FAFSA question

[teachermom2834]

DS is a junior, so this questions is for next year, but lots of changes in our situation and I am trying to figure out the implications on financial aid.

 

For background, ds is a good student and is interested in a private school.  He may apply to some of the schools that are generous with financial aid.  So, our EFC is going to be important for him.

 

DH is recently unemployed and we will likely be relocating.  There is a good chance that he will be underemployed, though hopefully he will have a job by then.  He won't be making a huge income.  If things go as planned when we file the FAFSA next Jan 1, we will have sold our house and be renting for awhile in our new location.  My concern is that any profit we make on selling our house (maybe about $50,000) will count against us on the FAFSA.  That isn't money sitting there that can pay for college.  We will need that to get into another home. 

 

How do we manage all of this without it looking like we have $50,000 just sitting available in a savings account? Money will be very tight.  We'll need that to get into affordable housing, it just likely won't be done before the FAFSA filing date.

[maize]

Do you have to rent at the new location? I think you are right that the $50,000 will count against you, and the best way I can think of to avoid that is to put it immediately into a new home.

[maize]

The other option I guess would be for your husband to relocate ahead of the family and you stay in the home you have until after the FAFSA is filed.

[JulieA97]

For the FAFSA you don't include the house you are currently living in. However since you will have sold it, it will need to go on the FAFSA. But you can also ask the Financial Aid Office for a Professional Judgement. This will allow them to review it and they may make an adjustment to your FAFSA and remove it. It depends on the policy of the FA office on how they will handle it and you will be required to submit a lot of documentation. If it's any consolation, the asset section of the parents side of the FAFSA does not play a huge role in the EFC. It does count of course towards it but not as much as you would think. Now if it was an asset in your ds name it would be hit much much harder. HTH!

[Teachin'Mine]

From what I've read, it's mostly income as opposed to assets that counts.  I may be wrong, but I don't think that the 50K will affect your EFC much.  As for individual colleges and their financial aid, it should be easy enough to explain that the money will be used to buy your next home and should have little effect if any.  This info may be helpful.   http://www.savingforcollege.com/financial_aid_basics/financial_aid_and_your_savings.php 

[regentrude]

From what I've read, it's mostly income as opposed to assets that counts.  I may be wrong, but I don't think that the 50K will affect your EFC much. 

Parental assets are "taxed" at a rate of slightly less than 6%, and only the portion exceeding a certain amount which, if I recall correctly, is about 30k. So, of the extra 50k, 20k of assets would be considered, which would cause an increase in EFC of the order of of about 1.2 k.

[teachermom2834]

Thanks.  I can run some financial aid calculators, too, and see what impact that money will have.  Just dealing with job loss, relocation, etc. and figuring this out is one extra complication.  Trying to think it through, though, so we are not surprised and scrambling at the last minute. 

[regentrude]

DS is a junior, so this questions is for next year, but lots of changes in our situation and I am trying to figure out the implications on financial aid.

 

... If things go as planned when we file the FAFSA next Jan 1, we will have sold our house and be renting for awhile in our new location.  My concern is that any profit we make on selling our house (maybe about $50,000) will count against us on the FAFSA.

...

  We'll need that to get into affordable housing, it just likely won't be done before the FAFSA filing date.

 

Not sure I understand your timeline: if your DS is  a Junior now, why would you fill out the FASFA next January?

 

You would not need to do that until January 2016, which gives you more than a year to sort out the sale and relocation.

[teachermom2834]

Yes, I should have been more clear. By next January I did mean Jan 2016. I am just thinking we might end up someplace temporary 14 months from now. I am not sure we will want to jump into another house purchase just over a year from now.

[Tsuga]

DS is a junior, so this questions is for next year, but lots of changes in our situation and I am trying to figure out the implications on financial aid.

 

For background, ds is a good student and is interested in a private school.  He may apply to some of the schools that are generous with financial aid.  So, our EFC is going to be important for him.

 

DH is recently unemployed and we will likely be relocating.  There is a good chance that he will be underemployed, though hopefully he will have a job by then.  He won't be making a huge income.  If things go as planned when we file the FAFSA next Jan 1, we will have sold our house and be renting for awhile in our new location.  My concern is that any profit we make on selling our house (maybe about $50,000) will count against us on the FAFSA.  That isn't money sitting there that can pay for college.  We will need that to get into another home. 

 

How do we manage all of this without it looking like we have $50,000 just sitting available in a savings account? Money will be very tight.  We'll need that to get into affordable housing, it just likely won't be done before the FAFSA filing date.

 

 

It is also my understanding that income plays a much larger role. This article is helpful:

 

http://www.fastweb.com/financial-aid/articles/3865-does-cash-from-the-sale-of-the-family-home-count-as-an-asset-on-the-fafsa

 

My suggestions, given your situation, are twofold:

 

(1) Speak to more than one financial aid counselor at his school of choice and a couple of other schools. Be clear. There are exceptions to the rule and schools can choose to waive certain types of savings--particularly if your taxes show home ownership one year, and no home ownership the next, as well as a change of residence. Ask if it's possible to use this information to get an exception in your case for just one year.

 

(2) Sell later, if at all possible. Not saying go into debt, but if all the counselors say, "You sell, the money is up for grabs," then I'd seriously consider not selling and instead renting cheaper. I know you need that money but as you also know your son could be looking at a Pell grant vs. nothing. So that's a big deal.

 

Good luck. That is very tough.

[Teachin'Mine]

Parental assets are "taxed" at a rate of slightly less than 6%, and only the portion exceeding a certain amount which, if I recall correctly, is about 30k. So, of the extra 50k, 20k of assets would be considered, which would cause an increase in EFC of the order of of about 1.2 k.

 

According to the link I posted, it's calculated on a sliding scale from 2.6% to 5.6%.  Since it is on a sliding scale, OP would get the most accurate info by contacting FAFSA or simply putting the info in the calculator and seeing what the difference would be.  Teahermom FAFSA counts for getting Pell Grants and that's about it at most top private colleges.  They will likely instead use the CSS form which is much more detailed and should actually work to your benefit as you'll have ample opportunity to explain what the savings are for. 

[teachermom2834]

Thanks for all the good info.  Very helpful. 

[G5052]

Yes, from what I've been told, income is more important.  And do communicate your situation because the FAFSA can't possibly cover every possible family situation.

 

We have good income, but very high medical bills, and our income will likely drop precipitously at some point during the college years.  Every financial aid officer I've talked to said to fill out the FAFSA as a "snapshot" and then to communicate any additional information not covered there, particularly if there's a significant change.  They won't know unless you tell them.  And of course you'll need to refile the FAFSA each year.

 

I have a senior, and I've already blocked out time over the holidays to take a first run at our taxes so that I can get them in as soon as possible in January and then do the FAFSA.