Law School Discussion

Selling the house- how will it affect FAFSA 2L & 3L

loki13

  • ****
  • 543
  • Exterminate all rational thought.
    • View Profile
Selling the house- how will it affect FAFSA 2L & 3L
« on: March 28, 2006, 10:36:21 AM »
Okay... here's a question I just thought of.

I (by *I* in this post I mean my family) qualified for maximum FA at all the schools I applied to because, well, we have no money. We will need this.

We will also be selling our house in order to move to the city (not sure which one yet) where the law school is.

After we pay down mortgage etc., and due to appreciation, we should clear 50-70k. I had thought about renting an apartment with this money for the next three years...

BUT I just realized that if we do this, that money will have to show up as assets in next year's FAFSA declaration, lowering the amount of total aid (current house does not count as assets).

Does this mean I have to roll it over into a house in order to make the FAFSA numbers work? I assume there is a huge difference between a large family with few assets and one low earner and a large family with 50-70k in the bank and one low earner.

Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #1 on: March 28, 2006, 04:14:30 PM »
What do you mean by maximum FA?  100% of tuition in grant?  Or 8500 subsidized Stafford + 10K unsubsidized Stafford + rest of tuition grant?

If I remember from the FAFSA form, they stated that they typically only expect you to spend 30% of your net worth through the 3 years.  So they may adjust your FA by 5-7K for the 2nd and 3rd years; though if you're already at maximum FA it probably means that you've got a bit of buffer before they'd lower your FA.

loki13

  • ****
  • 543
  • Exterminate all rational thought.
    • View Profile
Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #2 on: March 28, 2006, 05:17:23 PM »
100% tuition grant + max sub & unsub stafford for 1L.

upNdown

  • ****
  • 615
  • My favorite bike - cheap, ugly, heavy, and fun.
    • View Profile
Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #3 on: March 28, 2006, 06:04:31 PM »

Does this mean I have to roll it over into a house in order to make the FAFSA numbers work? I assume there is a huge difference between a large family with few assets and one low earner and a large family with 50-70k in the bank and one low earner.

Don't be so sure of that.  If you really have a large family with a low earner, the money in the bank may not matter.  I'm the sole earner for my family of 4 and I wasn't making much - about 40K last year, and when I did my FAFSA with and without $35K in assets, it didn't change a bit.  I believe there's some standard where if you have enough dependents and your income is low enough, then assets don't matter.  Of course, you need to research this because it isn't worth pissing away the 50-70K if I'm wrong.

loki13

  • ****
  • 543
  • Exterminate all rational thought.
    • View Profile
Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #4 on: March 29, 2006, 01:59:22 PM »
I'm wondering about that myself... butt the question is, how do I find out where the cutoff is *before* making this monumental decision.

My thoughts as of right now:

1. I will probably be better off (for many reasons, including taxes) rolling over the $$ into another house, even if it is just for 3 years, than using it for rent / misc. expenses.

2. Even if not, with the addition of a baby, we're now looking at three dependents and one wage earner under 30k for 1L, which I'm thinking won't change the FAFSA regardless of assets, unless I win the lottery.

And I don't exactly hang out in the gas station with scratch-off tickets and six-packs.

upNdown

  • ****
  • 615
  • My favorite bike - cheap, ugly, heavy, and fun.
    • View Profile
Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #5 on: March 29, 2006, 03:02:43 PM »
Well can't you just go in now and change your numbers on your current fafsa - play around with them and see how assets and dependents affect things?  As long as you don't list any schools, or list school's you're not attending, it shouldn't affect anything, right?

OingoBoingo

  • ****
  • 517
  • Simply the best band from the 80's
    • View Profile
Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #6 on: March 30, 2006, 01:02:01 PM »
I got a mix of subsidized, unsubsidized and graduate plus federal loans that made up, along with a scholarship, my cost of attending budget. I have heard of others who, when needed, borrow extra private funds to cover unexpected costs. Do you have to apply separately for these? Does the financial aid office take care of this for you?

We have a baby on the way too and I get nervous about this sometimes.

Oingo

HippieLawChick

  • ****
  • 2475
  • Current 2L
    • View Profile
Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #7 on: March 30, 2006, 01:17:25 PM »
I would ask the school you are planning on attending to help you with this.

To me, it seems unfair that I made $40K last year and own no assets (no house, stocks, trusts) and will get only the $18,500 in loans and have to do private loans for the rest of my living expenses, while you would get to keep $50,000 in cash.  I have to quit my job to attend LS, so my income will be zero during 1L while you would have $50K to use for living expenses.  That doesn't seem right, does it?


moonpie

  • ****
  • 389
  • No it's not mexico
    • View Profile
Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #8 on: March 30, 2006, 01:59:33 PM »
Can't you just ask that they calculate it based on your projected income for next year instead of this year?

SanchoPanzo

  • ****
  • 1993
  • My avatar is hotter than your avatar
    • View Profile
Re: Selling the house- how will it affect FAFSA 2L & 3L
« Reply #9 on: March 30, 2006, 08:37:05 PM »
I would ask the school you are planning on attending to help you with this.

To me, it seems unfair that I made $40K last year and own no assets (no house, stocks, trusts) and will get only the $18,500 in loans and have to do private loans for the rest of my living expenses, while you would get to keep $50,000 in cash.  I have to quit my job to attend LS, so my income will be zero during 1L while you would have $50K to use for living expenses.  That doesn't seem right, does it?




I don't know as much about other schools’ Financial Aid practices –except Harvard. Harvard will get you on the house issue whether you keep it or sell it. Essentially, Harvard counts all funds including income, cash on hand and assets. Your house, 401k, etc. The only reprieve is the 401k is marked down 20% based on the assumption that if you liquidate your 401k you'll take a tax hit.

So as someone who owns a house, keeping my house shows up as $$. Converting it to cash by selling it changes nothing for me.

I'm sure other schools are different though. So the best approach may be to ask the school.