Using Home Equity with Financial Aid over multiple years?

Parents Forum
81

My daughter went to U of Wyoming (still is there as a grad student). It is cheap. I don’t think we ever paid more than $15k per year (before loans) as an OOS student and she didn’t have the top scholarships that your kids would get. Some of the programs are really good, including international studies as the Cheney family provides a lot of money for study abroad and international students. Engineering, especial for hard rock and civil, is very good. The theater program has a fairly new $10m building. (the state funds the university very well).

The Montana schools also have great programs.

It is also very cheap to live in the towns these schools are in, so costs go down when students move off campus (although the dorms are pretty cheap too). My daughter is living on the amount she makes at Starbucks and banking her TA stipend to use next summer for travel.

I didn’t want my kids to take student loans either, and they didn’t for the first year. After that they took some (not max amount) of student loans. I did not borrow Parent Plus or other loans. That was the deal - they had to pick schools we could afford. One went to Wyoming as it was very inexpensive and the other to Florida Tech which was VERY expensive but she had everything covered with a merit scholarship and athletic scholarship. Were these the flashy schools they really wanted to attend? NO. They wanted to go to schools in California but we couldn’t afford them. They each loved their schools and it worked out pretty well.

If they want to stay in California, some of the community colleges do have dorms or apartments near the schools to get them ‘out of the house.’ My kids went to a private high school in California with a lot of affluent families and 50 out of the 235 grads went to nearby community colleges. Most lived at home (why wouldn’t they want to live in $Million dollar houses near the beach?) but some lived in apts near the colleges. CC can be the right choice even if you can afford more.

7 Likes
82

Revisit the home equity line of credit option. That is what you really need. Why is that not an option? You would likely be better off with a low interest personal loan than refinancing several times over the next few years.

2 Likes
83

UCDProf - i’ve been reading this, and following your posts. I like your practicality.
we have 4 kids, similar EFC if i remember right, but not twins. R&B for two at a time is a killer, but it was a Top priority for us - to have them live away.

here are just a few thoughts.
i know kids going to AZ who LOVE it there. (we are midwest). I think kids can be happy pretty much anywhere; if they are not, have them come home. but still - a free year of tuition is good.

  • count on your kids putting in some $ of their own for essentials. ($3K/yr at least)

  • If you qualify for the AOTC credit, use that. (2500/kid/yr for 4 yrs within certain income.)

  • R&B usually goes down once a kid moves off campus. That’s a few thousand savings for a few years.

  • I’d have your son look at New Mexico as well. Have a family friend who went there. Loved it.

  • *when your kids are gone, you’ll have less expenses at home to turn around and throw at college. we have just one of our three here now; it’s less. gas, driving, clothes, activities, food, etc. etc.

  • *and I’d refinance. we just did that for our #2 who is in grad school to help her out. it’s such a low rate. of course, we are midwest without quickly rising house values; our equity was just sitting there. much cheaper to pay 2.x % interest on that than parent plus loans. (AND as we get no $ from FAFSA for #3 kid who is in college, it just doesnt matter if that money is sitting in the bank).

  • I’d also take out subsidizes loans if offered for your kids. no interest accrues. can pay later.

i know you arent asking for my thoughts! but, here they are - from someone who’s valued living away, similar efc, and trying to get our kids through without loans or subsidized only (kid#2).

3 Likes
84

And as I said…I wouldn’t really recommend this….but you should be able to do a Parent Plus Loan for each of your kids for the first three years, then refinance your house and pay that Plus loan off.

It’s not a good plan…but it’s doable.

4 Likes
85

Northeastern

Search The Northeastern Promise

86

I agree with twoinanddone’s points above. There are inexpensive schools like publics in Wyoming, New Mexico, and Montana, and elsewhere…ones that OP might afford without taking $100k+ in loans, or accessing home equity thru refinancing, etc.

If the EFC requires these strategies, consider choosing an option that costs less than the EFC…and that’s not meet full need schools. Many people are faced with this choice each year, because there are many families who can’t or would rather not pay their EFC. Perhaps that is how this will play out, perhaps not but IMO saddling the kids and parent with 6 figures in loans should be avoided.

1 Like
87

Why are your kids terrified of student loans, but you aren’t terrified of a HELOC? I don’t know the particulars of where you live, but I’ve lived in three different parts of the country where everyone (my neighbors, real estate agents, mortgage brokers, etc.) believed that “Prices only go up” and therefore, that borrowing against your house “is just borrowing from yourself”.

Case one- major auto plant about 20 miles from my house announced that it was closing in three years. Home prices plummeted by 25% overnight (yes, I bought at the peak and sold at the trough- couldn’t be helped, was relocating for work).

Case two- major recession, based on the particulars of that city and the workforce, it was hit particularly hard with unemployment. Don’t know how many people had to sell well below what they paid in order to get a job out of town, but it was a significant number.

Case three- 2008. I have friends who still haven’t recovered financially, and they are staring down the barrel of retirement.

Taking student loans seems MUCH safer than wiping yourself out (potentially) just when you might need to sell your house to finance your retirement. I’d think very carefully before doing a HELOC, given that home prices are high right now, interest rates are low, and demand is huge… three conditions that are not likely to replicate themselves if your home ends up being an albatross.

Student loans get a lot of bad press, some of which is accurate. But if I walked you through my cousins, nieces, nephews, all of whom are paying off their loans on time AND seem to have a fine life (no, they weren’t vacationing in the Seychelles and skiing at Gstaad pre-covid) you might decide that your kids can handle loans early in their professional lives a lot better than YOU can handle loans in midlife!

Hugs. This is challenging…

2 Likes
88

Retirement assets are reported separately and aren’t counted as available for college by most (all?) FA formulas.

But as mentioned, distributions are viewed as untaxed income by FA formulas. So you’d want to wait until second semester of sophomore year at the earliest before making any of those withdrawals (assuming the student graduates in four years). There are risks here, such as unexpected leave of absence in the final few years bringing that untaxed income back into the FA picture.

89

For more WUE alternatives that would end up with less than the 22k you estimate so far, try University of Idaho. I suspect that you’d end up with approximately 15k after loans and work study/summer jobs. We were pleasantly surprised by the lovely campus and facilities.

1 Like
90

This is how we operate. DD’19 is at a regional public in Missouri. @UCDProf have you checked out the Midwest? Back when DD was looking, there were good automatic merit opportunities and in-state rates achievable at Missouri State, Southeast Missouri State, University of Central Arkansas, University of Nebraska-Kearney, etc., some getting her to $10k or less. They are all a pain in the butt to get to, but so is Estonia.

One-time only local scholarships helped with the more expensive freshman year on-campus. Moving off campus starting sophomore year saved a few thousand a year. She has some money in savings. Each semester I pay $2500 and she pays the rest ($1500) from savings. I get one of those $2500’s back on taxes each year. She works and pays her own rent and groceries.

4 Likes
91

Thanks and you’re right, we are definitely driving in the same lane. I really appreciate it any time someone who gets it interacts with me here, though I have to say this current thread is the best I’ve ever experienced on CC in terms of willingness to engage with the question.

We are definitely taking all student loans no matter what, for obvious reasons, however if the cost is somehow low-- yet TBD-- then I will be the one paying them back.

My daughter is (superficially) very against deserts, so Arizona is a problem initially, while Montana would be an easy sell. I might have missed something there. She did apply to one Montana school but it was not cheap out of state. Should circle back to Montana again but it did not seem affordable, and the scholarship winners I checked out did not seem to match my daughter’s profile-- they were more “accolades” type students.

There was also problem with New Mexico-- might have been that TO does not work for their merits, or something, but it was not cheap there when I checked.

I keep forgetting about the AOTC credit, which I believe we qualify for. It’s good to be reminded of that!

And yes refinancing is obviously on the table just have to figure out how to make it work.

1 Like
92

That sounds great, but its not as good a situation as you make it out. I’ve looked into most of the things mentioned and they do not work out at the costs people are saying once you actually run the numbers. Or test scores or weighted gpa becomes and issue.

It’s possible I’ve missed one, but every time, except for Univ of Arizona, that someone has mentioned one of these when I look at it, it’s not been as represented. Sometimes that is due to no test scores, but often it’s just not what is said.

I’ll go through all of these again.

93

yes I’m worried about borrowing on equity. I’m worried about a lot of things.

My students are taking loans. That’s absolutely certain. I hope I was clear about this. I’m less worried about them taking loans than they are. I was just saying how they feel, apart from me.

I could take plus loans too. But if we are going to Europe, and its a good chance my son will, then we need to pay up front and show money for a year in advance so cash will be necessary at that point.

It might be safer though more expensive to do it through plus loans, but that mostly works only in the states.

Not borrowing at all is not really an option, unless one of these obscure midwest publics really is as cheap as claimed for a TO California kid. So far that has almost never panned out as claimed but today I definitely was presented with some names I’ve never seen before.

If it comes down to me borrowing incautiously, and my kids not going away to college, I’ll chose the kids over myself. That’s something only someone actually presented with the choice could understand. If it comes down to that.

2 Likes
94

I’m definitely going to check those out. Hopefully one or more of those don’t require test scores and use unweighted gpa’s.

Thanks!

95

editing to add: yikes. not sure about TO and nm.

i do think midwest/southwest/west/southeast FAFSA public schools schools offering Test Optional merit, bringing costs to at least in-state costs, might be hard to find.

we know kids who pay </= 20K at SDSU (South Dakota State U); Northwest Missouri State, UNO, SDU; and i’ve heard Truman in Missouri is good. looks like NM could bring tuition to 9$k test optionally . . . (id look there again; deadline is soon; don’t know your kid’s stats).

love montana!! but it’s not cheap. Idaho is intriguing.

Really not pushing NM. however, look at this graphic. there’s a $17K scholarship for out of state

Screenshot nm scholarship
Screenshot nm scholarship1361×362 100 KB

here are costs for NM:

screenshot nm coa
screenshot nm coa1023×790 132 KB

but here’s where wiggle room: the $5950 in indirect costs is usually NEVER that high. we’ve had 22 semesters we’ve paid for college so far; indirect costs have never reached what was mentioned. SO - 43K - 17K - 3Kwiggle room - student 3K - $2.5K AOTC = 17 ishK; minus loan equals minus parent contribution. that’s how i’d look at it!

2 Likes
96

Back to the original question–

so is this agreed by all, that new IRAs popping up in second FA assessment won’t be counted against me in a new calculation of need at a CSS school?

That’s a pretty significant tool if so.

I think you are saying one can take the distribution once you are past the point of two-year lookback.

I’m not sure I get why it’s two years though. Can you always file FA before April, to avoid using the past years figures?

97

Just be cognizant of the fact that “affordable” for a U out of the country is based on today’s exchange rate (which fluctuates), the out-of-country tuition at that particular university (which will also fluctuate-- even if the tuition is low, there could be extra fees tacked on by the time you actually register) AND the headache of international travel. That $600 plane ticket in late October might be $800 in August or $1300 in December. And as one of my kids discovered (the hard way) overseas- that cheap sounding rent on an apartment (and it was cheap) LITERALLY included nothing but the walls and the ceiling. Monthly water bill, municipal trash bill (which in this country the tenant pays), electric, internet, etc. So by the time it was said and done- renting off-campus turned out to be just as expensive as living on-campus.

Did I miss why your son is TO???

3 Likes
98

If your kids are afraid of taking out loans, do they have a say? Can they choose to live with you and commute to “subpar Sac State” in order to save money? Are they on the same page as you regarding paying for college, going away, etc? If your daughter hates the desert why does she need to choose Arizona over Sac State?

1 Like
99

I was looking up Sacramento CC, and I have to admit that if we lived in California - I think I would be having my kids start at CC and transfer to the UC of their choice. $1288 for yearly tuition!! You could go to school on the money earned with a part time job…and if any of them decided a four year degree wasn’t what they wanted immediately, they would have some pretty great options after two.

Once again, super jealous of the California higher ed system.

2 Likes
100

Yes, we do have many options here. I took several prerequisites at local CCs for my second degree and was impressed with nearly all of my instructors. My sibling opted for our local CC then transferred to Berkeley. I’m a fan!

1 Like