Would our FAFSA picture improve if we paid off home?

<p>My wife and I have been saving and we now have just enough to pay off our mortgage. Putting aside all other considerations (e.g., is it wise to pay off mortgage, is home going to further devalue, etc), would our financial aid picture improve is we paid off our home? After listening to a college financial aid staffer give a presentation, it sounds like they don't the parents' mortgage obligations into the financial need, but would look at money in the bank as an asset that should be used to pay for tuition (decreasing need). Any thoughts? Thanks.</p>

<p>go to your other thread.</p>

<p>Your family contribution is going to be based mostly on your income. If that's high and/or your children go to FAFSA-only schools, then you may not get much aid anyway.</p>

<p>FAFSA-only schools don't usually give much aid.</p>

<p>the schools that give a lot of aid, use CSS Profile...and many look at home equity.</p>

<p>To answer your question...in a very simplistic way, yes paying off your mortgage would have a positive effect on your FAFSA EFC. The FAFSA does not consider any consumer debt, including primary residence mortgage in calculations; nor does it consider the value of your home. However, any money in a bank or investment account is considered an asset and so factors into the calculation. If you transfer the asset into home value, then the FAFSA EFC calculation cannot capture a percentage of the asset as part of your EFC.</p>

<p>This does not make it (paying off your mortgage) a good idea in and of itself.</p>

<p>True....but this person seems to be misunderstanding FAFSA itself.</p>

<p>FAFSA is mostly just to determine federal aid. It sounds like their income is too high anyway for federal grants.</p>

<p>CSS Profile schools (most of them) will consider home equity.....so this all may be for naught...and may tie up needed funds in a home.</p>

<p>We need more info....</p>

<p>What kind of schools will your kids be applying to?</p>

<p>if they'll be applying to state schools and good-but-not-tippy top privates, then the schools may not meet need anyway (if there is determined need).</p>

<p>For many families with decent incomes, their EFCs are too high (based on income alone) to get ANY free grants from anyone.</p>

<p>For instance...</p>

<p>If this family earns $100k per year, it's FAFSA EFC will be about $24k or so - based on income ALONE.. That is waaaayyy toooooo high for federal grants....EFC has to be about 5,000 or below.</p>

<p>If the kid goes to the state flagship that costs $32k per year, then the school will say that the student has $8k of need. The school isn't going to give the student $6k in a grant. The school is going to give $5500 in a student loan and gap 2500 dollars (or maybe give 2000 in work study) However, many with high EFCs do not get work-study.</p>

<p>If the student goes to a CSS Profile school that looks at home equity, then the family may be expected to contribute $30k or more (depending on the equity and other savings).</p>

<p><a href="http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf%5B/url%5D"&gt;http://ifap.ed.gov/efcformulaguide/attachments/082511EFCFormulaGuide1213.pdf&lt;/a&gt;&lt;/p>

<p>Run the numbers and see for yourself. The danger in paying off your house is that unless your income is low enough that you qualify for Pell & state grants, you will need that money for paying the costs. About the only time using your liquid assets to pay down your house would work is if your income would be low enough to have a very low EFC</p>

<p>Your EFC is very largely determined by your income, with only 5.6% or so of assets being tapped for contributions to the EFC. Parents also have an asset protection allowance meaning that a portion of your assets are protected from being used at all. To be honest, you would need to have VERY high assets to make a significant different in your EFC. </p>

<p>If the school is a FAFSA only school, it likely does not meet full need anyway...so you would not be guaranteed more aid.</p>

<p>If the school uses the Profile or a school form, the home equity in your primary residence IS listed on the Profile...and some schools do consider this in the equation,. Again...you might not net more aid.</p>

<p>I'm not sure you have much to gain here.</p>