Here’s the dilemma. Ivylad and I are keeping the proceeds of the sale of our house up in SC to invest in another rental property down in Orlando(ish.) We are planning to put down a fairly decent down payment. Until we find a property, the money is sitting in my bank account.
Now, I need to apply for a grant to help with my children’s tuition. I don’t want them to see a huge chunk of change sitting in my account and say, “Aha! She doesn’t need our help this year!”
I can’t take the money out of the account because the bank is relying on that money for the down payment, and they may raise an eyebrow if it suddenly disappears.
I was thinking about including a letter from the mortgage company to include with the financial aid application, explaining that the large amount they see in the account is earmarked for other purposes and should not be considered in granting aid. Should I include a letter from my realtor as well? This is really stressing me out. How should this be handled?
(Before someone tells me to use the money for tuition instead of buying a rental property, that’s not our plan. The rental property is to provide an income to help with future tuitions. If I use the money now, then we’re screwed, both for an investment property and upcoming school years.)
What your plan is and what the financial aid office thinks your plan ought to be are two entirely different things. And, since they have the money and *don’t have * to give it to you, they have more of a say than you think. Not to say that they can tell you what to do with your money, but they can certainly say, for all intents and purposes, “You have plenty of your own money to pay tuition, we’re not giving you any of ours.”
IANA financial aid officer, but I AM a guy who is trying to explain to a couple of law schools that I haven’t had material contact with my parents for ten years and their income isn’t really a factor in my ability to pay tuition.
Depending on the methodology favored by the college(s), it’s unlikely that this money will be considered entirely off-limits even if you explain its purpose. After all, if it were already invested in the rental property, it would still show up as an asset (albeit a less liquid one). Some financial aid formulas consider property such as real estate when determining one’s ability to pay.
At any rate, however, I don’t believe colleges would note the balance, remark that the balance is high enough to cover tuition, and close your file. The amount of any savings you’d be expected to spend will be figured at a percentage, because they presume you’ll be paying for more than one year of college and don’t expect you to deplete all savings in one year.
I am sure you are not the first family to be caught in a little capital-gains lag at the exact moment you are applying for aid. I’d try to document it, as you’re proposing. If worse comes to worst, remember that you reapply for aid every year. If the money counts against your apparent need this year, it won’t be there next year so it’s a whole new ball game.
This isn’t for college, this is for private school. The financial aid for the past two years has not covered everything, but it has enabled us to keep the kidlets out of the godawful public schools.
Happy, I’m aware they don’t have to give me anything at all. I just do not want them to make incorrect assumptions about the available cash we have. I’m asking for what documentation would be helpful in clarifying the application.
To me, the analogy is similar to when you have $150 cash. Your friends want you to go clubbing, but you have the money set aside for groceries. You may have the $150 to go clubbing, but that’s not what you’re planning the spend the money on.
Good luck with this one. In my experience with school administrators (university, mind you), they don’t seem to look beyond the bank to personal situations. For example, I was denied student loans because my parents earned too much money. Never mind that I hadn’t lived at home in three years, my mom was working as an lpn and my dad was working at McDonalds and they were $120,000 in for a mortgage… sigh. I’d include the letters from each and every party you can get your hands on and write a letter explaining the situation.
The problem is, ivylass, that the club believes itself to be the groceries.
All I’m trying to say is that financial aid offices have, by necessity, a shortsighted view of what qualifies for aid and why. Which is not to say that they won’t take your situation into consideration, but the purpose of the office is, to be quite honest, to figure out just how much you can possibly pay and then give you half of the rest. What you want to do with the money, no matter how beneficial it might be, means nothing to them. I hate to say it, but they’re your enemies in there.
My parents threw me out of the house my sophomore year at my first college. The next year, my total yearly income was less than $3500.00. I didn’t qualify for financial aid because my family income the year before was too high and I couldn’t provide evidence of change.
The best thing you can do is lock that money up somehow. If you can’t, then be prepared for a tug-of-war.
I’m afraid you’re going to have a rough time. If you have available money in the bank financial aid is hard to get, they don’t care if it is earmarked for something else you want to buy instead. I know that sometimes people will plan to make big purchases right before they apply for financial aid so the money will not be considered as an asset. How much time do you have to find another place? You might have a chance if the real estate deal is already in process and the money is actually tied up, but if you are ‘just looking’ it will be harder.
My experience in dealing with financial aid officers (and my aunt is one) is that they would not be sympathetic to people saying they would rather spend their money on a rental house than use it to pay tuition. (I understand your position and I am not accusing you of trying to get aid when you don’t need it.) Trying to get aid is a frustrating process and it often seems like it rewards those who fail to plan ahead and save any money of their own. Usually the people who get screwed are the lower middle class, too much money to get aid, not enough to pay tuition.
Like Cranky said though, your rental property will still be considered an asset even when your cash is spent. I do not know how aid officers view cash vs. property in terms of how much you qualify for. I am also unsure if you are applying for government loans or other kinds, as each would have different requirements (I am mostly speaking of government loans, but I am unaware if you can get government aid to send kids to private elementary school?)
It could not hurt to get a letter from your realtor or mortgage co. or wherever saying the money is being used as a downpayment, but even if they accept that they will still take into consideration how much equity is in your house.
We had a rental property the last two times we applied for aid. We’re just in between houses right now.
I have approval from a bank, and we’re just trying to nail down a property. It seems like our last few offers were a day late.
I’m trying to get this locked up before I send off the application. We’re looking at more properties this weekend. Hopefully I can get this money out of my account and into escrow before I have to send off the application.
I’ll ask our bank for a letter. Thanks for your help, and please, please, please wish us luck!
It is hard to say what will happen with private aid as they all vary from one place to the next. Each place can have different requirements. In a few years we will know the struggle as well as we hope to send the kid(s) to private school but we will need help.
You either lie or you are screwed. It’s that simple.
My father had me relatively late in life. He had a blue collar job. He was literally 65 when I applied for college, had just had a heart attack, and was about 6 months from retirement at the time (he was pretty clearly at the end of his earning capacity, and his “high” salary was due to 40 years as a blue collar worker, e.g. it was far, as in about 35% of what an average starting professional might make). As a blue collar worker, he had basically done well to have enough to have paid off the mortgage on a small house in a small town, and own a couple of cars roughly 6-7 years old each. All of the equity he had would be required to support him and my mother in retirement.
Financial aid basically saw the following: last years’ salary, owns house, owns 2 cars.
Explaining special circumstances really does not seem to help very much with regard to these people.
At the same time, I understand why they get that way. When I went to college, racking up fairly crippling student loan debt, I got to listen to people whose parents made six figure gripe about how painful it was to pay 1/4 of their annual income for tuition. If you had listened to those people, their parents were also such hard luck cases that they should have been paying at most about 10% of the normal tuition.
Slyfrog, you’re reporting your experiences at one postsecondary institution. I am not sure whether it’s fair to lump all financial aid offices into this nebulous group of “these people.”
As I said, it depends on methodology (and I don’t know what a K-12 private school might use) but at least one of the predominant postsecondary methods is very protective of the income of anyone close to or into retirement. The formula you describe is crude and not necessarily representative of what ivylass may encounter.
I am not a lawyer, nor an accountant, but have you talked to someone about the possibility of setting up an S Corp or something for the “business” and moving the assets that will be used to fund new rental property purchase there? That way the assets are tied up in the corporation regardless of if you currently own property or currently are in the business of buying property.
Completely fair point. At the same time, I’m giving my viewpoint based on what I’ve seen and heard from others who have attended other postsecondary institutions. You have picked a very specific part of my discussion, my overall point is that the feel I get generally regarding financial aid is: “If you have an asset, be it liquid cash, income stream, etc., we’ll take a shot at getting a chunk of it.”
You can always say that there’s an institution here or there that doesn’t; I’ll I’m doing is giving my general thoughts on the matter.
Is not financial aid for this who can’t afford tuition, and not those who just don’t want to pay for it?
It seems that you have the financial wherewithal to pay the full tuition but would rather spend your money on other things.
As financial aid officer I would be hard pressed to place a higher value on helping to pay your child’s tuition than you do.
If this school is important then I would budget that tuition first. I would not count on taking financial aid that may keep child with no other financial choices out of school.
My experience with financial aid (college and beyond) is that all they care about is whether or not you could pay. It doesn’t matter if you tied up all of your money into real estate, or have three more kids who will be going to college in the next five years, or want to save for your retirement. If you have the money, either in cash or as investments, you’re going to have a very hard time getting financial aid.
It makes sense, in that there are a lot of people who need the money more, but it does seem to penalize people for planning ahead and saving.
We do NOT have the financial wherewithal to pay the tuition for both children all by ourselves. If we spent the money we have set aside for the down payment on tuition, it would only pay for this year. Next year we would be in the same position, except with no other source of income other than salary, which will not be enough.
I save money each month for the children’s tuition. As I stated above, the aid only partly pays, but it does help, because we manage to come up with the rest.
I assure you, that this is not a matter of “We don’t want to.” It’s a matter of “We need help to plan not only for this year’s tuition but future years.”
Here though, I think, is the point. Putting on my financial administrator’s hat, I would say the following: “What you are effectively saying is that while we do have a chunk of money set aside, which many if not most working class families do not, rather than pay a full year’s worth of tuition with that money now and then perhaps get increased grants when that asset is exhausted and unavailable at the end of the year, we should be able to keep the asset and get aid that has to come from somewhere (e.g. a kid whose parents do not have a lump of cash set aside to buy real property). Why is that fair? Why should you not have to exhaust your existing assets now, until you are on par with those who do not have the money set aside?”
I am not going to justify how we are managing our finances. I asked for help in documenting and clarifying what the aid group may see as available funds that are not, in fact, available, and I have received answers. I thank everyone for their advice and insight.
**SlyFrog ** pretty much said it, and I understand your frustration, but the only answer you’re likely to get regarding the money you’ve got is:
This year you qualify by dint of all that money, so don’t buy a house, pay tuition.
Next year, when you have no money, you’ll qualify for aid.
There’s a limited yearly pool of money to be doled out. The tuition still has to get paid to the school, whether it’s out of the financial aid budget or out of your pocket. 100 students means 100 tuition checks. And if the financial aid office is going to write fifty of those, it’s unlikely to write yours when you demonstrably can.
Subsequent years don’t matter. You can pay now, so you will. There’s no guarantee, in their eyes, that you won’t pull your child from the school once the financial aid office stops ponying up.
Those people are not your friends. They’re employed by the school.