Paying down mortgage - college aid?

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MMLC3
Posts: 42
Joined: Sat Jul 08, 2017 6:49 pm

Paying down mortgage - college aid?

Post by MMLC3 » Wed May 15, 2019 11:43 am

I have been hearing differing opinions on this, so I thought I'll ask here.

If mortgage on primary residence is paid off, before child enters college, does it adversely affect his chances to get scholarships and/or financial aid of any sort? Do colleges look at it as parents' have no mortgage (significant liability for most) and hence should be in good shape to pay for college, thereby reducing chances for any aid?

State - CA
Preference - DS goes to in-state universities. 6 years till College.

My preference is to pay down primary residence mortgage completely (I understand the benefits of low mortgage rate vs using that money for investments etc.
I just want the peace of mind, before possibly early retirement)

SC Anteater
Posts: 119
Joined: Thu Jan 10, 2019 6:50 pm

Re: Paying down mortgage - college aid?

Post by SC Anteater » Wed May 15, 2019 11:50 am

MMLC3 wrote:
Wed May 15, 2019 11:43 am
I have been hearing differing opinions on this, so I thought I'll ask here.

If mortgage on primary residence is paid off, before child enters college, does it adversely affect his chances to get scholarships and/or financial aid of any sort? Do colleges look at it as parents' have no mortgage (significant liability for most) and hence should be in good shape to pay for college, thereby reducing chances for any aid?

State - CA
Preference - DS goes to in-state universities. 6 years till College.

My preference is to pay down primary residence mortgage completely (I understand the benefits of low mortgage rate vs using that money for investments etc.
I just want the peace of mind, before possibly early retirement)
Private schools that use the CSS profile generally consider some portion of home equity when deciding financial aid. The amount varies by school.

For FAFSA schools (including California public colleges) home equity is not considered.

DEBTINATOR
Posts: 91
Joined: Thu Oct 20, 2011 8:05 pm

Re: Paying down mortgage - college aid?

Post by DEBTINATOR » Wed May 15, 2019 12:47 pm

As SC said, you were getting different answers because schools have different standards. You need to look at the federal standards in the institutional standards.

Since you are six years out and you don’t know where your kid will go to school, You don’t know which set of standards to look at, or if those standards will change or not.

In other words it’s impossible to answer your question, but I can tell you that there is a better chance that moving money from my brokerage account to say home equity will help you versus hurt you.

Also worth mentioning that income is a much bigger factor then assets so you should figure out first if you qualify for any need-based aid due to your income before you start moving assets around

cshell2
Posts: 33
Joined: Thu May 09, 2019 10:29 am

Re: Paying down mortgage - college aid?

Post by cshell2 » Wed May 15, 2019 1:06 pm

FAFSA doesn't consider equity in your primary residence at all or consider whether or not you're paying a mortgage. Having money in home equity (and the income freed up to cash flow college) is a much better situation with them than having a big taxable account and a mortgage. Income is the huge factor and if you have a lot of it going to making a house payment then it's not there to help with school either.

That is for federal methodology and state schools. Anything goes with private schools and CSS profile. However, all the private schools DS is looking into use FAFSA as well and not CSS. Here's the complete list of schools that use CSS, but with 6 years to go it's hard to guess if you'll be looking at elite schools or not. 5 years ago MIT was my son's dream. Now reality has sunk in and U of MN is the hope. :?

https://profile.collegeboard.org/profil ... tions.aspx

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