Personal debt isn’t a consideration in FA calculations. It depends what sort of bills he paid.
If a parent pays off a substantial amount, it can reduce ordinary assets used to figure how much a family can afford for college. (Eg, using money in a bank account, reducing that balance…} Many do this.
But taking it out of an official retirement fund, (QRP/Qualified Retirment Plan,) which is meant to be preserved, not touched, (and is protected from FA calcs,) is a different situation.
So, depending on what he paid off with the retirement $$, you may still need “Special Circumstances.” Medical bills (not elective) are the classic example. Unlike other sorts of debt (often discretionary,) it’s usually beyond a family’s control. Likewise, a layoff. But some colleges assume that parent will find other work within some period.
A projection of 17.3k costs, if the family income returns to 100k, seems quite low. Maybe you have lots of siblings or ?
All this can spin your head. It certainly boggled my mind during my kids’ college years. But be careful you understand the way FA works, the terms that apply, check your original NPCcalcs that nothing was mis-entered, etc. And, if your family income is based on any self employment, the NPCs may not be accurate.
Sorry.