A family making above $100K a year is not a middle range income.
The U.S. median household income is somewhere closer to the $50K range
If your husband lost his job tomorrow, you could live for quite a while off of your assets.
If a person without such assets lost his/her job, they may quickly find themselves in dire circumstances.
The grass is most certainly not greener on the other side, even if the other side gets better financial aid.
What's considered "average" for non-retirement assets, does anyone know?
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That is a good question. Don’t know if we’ve ever seen an answer. I would imagine that schools expect that “big” savings should be in retirement accts. I imagine that anything over $75k that isn’t in retirement accts would be seen as above average.
Is the average meaningful, or is it more about the asset protection threshold? The way I always understood it was that any non-protected asset is assessed at a certain percentage as being ‘available’ to pay for college; there isn’t a threshold where they say, “Whoa, you have waaay too many assets, we’re going to triple your EFC because your assets are too high,”, it’s more like they have a threshold (say $10K – just a made-up number) and anything above that is assessed at 5%. I’m not sure if the schools have a general consensus on what “average” non-retirement assets are that is distinct from the asset protection allowance that they already work with.
So if you have $1000 in a non-retirement mutual fund, your EFC goes up by $50?
If it’s beyond the protected assets amount…which is about $30k for a married couple.
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Is the average meaningful, or is it more about the asset protection threshold?
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We don’t know how schools like H calculate “average”. They don’t specify, likely to give themselves wiggle room.
According to the Federal Reserve’s Survey of Consumer Finances:
“median value of all financial assets held by families fell 8 percent,
from $23,000 in 2010 to $21,200 in 2013”
http://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf
(page 15)
Well so much for rechecking and recalculating, as our EFC went up by $10k! But thanks to the spreadsheet one of our CC members sent me that lets you play around with the #s and to see how it reduces or increases your EFC, I at least understand it better. Best of luck to everyone and hopeful that your children CAN follow their dreams.
Are you saying your kids can’t follow their dreams because you have $600k in non-retirement assets? I wasn’t sure what the emphasis was for on CAN.
We have lots to think about and our S does too. We didn’t get to be where we are today by not being very frugal, but I’m more confident than when I started this thread thanks to fellow CC members and thoughtful advice:-)
RDots its, your son already has acceptances with some merit aid, so he has seemingly affordable options.
Just to clarify - so as I understand it, the OP owns two houses but rents them out because the husband’s employment (military) provides housing - then neither of the two properties can be considered their home?
Wondering about this because afaik lenders sometimes treat it differently from the IRS etc.
For CSS Profile, it will however consider debt (mortgage, heloc) against those assets, regardless, right?
The IRS only considers it if you actually declare that a home is your primary residence AND IT IS - you use that address to vote, register cars, etc. A mortgage lender will treat a primary residence different than a rental property (for primary, you can usually get an FHA or other loan through a govt program; for a rental, you’d better have a 20% down payment).
My sister and her husband each have their own primary residence, but they don’t rent either out. He lives in one, she lives in one. My friends and her husband do too, because they bought one with the proceeds of an inheritance/sale of property, and made it his home so that if/when they sell they won’t have capital gains. Again, they don’t rent it.
There are inherent injustices, unfairness in the FAFSA, the financial aid system. I won’t go into my list of them
However, it is an issue when you have assets outside of qualified plans vs in them. I’ve mentioned an old friend of mine a number of times. He “retired” from his job quite early due to some medical issues, and started buying properties at good prices and fixing them a bit, renting them and becoming a slum lord of sorts. He made a nice income, but modest at about $60K a year. Harvard is very generous to students coming from families at that income range, but the problem he had was that he owned a lot of properties that had large market value. Getting loans against them was difficult if even possible, due to the nature of the properties, and then he’d have to pay back those loans out of income. The properties represented his nest egg for retirement, along with being the golden goose that was providing him and his family with income To sell one, meant lowering his income. Despite his appeal that was laid out very reasonably, Harvard refused to budge. Son didn’t get a cent of financial aid.
@scholarme if the OP is renting out both of those homes and they’re living and renting elsewhere, then of course those two homes would be assets, right?
Wondering about this because afaik lenders sometimes treat it differently from the IRS etc.
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Lending is a different situation. Likely one of those homes was purchased when it was their primary home (or supposed to be), so the bank let them have a primary home mortgage. The fact that they now use that home as a rental (but have a primary home mortgage on it) is irrelevant.
Yes one home was our primary home when we were stationed there. It’s now a rental. The other home is investment property and purchased as such. Either way it sucks that they are considered assets. Actually should be glad they are worth a lot less than when we bought them or it would look like we have even more assets.
And this tour of duty we were required to live in onpost military housing. We weren’t allowed to live off post:-(
Rdtsmith, I would call a few financial aid officers and the FAFSA number to find out if what you consider as your primary home though not living in it, could be so treated being that you are in the military and on tour of duty. You might want to do the calculation and see what the difference in EFC is if that home equity value were not part of the assets. You can also ask for a professional judgement on the issue. The rent you get from the home, yes, you would still have to include as income, but I would not be surprised if there might be some exception for military on active duty living on post housing or wherever that makes it not possible to live in the primary home.
I don’t think that the equity is this house is going to matter in the long run. The total equity for BOTH rentals is $100k. If the equity for this ONE rental is about $50k, then that won’t reduce the EFC enough AT ALL.
The OP already redid her calculations and the EFC went UP to $100k…so reducing $100k down to $90kish won’t make any difference at all.
Not to mention that if they’ve been declaring any depreciation or anything like that in deductions, the CSS schools are just going to add that back in.
If their EFC is in the $90,000 range, they would have to do a lot more than eliminate one property asset to get down to a point where their EFC is less than the cost of attendance at most schools.