<p>Cactus, equity on home #2 is an investment asset.</p>
<p>Of course you are not guaranteed money in lowering your EFC unless you hit low enough threshholds to qualify for federal and state grants. However, by bringing it down, you can increase the chances of getting more money. Most colleges have a bunch of grants that they distribute, using the EFC or other need figure as a criterion for getting those funds. Schools with SEOGH or Perkins funds are required to distribute to Pell Grant kids first, for instance. So bringing down that need figure can increase the chances of getting more money, but certainly does not guarantee it. There are need based grants out there that have income threshholds.</p>
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<p>A minor detail here, but paying down principal on a mortgage reduces interest paid (all other things being equal) but does not increase AGI. AGI is calculated prior to any itemized deductions, so the net effect of a lower mortgage interest payment on both AGI and EFC is zero. Since EFC is based on AGI, reducing itemized deductions doesn’t help (or hurt). Finding ways to reduce AGI would certainly yield a lower EFC, so looking carefully at lines 23-37 on your 1040 would be prudent.</p>
<p>Good catch vballmom. I stand corrected.</p>
<p>All the more reason why the return on the money in paying down principal is a prudent way of getting return on your money without increasing your EFC.</p>
<p>Even better for those of us who don’t quite have enough interest/taxes to itemize. Our 6% (typical mortgage interest) is guaranteed and tax free (no lost deduction). Not bad in today’s market.</p>
<p>Just wanted to mention that even when you play by all the financial aid rules, ultimately most colleges can decide to give you what they feel like, in spite of your FAFSA and Profile applications.</p>
<p>I receive interest on a mortgage, claim it on my taxes, and put it down on my FAFSA and Profile statements. I called the FAFSA and CSS folks and asked how to address this, and was told twice by both that the interest is income, but since the title to the property is in the buyer’s name, the asset value is $0(makes sense.) However, two of my son’s colleges ignored this and assessed me with about $300K in assets, which resulted in him being denied any need based aid despite an EFC of $17K.</p>
<p>sketchy-</p>
<p>It’s not at all clear (to me, anyway) what you’re saying.</p>
<p>“I receive interest on a mortgage..”</p>
<p>People generally pay interest on a mortgage, they don’t receive it. Unless they carried back a loan to the buyer of their property. Is that what happened in your situation?</p>
<p>sblake,</p>
<p>yep, I’m the mortgage holder.</p>
<p>Okay— gotcha. So even though the home you sold is no longer yours, they considered the mortgage your holding as an asset. Kinda makes sense, actually. I guess the question would be whether it’s a reportable asset-- and from what you’re saying, they think it is a reportable asset.</p>
<p>Rolling UGMA funds into a 529 plan: Is there typically a limit on how much can be rolled over? If one wanted to roll over a conservative amount assuming that a child would attend four undergraduate years, but not knowing whether it would be at an in-state public, OOS public, or private school, what amount would you choose in order to be relatively sure that you’d use it all? $10,000 / year x 4 = $40,000, adjusted for a 5% rate of increase for each year until the child 's projected freshman year??</p>
<p>There’s no limit on the amount that can be rolled over from a UGMA to a student-owned 529. </p>
<p>I’m assuming I’ll pay $25K/year for in-state public schools, and will likely pay this for 5 years rather than 4 given the odds of not finishing in 4. I don’t want to over fund the 529, so I’ll probably stop after it gets close to $75K.</p>
<p>Rather than rolling everything over at once, consider rolling over a fixed amount every month for a year. That’s a more conservative approach, rather than trying to time the market.</p>
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<p>This is very deceiving in colleges that award merit aid. Make sure you ask for examples of financial aid awards for students with incomes in your range.</p>
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<p>this is one of the biggest misconceptions out there - we never had a lot of assets anyway, but afte having at least one kid in college for the past 7 years and 4 more years to go - we are about out of assets. No hiding here.
By having a low EFC does not mean there will be BIG financial aid awards - hardly any schools meet 100% of need - you and your kids are ALWAYS better off if you have high income and high savings - even if it means you have to spend it.</p>
<p>calmon - Thanks for reply in post #121.</p>
<p>Does anyone know why equity from a second house used as rental property must be reported as investment asset and equity from a store or farm business can be reported as business asset? Both rental properties and stores/farm businesses are used to generate income, why the equities are treated differently for EFC calculation? Thanks.</p>
<p>I’m with Justamom. If anyone thinks spending money like crazy and throwing your mercies on financial aid is good strategy, that person is nuts. THere is absolutely no guarantee you will get a sizeable award of any sort even if you have need. Most schools are not need blind and gap terribly. Those that are need blind tend to be very selective. Also income is really the main thing that directs financial aid, unless assets are pretty danged large. If you have that much money hoarded away, you should consider using it for school unless education is not important to you. Then why should the government and the school pay for you?</p>
<p>Cactus, there are hundreds of things that make no sense in FAFSA. This is a minor thing compared to some of the madness. Rockefellow kids are eligible for govt funds if one of them is not the custodial parent, for instance.</p>
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<p>Two good reasons on the parents’ part why it is still helpful to the children to make more money rather than less, and to save for college expenditures. Some families have little choice in the matter, but for those who do, the expedient choice is still to lay up money for college, keeping in mind the tax and financial aid policies established by Congress.</p>
<p>The advantage of saving up is peace of mind for the parents and the child. The disadvantage is that you have to live within your means. Though not everyone would agree that this is a disadvantage.</p>
<p>taxguy - a question: my s will start school in september and the FA office recommended that he take out a subsidized Stafford loan. Wouldn’t it be better for fin aid for year two if we just used some more of our savings thus lowering our net worth for next year’s FAFSA and College Board profile?</p>