I am a single parent thinking about moving in with my parent. The time is coming when having someone with my parent overnight makes sense. If I move them here, I wouldn’t have a bedroom for them, but they have more rooms so we could make it work there.
But what does that do for FAFSA/CSS. My biggest asset is my home. Right now, as I understand it, it’s protected and not taken into account when filing FAFSA at least. But if I’m not living there, and renting it out, or if I sell it and put that money into something else, it won’t be right?
Is there a way to figure out what impact this might have?
If you are not living in this home and are renting it out, the equity becomes an asset on both the FAFSA and profile. And the rents are considered income.
If you sell the home and put the money in a regular account (not a retirement account…(and there are limits on the amount you can put there), that money becomes an asset.
So yes, when you decide to do this, it would potentially have an impact on college financial aid. BUT if the college doesn’t guarantee to meet full need anyway, it might not matter…but it might.
Remember, your income is still considered…and that could put you out if the running for significant need based aid in some cases.
It seems unfair that some people can shelter hundreds of thousands of dollars of assets, and other people. Even if the kids and I have a temporary place to live, it doesn’t change the fact that in my retirement, I’ll need a place to live, so either keeping the home or saving the profit to buy something new when my parent dies, or needs to sell their home to cover a nursing home or something like that, seems reasonable to me.
Including the rent as income does seem fair to me.
I wonder if I could buy a portion of my parent’s home. Can a “primary residence” be shared in that way? I’m not sure what that would mean if my parent dies while we still own that house.
I am confident that my income will put us in the range for need based aid.
Not tomorrow, but my youngest won’t graduate college for another 8 years. I think it’s likely that my parent will need this help long before then, and I’m the best positioned sibling to provide it.
I just did this for a random school I know is excellent with financial. with approximated numbers. I didn’t include rent, I just turned the equity into investments. Our contribution went from $8K to $33K.
Every college has a mechanism for Professional Judgment- which is where considerations like 'the money in my brokerage account came from the sale of my residence and I need those funds to purchase another home". No guarantees that they will view the money the same way you do- but there is always a way to explain/challenge/get consideration for an unusual circumstance.
The tricky thing though- is that even if your income would qualify you for aid, for many colleges it won’t matter. They don’t promise to meet full need, so the fact that in order to pay for your kid’s education you’d have to spend down your housing fund is just not relevant. Pay it or don’t pay it- that’s their deal.
So thinking now about your non-asset based options is smart. Can you afford your (or your parents) instate options without tapping your assets at all? That’s step one. Are your kids stats likely to make them competitive for merit aid, and based on typical merit packages can you afford them without tapping assets? That’s step two.
And on from there.
But do not make any financial decisions based on projected financial aid. You’ve got a much bigger expense to finance- namely your own future and retirement. So do what makes sense for your family situation and your own financial stability and worry about the aid consequences later.
What is the cost basis of your current home, and how old are you? (I don’t mean you should post this information, just that these are two relevant factors to consider). Selling your house could trigger a large tax bill. Just to name one “unintended consequence”. Owning an income producing asset (like renting out your house while you live with your parent) is not as easy as cashing a dividend check. In addition to the time/aggravation factor, there will be tax consequences down the road once you’ve converted your primary residence into an investment property.
Lots to consider. If you have a financially savvy friend or neighbor or co-worker who can generate a list for you of the key issues you need to figure out that could help.
Do you have a sense of the market value of your parents home?
Sorry to give you more stress than you’re under right now. But tread carefully…
I don’t realistically see how it works to just not think about getting financial aid. I need to plan for college costs now, if they’re going to be able to go. Two kids at instate schools would cost more than my take home pay, so either financial aid or assets will need to be involved. At the same time, caring for my aging parent is also a priority for me.
And yes, we’ll look at all the rest of it. My understanding is that there won’t be tax consequences when I sell the house as long as I move back into it for a certain number of years before I put it on the market. So, renting it out might make the most sense. If I do so, it makes sense to me that the rent would be taken into account. It doesn’t make sense to me that the equity would be taken into account.
Well, an aid maximizing strategy might be to move your Mom to your house (I realize you’re short a bedroom, but can your kids double up, convert a den into a bedroom, ???) and rent out your Mom’s house. She’ll get the income from the rent which will have zero impact on your financial aid, your home won’t be considered an asset since you are living in it, and assuming your siblings can deal with the hassles of tenants and maintenance, you won’t alter your financial aid picture vs. where it is now. Her home is HER asset. And down the road, assuming it’s an asset which gets split among the siblings, there will be some financial payout for you for having taken care of her all those years- hopefully in many, many years…
Unless she is in a very high cost of living area, the rent isn’t likely to cover an assisted living situation. But if it does-- that’s a variant.
There are likely lots of reasons why this is a bad plan, but based on what you’ve posted, this is the “aid maximizing” strategy.
The reason I suggested putting aid aside for now is that many people find that once they’ve done the “Aid Maximizing” strategy, life intervenes. Their kid ends up at a college which doesn’t meet need anyway, so their assets and income stream are irrelevant. Their kid ends up at the Naval Academy which is free and they’ve gone to the trouble of retitling, selling, moving assets for naught- and have likely incurred an extra tax liability along the way. Or your kid lives at home and commutes to a local college (which is what tens of thousands of kids do when money is an issue).
I’m not suggesting you ignore college (far from it). Just pointing out that college is 8 years (you have two kids, yes?) and your planning horizon could be 45 years (I don’t know how old you are). So your long term financial health is a more critical thing to worry about even as college looms…
In your situation, perhaps your kids would be better served looking for schools with sufficient merit aid to meet your price point. That would not take your family finances into consideration at all.
Realistically, how do you find options that will come in under $20K with merit for a kid who isn’t at the top?
If my second kid stays on the same trajectory he’s on, I think he might be able to find it, but my first kid with learning disabilities, and not a ton of rigor? That seems unlikely.
Students can start at community college and spend two years there (or more if they work and go to school part-time.) Another option depending on access is living at home and commuting to a four year college.