asking those schools that use home equity (schools that ask for the value and PROFILE schools). There was a list somone here compiled on this board somewhere, but these things can change any time. Some schools use a cap, some don’t. The cap is usually a multiple of income, and commonly 2.4X or 1.2X but it can be any number. You have to ask. You should also ask what they want used to come up with a quick sale net value of a ahome as an asset.</p>
<p>If you have $40K owed in a HELOC that is less than $3k at most that it affects the EFC. If your house value is under the multiple that a college considers as an asset it makes no difference at all. For FAFSA purposes, by paying off what you owe on the HELOC, it would reduce the EFC by about $3k If you are not covered by asset protection. </p>
<p>The thing you have to decide is how much difference a $3K increase in EFC is going to make. If it bumps you out of the PELL eligible category, that could have a number of ramifications, as some schools do have special considerations for PELL eligible kids. Also are there state funds that are on the line? For those on the border of being considered for one thing or another, $3K can make a difference. BUt for many, it could make no difference what so ever as most schools don’t meet EFC need anyways out of their own funds, and then even if it does, all it could mean is some Direct loan subsidization while in school and maybe workstudy. </p>
<p>I’ve seen families do all sorts of things that are not things they would have done to try to get the max fin aid and the end result is very little or no extra and more complications in their financial picture.</p>
<p>For year one it is a wash or close to it, because the lowering of your EC due to having fewer assets will be offset by having $10K in extra income due to selling the stock.</p>
<p>However - for years 2-4, your EFC will be around $2-3K less because of the smaller amount of counted assets.</p>
<p>You can model this with the NPCs by removing both the asset and the extra income from the entries.</p>
<p>
The “problem” with FAFSA schools is that very few if any will meet full need without loans. This is also true for many if not most CSS Profile schools as well.</p>
<p>So if the upshot of all of this is to lower your EFC from $28K to $25K (for example), odds are that the only difference to your financial aid package from most schools will be more loans.</p>
<p>Do keep in mind that income is far more heavily weighted in the fin aid consideration than assets. It’s about 5.6% of assets over the protection allowance vs maybe a 40% or more hit on marginal income. So if you get a realized gain in selling those assets, that can get big hit right there. That 's something that I did not take into consideration in my posts. Again, how much of a difference that will make can vary on the exact numbers, and the schools in question and how they give out money.</p>
<p>Thanks, not rich and cpt. Cpt, your last sentence in post #9 really sums it up as to how I’m feeling about this. Life is complicated enough as it is!</p>
<p>Adding to the complexity of the situation is the fact that my wife started her own business middle of last year. She has done very well this year, but I don’t have much of a clue what her net income will be. I meet with her accountants in a few weeks to try to get an estimate.</p>
<p>When a family has a business in the picture, it skews things even more. There was a poster this year who got little money out of Swarthmore due that situation. Appeals went nowhere. And Swarthmore is way up there in terms of generousity of financial aid in every ranking you will see. So the poster decided that he would go to his state school since the family could not afford a private school education without the financial aid.</p>
<p>Lo, and behold , another LAC, Carlton or some other school in the midwest, of similar caliber, an excellent, well regarded school like Swarthmore, comes up with an aid package that does not asses the family business the same way, and the aid makes it doable. Two schools that I would have though would use similar methodology came up with way different ways to handle a business. </p>
<p>And so that’s how it works. With family owned businesses some schools add in many more of the business deduction and have a stringent way of evaluating the business as an asset which can really be a hit on financial aid. BUt another school might not be so hard on the the situation.</p>
<p>Interestingly enough, Swarthmore is on the ‘apply’ list.</p>