Grasshopper and Ant
March 13, 2008 6:46 PM Subscribe
Will a single parent selling a home that has appreciated a lot and that has a very low mortgage payment, then buying a much more expensive house with all of the proceeds help make the child more (or less) eligible for financial aid (not loans) for college?
My SO and his ex are the parents of a 17 year old girl, junior in high school. College plans are being discussed by everyone, although the parents haven't had a sit-down to talk about particulars since last summer. Each is obligated by divorce decree to pay for 1/2 of in-state tuition for the state college (in this case U of MD). FAFSA forms have not been completed, primarily due to a reluctance on the part of the ex to disclose her substantial income. (This came out in the only talk the two parents had on the subject, sometime last summer.) Mom did hire a college financial aid "expert" last summer. His suggestions included having the kid move in with Dad because Dad makes less money, and "goggling" for scholarships. (He really did misspell Google!) That was $500 thrown down the toilet, but I'm not sure that Mom isn't getting equally bad advice from someone else. Here's why...
Very recently, the ex put her house on the market. She and the daughter went house-shopping, and when we saw the girl next she was absolutely thrilled with the prospect of moving into a beautiful new home near her school. The new home would be in the $1,000,000 range... which nearly made me choke. The house the ex is selling is on the market for $619,000. The daughter wasn't supposed to share these details with me, but we're very close. She slipped up in her glee and when I asked her why they were thinking of moving, she said "Mommy thinks it would be bad for financial aid for her to have a really low mortgage payment and a large income."
I did some research, and I'm still confused. It appears that the income from my SO is not counted toward family ability to pay. It also appears that FAFSA doesn't take into consideration what they call "lifestyle choices" against a parents ability to pay. Several articles I read said that it is a choice to live in a nicer neighborhood or drive a newer car, and that those choices are not reasons to qualify for more aid.
My SO fully intends to help his daughter in every way, but we're limited by our not-substantial incomes. We own a modest townhouse, he drives a six year old Honda, we don't take expensive vacations or spend a lot of money on ourselves. We carry our lunches to work. A big night for us is a movie date in front of our tv. Plus, neither of us has any real money set aside for retirement. Our retirement plan is to pay off our house by the time he retires. Mom, on the other hand, drives a new Lexus SUV, has a timeshare in the Bahamas, takes vacations each year to Sonoma AZ, and other resorts, and has expensive tastes. She's passed some of these tastes on to the daughter, who wants to attend a presigious school. Columbia is at the top of the daughter's wish list. Columbia is very, very expensive. Mom is pushing for Columbia, among other pricey schools.
My SO and I still hope that she would decide to attend U of MD and perhaps get merit scholarships (she will graduate from an IB school with honors, has taken AP tests and scored 5s, and just took her SATs... no surprise that she has an excellent score). If she was able to finish her undergrad schooling without incurring a ton of debt, that would be great. Her dad would still set aside in her 529 plan any money he didn't have to pay for undergrad years. This would go toward her grad school costs. We have heard no such plans from her mother, and my SO hasn't yet asked her what her plan would be. We don't think she has any plans to set aside money for college out of the proceeds from selling her house... the daughter told us that "Mom is going to put it all on the downpayment so she can afford the monthly payment, but it will still be a lot more than she pays now."
It's a touchy subject. He doesn't know how much money she makes, and has never asked; she doesn't have a clue how much (or how little) he makes, and she's fiercely independant. Aside from this potential tension, we all get along fine. Really. We actually like each other.
So. For any of you who have faced anything similar, can you shed some light? I'm primarily concerned that the daughter isn't somehow penalized in the financial aid department because her mom is receiving lousy advice. If this new home purchase is being made to make the ex look poor on paper and it backfires, the daughter will have to pay the price. That price might mean taking out student loans, or attending a less expensive school. While a less expensive school is not the end of the world, I would hate to see this child saddled with a huge debt burden, while her mom gets to live in a $1,000,000 house and plead poverty. We've already told the daughter that the ultimate choice about where to go will be hers - her first adult decision. If she decides to be prudent and not go into debt, that will be a good thing. If she is forced to take out many thousands of dollars in loans because her Mom made a mistake... well, it's not too late to have that discussion and at least give Mom a contrarian opinion.
Grasshopper and Ant.
My SO and his ex are the parents of a 17 year old girl, junior in high school. College plans are being discussed by everyone, although the parents haven't had a sit-down to talk about particulars since last summer. Each is obligated by divorce decree to pay for 1/2 of in-state tuition for the state college (in this case U of MD). FAFSA forms have not been completed, primarily due to a reluctance on the part of the ex to disclose her substantial income. (This came out in the only talk the two parents had on the subject, sometime last summer.) Mom did hire a college financial aid "expert" last summer. His suggestions included having the kid move in with Dad because Dad makes less money, and "goggling" for scholarships. (He really did misspell Google!) That was $500 thrown down the toilet, but I'm not sure that Mom isn't getting equally bad advice from someone else. Here's why...
Very recently, the ex put her house on the market. She and the daughter went house-shopping, and when we saw the girl next she was absolutely thrilled with the prospect of moving into a beautiful new home near her school. The new home would be in the $1,000,000 range... which nearly made me choke. The house the ex is selling is on the market for $619,000. The daughter wasn't supposed to share these details with me, but we're very close. She slipped up in her glee and when I asked her why they were thinking of moving, she said "Mommy thinks it would be bad for financial aid for her to have a really low mortgage payment and a large income."
I did some research, and I'm still confused. It appears that the income from my SO is not counted toward family ability to pay. It also appears that FAFSA doesn't take into consideration what they call "lifestyle choices" against a parents ability to pay. Several articles I read said that it is a choice to live in a nicer neighborhood or drive a newer car, and that those choices are not reasons to qualify for more aid.
My SO fully intends to help his daughter in every way, but we're limited by our not-substantial incomes. We own a modest townhouse, he drives a six year old Honda, we don't take expensive vacations or spend a lot of money on ourselves. We carry our lunches to work. A big night for us is a movie date in front of our tv. Plus, neither of us has any real money set aside for retirement. Our retirement plan is to pay off our house by the time he retires. Mom, on the other hand, drives a new Lexus SUV, has a timeshare in the Bahamas, takes vacations each year to Sonoma AZ, and other resorts, and has expensive tastes. She's passed some of these tastes on to the daughter, who wants to attend a presigious school. Columbia is at the top of the daughter's wish list. Columbia is very, very expensive. Mom is pushing for Columbia, among other pricey schools.
My SO and I still hope that she would decide to attend U of MD and perhaps get merit scholarships (she will graduate from an IB school with honors, has taken AP tests and scored 5s, and just took her SATs... no surprise that she has an excellent score). If she was able to finish her undergrad schooling without incurring a ton of debt, that would be great. Her dad would still set aside in her 529 plan any money he didn't have to pay for undergrad years. This would go toward her grad school costs. We have heard no such plans from her mother, and my SO hasn't yet asked her what her plan would be. We don't think she has any plans to set aside money for college out of the proceeds from selling her house... the daughter told us that "Mom is going to put it all on the downpayment so she can afford the monthly payment, but it will still be a lot more than she pays now."
It's a touchy subject. He doesn't know how much money she makes, and has never asked; she doesn't have a clue how much (or how little) he makes, and she's fiercely independant. Aside from this potential tension, we all get along fine. Really. We actually like each other.
So. For any of you who have faced anything similar, can you shed some light? I'm primarily concerned that the daughter isn't somehow penalized in the financial aid department because her mom is receiving lousy advice. If this new home purchase is being made to make the ex look poor on paper and it backfires, the daughter will have to pay the price. That price might mean taking out student loans, or attending a less expensive school. While a less expensive school is not the end of the world, I would hate to see this child saddled with a huge debt burden, while her mom gets to live in a $1,000,000 house and plead poverty. We've already told the daughter that the ultimate choice about where to go will be hers - her first adult decision. If she decides to be prudent and not go into debt, that will be a good thing. If she is forced to take out many thousands of dollars in loans because her Mom made a mistake... well, it's not too late to have that discussion and at least give Mom a contrarian opinion.
Grasshopper and Ant.
Financial Aid isn't based on your debt, but your assets. Otherwise, everyone would rack up their Amex with jetskis and buy new cars right before filling out their FAFSA. Poor on paper isn't the way to get need based aid, because nobody needs to live in a million dollar home, and poor money management doesn't get students better aid packages.
But ASAP, mom and dad have to sit down together with their daughter and talk about how college will be paid for upfront, especially if you all have told daughter that she can make the decision to go anywhere she wants to. This talk should include how loans work, real numbers of what they will be paying, and what it means to graduate with a big debt. If you tell her she can choose any school she wants but don't tell her how much each parent will be contributing and educate her on what a large loan means after graduation (no grad school, not buying a car, an $XXXX payment every month that forces her to live at home), you are setting yourself up for a world of hurt during acceptance season - see collegeconfidential.com parent forums for some great examples of what happens when kids get into private schools and THEN find out that the only way they can go is to borrow $150,000. Worse is when those kids end up going that much into debt.
It wouldn't hurt to start playing with this as well http://www.finaid.org/calculators/finaidestimate.phtml
posted by kristin at 8:26 PM on March 13, 2008
But ASAP, mom and dad have to sit down together with their daughter and talk about how college will be paid for upfront, especially if you all have told daughter that she can make the decision to go anywhere she wants to. This talk should include how loans work, real numbers of what they will be paying, and what it means to graduate with a big debt. If you tell her she can choose any school she wants but don't tell her how much each parent will be contributing and educate her on what a large loan means after graduation (no grad school, not buying a car, an $XXXX payment every month that forces her to live at home), you are setting yourself up for a world of hurt during acceptance season - see collegeconfidential.com parent forums for some great examples of what happens when kids get into private schools and THEN find out that the only way they can go is to borrow $150,000. Worse is when those kids end up going that much into debt.
It wouldn't hurt to start playing with this as well http://www.finaid.org/calculators/finaidestimate.phtml
posted by kristin at 8:26 PM on March 13, 2008
To begin I am a current college Senior. FAFSA doesn't provide that much money. You get awarded three things: Fed Pell Grant, Fed Stafford Loan Subsidized, Fed Stafford Loan unsubsidized. The pell is free money, subsidized loan is a loan where interest is paid by the government and you can guess what the unsubsidized loan is. This is for an ENTIRE YEAR (not semester).
Here is what I currently get:
Fed Pell Grant: $4,310.00
Fed Stafford Loan Subsidized: $5,500.00
Fed Stafford Loan Unsubsidized: $5,000.00
My family income and any place where they ask how much money I made/have on the form is $0.00 so this is the maximum payable amount you will probably get. The pell is only for 'extreamly' low income families. Unless you have nothing to your name in terms of savings and are making near minimum wage your child wont get any free government grant money and financial aid will be tight at best.
I really cant speak about how to properly hid her mother assets however there are cases where it might be cheaper for everyone involved that you don't try to hide assests. If she decides to got to an out of state, state run school you NEED to sit down and figure out if it is cheaper to keep a child on as a dependent on your tax forms or should she try to obtain residency and in state tuition. This leads to some really screwed up family dynamics where a mother claims a child as a dependent, doesn't give her any of the money she saved from making the claim and when the child tries to obtain in-state tuition they are denied since their residence is where the mother is since the child is a dependent.
Anyways I wish you guys luck and my final advice is if she is going to go to graduate school in a science related field she shouldn't need to save any money since it will be paid by the school or someone else.
posted by metex at 8:27 PM on March 13, 2008
Here is what I currently get:
Fed Pell Grant: $4,310.00
Fed Stafford Loan Subsidized: $5,500.00
Fed Stafford Loan Unsubsidized: $5,000.00
My family income and any place where they ask how much money I made/have on the form is $0.00 so this is the maximum payable amount you will probably get. The pell is only for 'extreamly' low income families. Unless you have nothing to your name in terms of savings and are making near minimum wage your child wont get any free government grant money and financial aid will be tight at best.
I really cant speak about how to properly hid her mother assets however there are cases where it might be cheaper for everyone involved that you don't try to hide assests. If she decides to got to an out of state, state run school you NEED to sit down and figure out if it is cheaper to keep a child on as a dependent on your tax forms or should she try to obtain residency and in state tuition. This leads to some really screwed up family dynamics where a mother claims a child as a dependent, doesn't give her any of the money she saved from making the claim and when the child tries to obtain in-state tuition they are denied since their residence is where the mother is since the child is a dependent.
Anyways I wish you guys luck and my final advice is if she is going to go to graduate school in a science related field she shouldn't need to save any money since it will be paid by the school or someone else.
posted by metex at 8:27 PM on March 13, 2008
I am a junior at a top public school paying in-state tuition, so this is my fourth FAFSA , and my parents are divorced. (And for what it's worth, I firmly believe that no one, and certainly no one who plans to go to grad school, needs to be spending more than what I spend to get an undergraduate education. But you guys have the right attitude by letting her know that it's ultimately her choice, and she sounds smart enough to handle it. Anyway...)
I'm sorry if I missed it in the post, but how much time does your stepdaughter-person spend with you and her dad? Is it at least 50%? If she spends half her time with you AND you provide half her support, then she should just put you two down on the FAFSA, and not her mom.
All of the above posters are right when they say the FAFSA looks at income and assets (NOT your home's value, or your mortgage payments). I agree with you that Mom is probably getting bad advice on this matter.
Metex is right that FAFSA doesn't provide that much FEDERAL money. But remember that the FAFSA is what your university will use to determine how much state and local FREE MONEY they will give you. For example, this past school year I wasn't awarded a Pell Grant, but I received a $5300 state need grant, just by submitting my FAFSA to my school. BTW, my Expected Family Contribution is ~$7000 per year.
When combined with some good merit-based aid, that goes far toward eliminating the need for loans or parents. Since my sophomore year at college, I haven't taken a penny from my parents, or had to take out loans. I've even managed to save enough money to be able to study abroad (and that's a good carrot to dangle in front of your girl to get her to consider a cheaper state school--more $$$ to spend on a semester in Europe). I happened to be awarded a really great scholarship in highschool that covers tuition, and then my university gave me a $1200/year merit award for my first two years, and I got a job after about 6 months. Everything else has been FAFSA grants. You should always fill out a FAFSA!
posted by folara at 10:02 PM on March 13, 2008
I'm sorry if I missed it in the post, but how much time does your stepdaughter-person spend with you and her dad? Is it at least 50%? If she spends half her time with you AND you provide half her support, then she should just put you two down on the FAFSA, and not her mom.
All of the above posters are right when they say the FAFSA looks at income and assets (NOT your home's value, or your mortgage payments). I agree with you that Mom is probably getting bad advice on this matter.
Metex is right that FAFSA doesn't provide that much FEDERAL money. But remember that the FAFSA is what your university will use to determine how much state and local FREE MONEY they will give you. For example, this past school year I wasn't awarded a Pell Grant, but I received a $5300 state need grant, just by submitting my FAFSA to my school. BTW, my Expected Family Contribution is ~$7000 per year.
When combined with some good merit-based aid, that goes far toward eliminating the need for loans or parents. Since my sophomore year at college, I haven't taken a penny from my parents, or had to take out loans. I've even managed to save enough money to be able to study abroad (and that's a good carrot to dangle in front of your girl to get her to consider a cheaper state school--more $$$ to spend on a semester in Europe). I happened to be awarded a really great scholarship in highschool that covers tuition, and then my university gave me a $1200/year merit award for my first two years, and I got a job after about 6 months. Everything else has been FAFSA grants. You should always fill out a FAFSA!
posted by folara at 10:02 PM on March 13, 2008
This is crazy. It won't help a bit with her financial aid package that her mom has a higher mortgage payment. It might, however, help her mom wheedle and negotiate with both of you as to the extent of how much she needs to pay for her daughter's education.
College isn't just tuition, btw. You need to also discuss things like: rent, how much your daugher should work, books, utilities, expenses, activities (sororities, for example), etc. Are these OK things? If so, who pays?
You can't cover all the bases, but you can set up some sort of framework for it. That FAFSA form will disclose the mom's income, based on her tax returns. You'll have real numbers to work with while you negotiate. If you put it as "this is an important time in our daughter's life and we want to make sure that she can make the most of it", you'll have a good starting point.
I agree with the idea of lifestyle choices & financial aid, and I think it doubly applies here. Your SO & she may go halfsies with the tuition, but I think it's pretty obvious who has the higher disposable income and who may, as a mother, want to contribute a bit more than half to make sure her daughter doesn't have to work 30 hrs a week to cover her living expenses, while trying to study at the same time. The minute her daughter says she wants to rush, gets an invite to pledge a house, and has to decline because she can't afford the fees is the minute her mother will regret any decision to not give her daughter more financial support.
posted by Grrlscout at 12:04 AM on March 14, 2008
College isn't just tuition, btw. You need to also discuss things like: rent, how much your daugher should work, books, utilities, expenses, activities (sororities, for example), etc. Are these OK things? If so, who pays?
You can't cover all the bases, but you can set up some sort of framework for it. That FAFSA form will disclose the mom's income, based on her tax returns. You'll have real numbers to work with while you negotiate. If you put it as "this is an important time in our daughter's life and we want to make sure that she can make the most of it", you'll have a good starting point.
I agree with the idea of lifestyle choices & financial aid, and I think it doubly applies here. Your SO & she may go halfsies with the tuition, but I think it's pretty obvious who has the higher disposable income and who may, as a mother, want to contribute a bit more than half to make sure her daughter doesn't have to work 30 hrs a week to cover her living expenses, while trying to study at the same time. The minute her daughter says she wants to rush, gets an invite to pledge a house, and has to decline because she can't afford the fees is the minute her mother will regret any decision to not give her daughter more financial support.
posted by Grrlscout at 12:04 AM on March 14, 2008
This sounds crazy, but some private schools have relatively high cut offs. For example, Princeton is generous to fairly high incomes. My recollection is that Stanford and Vanderbilt are also affordable. Gosh, aren't there resources one college hunting about this?
posted by a robot made out of meat at 4:25 AM on March 14, 2008
posted by a robot made out of meat at 4:25 AM on March 14, 2008
The mortgage payment itself is irrelevant, but a few schools (including Harvard and Princeton) have stopped counting home equity in financial aid calculations, and Columbia, along with some other schools, doesn't count any home equity beyond a certain multiple (2.4, last I checked) of the parents' annual income. Maybe that's what the mom's thinking of?
posted by phoenixy at 7:41 AM on March 14, 2008
posted by phoenixy at 7:41 AM on March 14, 2008
I think you're looking at this wrong..
It doesn't matter what the Mom does regarding her house... the terms are laid out in the divorce, she pays 50% if she's living at Graceland or in a tent... and you have no control over how/where she lives, travels, vacations, etc..... they are divorced!
Student aid will be based on info from tax returns, it is what it is...
Your SO will be paying 50% of the cost of school.... He should do everything to make sure he can afford to do this, that's his responsibility...(We just got screwed by my ex's husband who said he wouldn't follow a divorce settlement regarding his daughter's college...we decided to pay for it so she could finish school without the conflict, the lawyers will find him in the end...!).
He does his part, the mom does whatever she does, if she screws over her daughter it will be up to your SO to decide if he wants to bail her out or go back to court .
posted by HuronBob at 9:01 AM on March 14, 2008
It doesn't matter what the Mom does regarding her house... the terms are laid out in the divorce, she pays 50% if she's living at Graceland or in a tent... and you have no control over how/where she lives, travels, vacations, etc..... they are divorced!
Student aid will be based on info from tax returns, it is what it is...
Your SO will be paying 50% of the cost of school.... He should do everything to make sure he can afford to do this, that's his responsibility...(We just got screwed by my ex's husband who said he wouldn't follow a divorce settlement regarding his daughter's college...we decided to pay for it so she could finish school without the conflict, the lawyers will find him in the end...!).
He does his part, the mom does whatever she does, if she screws over her daughter it will be up to your SO to decide if he wants to bail her out or go back to court .
posted by HuronBob at 9:01 AM on March 14, 2008
ouch.... mind blip.........
"We just got screwed by my ex's husband"...should have read, of course, "we just got screwed by my wife's ex-husband"...otherwise it just doesn't make sense, does it...? and standing alone it looks like porn anyway...
/i'm done now...
posted by HuronBob at 9:04 AM on March 14, 2008
"We just got screwed by my ex's husband"...should have read, of course, "we just got screwed by my wife's ex-husband"...otherwise it just doesn't make sense, does it...? and standing alone it looks like porn anyway...
/i'm done now...
posted by HuronBob at 9:04 AM on March 14, 2008
This thread is closed to new comments.
But mostly I just wanted to possibly help give some perspective. My family didn't even own a home, and with four dependents made what I am guessing is a substantial amount less than the ex. They weren't even paying for my education, I was, but it's still part of the calculation. I did get some Pell Grants, but those max out - and of course aren't enough to cover private school tuition, and I received some aid from school, but not enough. I had to take out about $60-70,000 for my undergrad (I went to good private institution).
It does sound like she would be a good candidate for some merit based aid so she could focus on that, but this scheme seems whack - not to mention a little infuriating to actual poor people. Anyway, isn't this why Harvard and others decided to cut tuition? So people who were upper-middle class but couldn't afford their tuition, but could afford state tuition, would still attend (they would make the money up later when the alums graduated and donated back)? Maybe she could go there. Last I read, Columbia was against this idea (takes away money from people who otherwise couldn't go to school, not even state school, etc), too bad it's her top choice.
posted by unsigned at 8:04 PM on March 13, 2008