<p>We plan to refinance and use home equity to cover the $40K per year we owe after financial aid grants to put our two kids through college. Rates are low so would it make sense to take $160K out now and draw it down year by year, or would having the cash liquid as opposed to in our house mess up our financial aid next year and following years? Your experiences with this? THANKS</p>
<p>Home equity is not reported on FAFSA; cash is. So all other things being equal, if you have $160K in equity its effect on your EFC is zero; if you have $160K in cash, its effect on your EFC is $9040 ($160K x 5.65%). That’s assuming you’ve maxed out your asset protection allowance with other assets.</p>
<p>Better to draw down equity when it’s needed, although you should know that in the past few years banks have been reducing HELOCs and demanding repayment ahead of schedule for some people as the value of the homes in their areas declined.</p>