Financial Aid & Additional Asset - Please help!

swimcatsmom
Sat, 26 Apr 2008 15:23:26 +0000

Plan 1: Selling the house. Paying off the mortgage for our current home. Putting the money in retirement accounts (From what I hear the FA people / government do not count retirement as much towards the EFC / need based aid).

There are a couple of problems with this. Selling the house will create income if it is not used to purchase another house. The income will be used in the EFC calculation. And the amount you can put in a retirement account each year is limited. Any money left over would still be an asset. And I thought you said you cannot easily sell the asset?



Plan 2: Same as above, except sell our current home as well and then purchase a more expensive house. This would leave us with little money on hand. (From what I hear the FA people / government do not look at the price of the home you live in).

FAFSA does not look at primary home. CSS/profile (which I think northeastern is?) does look at the primary home.



Plan 3: Sell the house and then put most of the money into Bonds (can’t touch the money for years).

Who gave you this suggestion? Bonds are an asset. They are **not ** a protected asset under FAFSA. If you can’t touch them for years you will have an asset you cannot use that is still used to calculate your EFC. So you will have to come up with the money but you cannot access the money.



Plan 4: Do not sell the house or sell the house. Pay full tuition for 4 years…(I plan on taking out $10,000 in loans every year to ease the cost).

Sounds like a plan.



Plan 5: Sell the house to a relative for a very low price. (But we still manage the home)

sounds like an attempt to defraud the financial aid system. I would not recommend it. So many pitfalls here. Without even researching it let me see - If the relative dies what happens to the house? The house will be part of the relative’s estate and will be valued at the current value - not the very low price. so even if it is left back to your parents it may cause very high estate taxes on the relatives estate. If your parents die suddenly there could be estate problems. Do not even consider this.

Have your parents considered borrowing money against the second home to pay off the mortgage on the primary home? The primary home is not considered an asset by FAFSA so it would make more sense to have full equity in the primary home and have a mortgage against the 2nd home thus reducing the equity in the 2nd home. Even then it would still be a pretty large asset so I am not sure how much it would reduce the EFC.

What sort of financial advisor is suggesting these things to you?