Pay off car?

<p>I have one last request for advice. We have some money left over from selling our home a few years ago. (we bought a smaller home) Should we take that money and pay off our 2 year old car? We still have 3 years of payments. Does it make a difference as far as financial aid? We have high income, just about 100,000. Thanks in advance for your help.</p>

<p>I asked a similar question last year-- we had been saving for a new car, but the old one was still hanging in there. The good advice I got was to run the EFC both ways and see what difference it makes. $100K does not put you out of the ballpark for aid at the pricier privates.</p>

<p>1moremom is right. It can make a difference at your income bracket. How much is left on the car? YOur assets are assessed at about 5.6% which gives you some idea as to what the difference could be. If you pay off the car instead of having the $10k sitting there, your EFC is reduced by about $560 for that year.</p>

<p>We owe about $8500. on the car- I am going to pay it off! It is 300 hundred less per month to pay out, plus we save about $600. in interest. Plus,I like the feeling of having a paid off car. For a change, we won't be paying it off just when it is starting to go......kerplunk! (LOL) Thanks for responding.</p>

<p>It's a great idea to use liquid assets to reduce any debts, for FAFSA it is even a good thing to reduce home mortgage amounts, unless you will need that money available for other expenses.</p>

<p>I would advise you though to be careful about assuming that small (relatively small) asset changes for a parent are going to make a large change on the EFC. Keep in mind that the usual asset contribution is about 2.5 - 3.5 percent of the actual net worth, so with most families using $10,000 to pay off a loan only reduces their EFC by about $250 - 350.</p>

<p>From a cash flow perspective it may make great sense, giving you more flexibility when determining how you are going to afford your EFC, but don't do it if your only reasoning is to get more aid.</p>

<p>We paid off our car - and made sure that both cars would make it through the 7 years that we will have two kids consecutively in college. FA doesn't "allow" for debt - so better to be debt-free with smaller assets than have debt and higher assets. Plus, it gives you a little more wiggle room in the budget to pay that EFC. That being said, I know we live much closer to the wire than most people would be comfortable with... basically no savings, and everything that comes in goes out immediately to pay our EFC and living expenses. If the roof falls in, we will have to borrow - but we are hoping that the roof, the AC, the cars and all will stay intact until the kids graduate.</p>