Using Home Equity with Financial Aid over multiple years?

Parents Forum
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Self study for AP’s is a great idea.

But not sure why the process of self study is any different from prepping for the SAT’s… A kid motivated enough to teach himself AP Euro or AP Bio enough to score a 3 or 4 is likely motivated enough to take a standardized test, no?

Sorry to harp on this… I’ve just seen that the “test optional but we give merit” schools seem to get a WHOLE lot more generous when there are ACT or SAT scores on the application. And since the 5 or 10K merit award isn’t going to get the price to where you need it (for most of these colleges we’ve been discussing) every little bit to boost the merit category will help your son, no?

Good luck- sounds like you guys are well on your way to formulating a plan…

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I was not saying that we are self-studying, but that someone else who is not us and wanted to go to Europe and again, is not us, could self-study APs and get good scores. They would have to go to another forum for advice but students are doing this, students who again are not my kids. In some cases SATs can also work in Europe, and sometimes subject tests. It depends.

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Also merit is not an issue for us except at maybe these obscure states (obscure to me in CA) where merit can actually match need.

We have gotten the highest available merit in several places while TO, which I assure you is not an option for us. You just have to believe that (about our testing situation). I know its different for others and if merit is an issue they should probably work for high test scores.

The top merit still doesn’t come close to need for us. It’s only people with more money for whom this merit question matters.

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Peace. Trying to be helpful, happy to bow out if you find my suggestions annoying.

Good luck. But point of clarification- the merit question can matter for both people with more money than you AND with less money (obviously I don’t know the in’s and out’s of your particular situation). A case in point- the service academies. They are free regardless of your income (so clearly each student is getting a hefty merit award) and I’ve known some kids whose financial situations made it seem as though they wouldn’t be able to get a four year degree… who got an appointment and made it through courtesy of you and me (and millions of other taxpayers).

Not a route to take solely for the money of course. But a kid who might have explored ROTC and seen that they finances got them close but not over the hump… the service academies provide a merit-based solution if the kid is qualified and wants to serve in the military.

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Service academies is a quite bendy way to say that merit matters for the poor. But, okay.

For the most part, merit won’t make college affordable for many at a certain income level, except at certain state schools.

It’s really important that people understand that, or at least consider that it may be in some part true

I did not understand that, and we put a lot of work into things that were going nowhere.

That is not to say that there aren’t special opportunities opened up for merit competition for people below certain income levels and with other disadvantages. There are and if you qualify go for it.

Merit can change the conversation over the need-based pool of money at a certain stage of deliberations, but not change the bottom line cost of the student, which is also taken heavily into account.

If you can test well you should definitely use that to get the most you can. It can’t hurt that’s for sure.

We did get 60,000 per year from one college that was not specified as to merit/need but certainly had to be partly merit-motivated. The offer exceeded the maximum range of grants specified on the website.

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I don’t know what health fields your kids are considering, but many of them are very test heavy, for the entire career. Just something for them to consider since you have said test taking isn’t their strong suit.

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yup, but that’s something they have to work out themselves. I can’t tell them they can’t do it.

I think we’ll know more after one year. Like I said, there is no way to know how they are going to do.

A lot of these classes are also memorization heavy, and all we know now is that they have no experience with that, not that they have no natural abilities with that. They might be memory robots, who knows.

Study skills training could be a good idea.

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Back to your question on this thread.

Funding.

A Parent Plus Loan can be taken for just the amount you need each year…if you qualify. You could do that for years 1-3 and then refinance to pay off the Plus.

Oh…and if you apply for a Plus and don’t qualify, your kids get an extra amount added to the Direct Loan…$4000 additional for freshmen.

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To return to your original question:

As @thumper1 and @politeperson noted earlier, the 2-year lookback is based on the academic year, regardless of when you actually file taxes or FA forms. So:

Academic year 22-23 Fr (income from 2020)
Academic year 23-24 So (income from 2021)
Academic year 24-25 Jr (income from 2022)
Academic year 25-26 Sr (income from 2023)

Money contributed to a Roth is not reported to colleges as untaxed income (or any type of income), because it is after tax.

It is reported as a retirement asset, but it is intermingled with your other retirement assets (if any) when reporting them and colleges say they do not assess against retirement savings. So they will know about it, but have promised not to “use” it.

Note that if you already contribute to a regular IRA, then there are rules about how much (if any) you can contribute to a Roth. There are also income limits, but based on what you reported earlier, I don’t think you exceed them.

This is my understanding: If no other restrictions apply, you can put 6k each year in a Roth for yourself (7k if over age 50) and your spouse (if any) can do the same. As for your kids, they can also have a Roth if they have earned income (they can contribute up to their earned income, not to exceed 6k. You can use your HE funds for their Roths on their behalf – they don’t have to use their own actual income).

Thus, it could play out like this:

Jan 2022 or later: home equity funds dispersed
Set aside what is needed for AY 22-23 tuition

Make your 2021 Roth contributions by April 15, 2022

Make your 2022 Roth contributions any time in 2022 (but before you file FA forms for AY 23-24)

August 2022 (likely): Pay tuition for Fall 2022

January 1, 2023: Contribute to your Roths for 2023

January, 2023: Pay tuition for Spring 2023. Pay any other big expenses.

Jan-Feb 2023: Fill out FA forms for AY 23-24 (check school deadlines, as they vary)

For the FA forms you fill out in Jan/Feb 2023, your assets are increased by whatever is remaining from the Home Equity loan, but decreased by 3 years of Roth contributions if you time it right (2021, 2022 and 2023) – so 26k or 42k assuming two parents, depending on ages and some amount for kids.

August 2023: Pay tuition Fall 2023

You can then withdraw money from the Roths anytime after January of 2024, since that is later than your latest “lookback” period.

Roth monies are categorized as both contributions and earnings, and different withdrawal rules apply.

Withdrawing your contribution is always penalty free and tax free.

Withdrawing your earnings is tax free and penalty free if you withdraw after age 59 ½ and have had the Roth for at least 5 years.

Withdrawing your earnings is penalty-free but not tax free if you withdraw before 5 years of Roth existence, regardless of age, if they are used for a qualified educational expense.

Note that if your kids are taking a gap year, then all of the above dates get moved up by a year, and it also gives you one extra year of Roth contributions before you start the withdrawal.

Also note to of course check with your accountant or other professional about tax matters – this is just what I have learned for myself.

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170

Will they take tests? It helps for schools like UAH - with a 28, tuition $5K or so after merit.

There’s others for sure…but guess have to figure out what you’re after.

Many schools in the South or western MW have huge merit…other schools like S Illinois or W Carolina or Truman State are just low cost., etc.

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What European universities are you considering?
British with Foundation year? Honors Colleges at Dutch Universities? Others?
What world language do they speak (even if “not well”)?

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$60K per year for one kid? Doesn’t that come close to meeting your need? Or was it from one of the pricier schools?

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I don’t think that’s right. It can also mean cash-out equity in a re-fi, in addition to a HELOC.

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Yes it comes close and will be hard for state schools to beat. Sticker price is 82k. it is the one that gets down to 22k including everything and indirect costs, so with student loans/work study added in, is very close to FAFSA EFC (16k) which is a benchmark reference point I’m using here to communicate on CC as the bare minimum goal.

Should we get both in that range, then 32k per year is the figure I am throwing my own loans at to tame the beast (or defer the beast).

I expect I might be able to use this offer to get similar offers elsewhere, for my son. My daughter who is the stronger candidate does not have this kind of leverage though.

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Are your kids in line to receive a Pell grant based on your current FAFSA filings? If not, this is a lot of gymnastics for little gain. Yes, the loan proceeds sitting in your savings account or a CD or something is much easier to explain to a private school using the CSS, but are you looking at a lot of need based aid right now?

If so, then why aren’t they looking at California schools with all the grants and programs there? California publics no longer accept test scores for admissions. Most accept the insurance policies. Why not look at Humboldt, Channel Islands, Fullerton?

Yes, most of the WUE schools do require a test score to get the merit scholarships. If you aren’t willing to have your kids take a test, they aren’t going to give the merit awards. Your choice.

Sounds like you have options already. Why don’t you just focus on those trying to make them work financially.

If either child is planning on a gap year, he/she could move to Utah, Missouri or a couple other states and establish residency, thus getting instate tuition in 12 months.

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176

Honors colleges at Dutch Universities require APs for entrance, so no, not now. They don’t qualify.

The Universities of Applied Sciences in Netherlands do not require this, and are 4-year programs.

The regular universities also have English language programs and entrance can be through “foundation year” programs if you lack the APs.

Studying in Netherlands is, all things considered, pushes the edges as far as expense compared to the U.S. however, at our COA. For many people reading this, it is far cheaper than what they pay in the U.S.

Foundation programs in Italy are definitely under consideration, and they include intensive Italian and that connects with relatives nearby.

There are also several places in Greece, some American system, some British.

There are ton that we’ve investigated in France under different assumptions about majors, but are for the moment out.

Czechia has many public universities that are very cheap and used to accommodating foreigners in their English programs, and one private in Prague, Anglo-American University, that is less than our US COA , but is small and has no science.

Only English is required for entrance at almost any EL program anywhere in Europe. However, the chance to learn other languages effectively can be there, depending on the country and the program. A lot of programs are so tightly scripted that there isn’t room for language electives.

My kids speak an obscure Asian language from a small country that never colonized anyone, so no “world languages.” My son has expressed a desire to learn languages and to travel, without my asking.

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177

Its not “my choice” that my kids can’t score high on tests in January of senior year, or ever. If they could, they would.
How about just leaving that be.
No Humboldt state is way too expensive for us, as are all the Cal States. My daughter is applying to Humboldt State however because she really wants to go and her friends are going. It’s not going to happen though.

We have some options, like this 22k option, IF I borrow a lot of money, and my kids do too. That is the purpose of this thread, to figure out the how to pay for it. That’s what this thread is about, focusing on making them work financially.

Sometimes people have other things they want to bring up, which is fine.

You can say it sounds like to you we have options, why not just take them. But that’s to you. Not to us they are not options without borrowing.

It is possible to scrap this year’s application cycle, move to another state. Yes that’s an option.

I’m definitely not guaranteeing that this whole ordeal this year was not a bust, but a learning experience.

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178

Once more….have you considered the Parent Plus Loan?

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Wow thanks! That’s a pretty comprehensive road map, and very clear, to how to negotiate this situation. I appreciate that so much. Add in a couple other less momentous things people brought up earlier, and the “penalty” for doing it this way is pretty much mitigated, at least at the relatively small size of the loan I’m doing.

Additionally this gives us flexibility if we do have to pay all at once, and show money in the bank, to go to Europe. It may be one in Europe, one in the US, and a combination of PLUS loans and equity loans is necessary.

This is all good to know, and not just for me but for others who may want to take this route. Thanks so much!

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yes I’m not borrowing enough on equity to cover 4 years, only a portion of what I need to borrow. I will also have to take PLUS loans at different values depending on the situation.

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