Fire Insurance Pmts & FAFSA

Paying for College
1

<p>I have a friend whose house was just burned down in a fire earlier this month. They have a high school senior, and are planning to fill out the Profile and FAFSA because some of the colleges are expensive privates. </p>

<p>Now they’re trying to deal with the loss of their home and belongings, and the resulting insurance proceeds, and I’m not sure how any of these will be viewed by FAFSA/Profile, and whether there are any professional judgments that could come into play under the circumstances.</p>

<ol>
<li><p>They received a lump sum living allowance for the next twelve months to pay for renting a home while theirs is rebuilt. (They will still have to pay the mortgage payment on their burned down home during this period. Property taxes will be lowered, but that’s all.)</p></li>
<li><p>They’ve received (and probably spent) some advanced funds for belongings to replace immediate needs. (I don’t think this will affect financial aid.)</p></li>
<li><p>In terms of all of their personal property – and a whole house full is a lot of personal belongings and furnishings – once they submit detailed inventories, she understands that the insurance company will give them a lump-sum check for the actual cash value of everything, and then as they replace things, the company will cut additional checks to cover the difference between ACV and the actual cost of replacement. But, some of the replacement items, like appliances, won’t be purchased until their home is rebuilt – in about a year – and some are seasonal (you can’t really buy sundresses right now even if you wanted to, the bathing suit selection is also rather sparse,…) – so they’ll have a rather whopping chunk of money sitting in a bank account for a while, probably including the time period during which the FAFSA/Profile has to be filed to meet the various school deadlines.</p></li>
<li><p>On the house front, the insurance company funds an account at the bank that has some arrangement with their mortgage company, and a construction management person at the bank pays the construction related bills as they come due and the work is verified. That’s going to be a whole heap of money sitting there for a while, though she still isn’t quite sure of how all the mechanics of it work. The replacement cost of their home is quite a bit larger than the mortgage amount that is outstanding.</p></li>
</ol>

<p>Any help on how this will be handled for financial aid purposes? Any suggestions for her?</p>

2

<p>Not sure, but I would think that for CSS schools, it might make a difference.</p>

<p>However, if the family normally earns a good income, then their FAFSA EFC would probably be too high for any Pell (free money) anyway. Not sure it will make much difference.</p>

<p>What would the family’s FAFSA EFC without the fire money? </p>

<p>What kind of schools with the student be applying to?</p>

<p>If schools won’t take this into consideration, then the student might have to either take a gap year or look for big merit.</p>

<p>I would see if they can “pre-pay” any rent to their landlord to reduce their assets.</p>

3

<p>FAFSA Forecaster was at $24K/year – so a family that might get some assistance at more expensive privates (some of which are on their child’s list), and probably no assistance needed for the in-state public that’s the safety school.</p>

4

<p>I think they need to call some of the CSS schools on their lists and get an opinion on how these big lump sums will be handled.</p>

<p>And…to be safe, I’d also apply to a few schools with assured scholarships.</p>