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I am in the process of submitting a home equity appication - not so much for the purposes of college bills, but since it turns out I am doing this at the same time that we will be applying for financial aid (son is a senior applying) I want to make sure I am not doing anything that will realy harm my chances of obtaining financial aid.

Does anyone know a website I can go to that discusses the Do's and Dont's of putting yourself financially in the best position to qualify for aid?

By Momof2 (Momof2) on Tuesday, September 16, 2003 - 12:37 pm: Edit

Are you applying for a home equity loan or line of credit? They are treated quite differently in finaid.

By Aparent (Aparent) on Tuesday, September 16, 2003 - 01:09 pm: Edit

Please say more about that difference, Momof2.

By Momof2 (Momof2) on Tuesday, September 16, 2003 - 04:51 pm: Edit

OK - well this isn't first-hand experience, but a line of credit (which TX does NOT allow) lets you draw only the amount you need each year for college or whatever. Several of my out of state friends have used this to help out with multiple kids in college - can total their summer earnings, financial aid, work-study, etc. and then make an informed guess as to the amount to borrow for the year.

A home equity loan, as explained to me here in TX, means you estimate the amount needed for the entire 4 yrs. of school and borrow that amount up front. So if you need $40,000, then you get $40,000 to put in an account and draw as needed. This also means you pay interest on the total from the start and the $40,000 would be counted as parental assets for finaid purposes each year. The alternative would be to go through the application (and fees!) process every year, which would waste a lot of money.

At least this is how I understand it - if someone else has a better or different understanding - please comment!

By Momof2 (Momof2) on Tuesday, September 16, 2003 - 04:57 pm: Edit

Judy - by far the best reference we used was the Princeton Review "Paying for College Without Going Broke," which offered a lot of strategies, as well as a line-by-line guide for filling out those dratted forms! Hope it's OK to post a link to it:

http://www.amazon.com/exec/obidos/tg/detail/-/0375762736/qid=1063745642/sr=1-5/ref=sr_1_5/104-9204529-4937530?v=glance&s=books

It would be a good book to read a year or two before graduation.

By Dt123 (Dt123) on Thursday, September 18, 2003 - 06:58 pm: Edit

First, home equity lines of credit in TX were approved in a state-wide election just last week. There was an article in the Dallas Morning News this week saying how banks and credit unions are running around with their hair on fire to be ready to write the lines of credit as soon as the election results are certified a week or two from now.

The real issue is what is the effect of home equity on financial aid awards, and what can you do about it to maximize your aid? Equity of course does not come into play in determining FAFSA aid, only Profile aid. Some say you can increase your "neediness" on the Profile by borrowing all or part of your equity and spending it on something non-includable in Profile assets, like personal possessions (new car, boat, etc.). Obviously converting the equity to cash in the bank or investments does not help.

By Judy (Judy) on Friday, September 19, 2003 - 12:02 am: Edit

Dt123 - thanks for the response. I didn't know equity does not come into play with FAFSA aid. One of the questions I have is - which is better - to take out a 50k line of credit, use 25k of it to pay off credit card debt and have the remaining 25k line for when I need it OR take out a line but not have that much unused, sitting there for future needs?

I really do want a sizable chunk available to me for household repairs, etc. down the line but I am not sure how having the line of credit out when I apply for financial aid will be looked at?

By Dt123 (Dt123) on Friday, September 19, 2003 - 07:24 am: Edit

Judy, an unused line of credit will have no effect on you for FinAid purposes. I sense that you are thinking that applying for financial aid is like applying for a bank loan, where your other debts are looked at to see whether you can afford a new loan. The better you look, the more you get. FinAid is not like that at all. It's a completely different ball game, where the worse you look the more you get. I recommend you take a look at any of the numerous books and websites on this subject to get a handle on the basics.

By Easydoesitmom (Easydoesitmom) on Friday, September 19, 2003 - 08:42 am: Edit

Judy - You say your son is a Senior .Is he your last child bound for college ? I highly recommend DON'T MISS OUT and FINANCIAL AID FOR DUMMIES if you have other children that are heading for college .

By Kjofkw (Kjofkw) on Friday, September 19, 2003 - 09:33 am: Edit

along this thread....
I don't know if this is atypical or not, but like most others we were "shocked" at our EFC. Unfortunately, we have tried to save for retirement in non-retirement funds. This is primarily due to necessity, not choice. (There is a 401K, but very limited in scope, no company matching, etc. etc.). IRA's are limited (because of the existance of a 401K plan). There are no pensions, stock options, or other retirement options open to us in our jobs. It is our understanding that because the savings are not typical retirement savings, they must be included as open money for colleges. We know this is a topic for a financial planner, but any suggestions?

By Momof2 (Momof2) on Friday, September 19, 2003 - 09:50 am: Edit

I'll move over - you can join this crowd. The only good news I can offer is that the finaid formulas in general expect parental contributions of about 5.6% of savings per year ($560 of the first 10,000, etc.)

Since both parents are self-employed and we have absolutely no adult family to call upon in an emergency, we worked for years to save up near 12 months of pay for emergencies. And we, too were hit hard on EFC. The only consolation is that it would have been much higher if saved in the student's name.

Judy - finaid aside, you will probably save on interest if you only draw the money as you need it. Do the math (including bank fees) and compare.

By Massdad (Massdad) on Thursday, September 25, 2003 - 03:08 pm: Edit

KJ, I agree regarding EFC. Those with gold plated retirement plans can really make out like bandits. Folks like us lose big. We in the northeast (we live in the Boston area) get hit again, because the formulas assume it costs the same to live here as in Iowa. It does not.

At least there's a good deal of merit aid out there, just not at the top schools.

By Momof3boys (Momof3boys) on Friday, September 26, 2003 - 09:52 pm: Edit

When our S sends in applications and the question is asked as to whether he will be seeking financial aid, how should he respond? I figure that with 2 middle class incomes we won't qualify for anything....and should say 'no' to the financial aid question. Is that true, or am I making a big mistake?

By Massdad (Massdad) on Friday, September 26, 2003 - 11:46 pm: Edit

I was told at one place to always check it, otherwise they may even skip the merit aid. I think if some place is so hard up for cash that they'd reject because of that question then I would not want them anyway. Now, watch that place be my d's favorite!