Real Estate Investments/Assets & Financial Aid

[Playmakur42]

Hi,
I'll be attending medical school this August and I've got a few questions about financial aid & personal assets.

1.) I'm a non-trad (28) who has been on my own since age 17. Do I include my parents income on the FAFSA form?

2.) Does my current income affect what my financial "need" will be since once school starts, I will no longer have an income from my current vocation?

3.) I've got a few real estate investments that I'm planning on renting out during med school. They should provide a decent net cash flow. Will transferring those properties to another family member maximize my financial aid package since I have substantial equity in those properties?

4.) Does having money in a savings account or stocks typically lower the amount of financial aid you receive?

5.) Any other advice you think might be helpful to me?
Thanks for the help!

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[Sol Rosenberg]

Hi,
I'll be attending medical school this August and I've got a few questions about financial aid & personal assets.

1.) I'm a non-trad (28) who has been on my own since age 17. Do I include my parents income on the FAFSA form?

You don't HAVE to for Federal aid, but many, if not most, schools require this information for institutional aid.

2.) Does my current income affect what my financial "need" will be since once school starts, I will no longer have an income from my current vocation?

Yes, but my school financial aid officer said that that would be taken into account. He wouldn't elaborate.

3.) I've got a few real estate investments that I'm planning on renting out during med school. They should provide a decent net cash flow. Will transferring those properties to another family member maximize my financial aid package since I have substantial equity in those properties?

Yes, but you obviously REALLY need to trust that family member, since you will be signing your house(s) over to them. Personally, I wouldn't risk that just for an additional $8k/yr in subsidized Stafford loans.

4.) Does having money in a savings account or stocks typically lower the amount of financial aid you receive?

Yes

5.) Any other advice you think might be helpful to me?
Thanks for the help!

I think that a link to a "mock FAFSA" was posted here (perhaps many times.) You should fill it out and see what it returns for your EFC.

 

[TMP-SMX]

Hi,
I'll be attending medical school this August and I've got a few questions about financial aid & personal assets.

1.) I'm a non-trad (28) who has been on my own since age 17. Do I include my parents income on the FAFSA form?

2.) Does my current income affect what my financial "need" will be since once school starts, I will no longer have an income from my current vocation?

3.) I've got a few real estate investments that I'm planning on renting out during med school. They should provide a decent net cash flow. Will transferring those properties to another family member maximize my financial aid package since I have substantial equity in those properties?

4.) Does having money in a savings account or stocks typically lower the amount of financial aid you receive?

5.) Any other advice you think might be helpful to me?
Thanks for the help!

1) Yes you include parental info if you want any kind of school based or need based aid. You will still be eligible for at least some subsidized (maybe) and full unsubsidized stafford loans at 6.8%. You are considered independent so for FAFSA purposes parental info is not required but as I said if you want any need based aid from your school you must include it along with your 1040s from your parents too to your school.

2) For FAFSA purposes anything on your W2, 1099, and anything on your taxes will affect your eligibility for the full subsidized loan amount. However, you can have a discussion with your school based on what the reality may be during the school year with no income.

3) I'm not 100% sure if real estate is included but I think it is so it would probably have some kind of effect on your eligibility. However, if you are already worrying about your income from last year you probably aren't eligible for any subsidized loans if you had a decent job.

4) Yes anything in your savings counts against you because they expect you to use it for school. If you aren't eligible for the $8500 in subsidized loans you will still be eligible for the full amount of unsubsidized stafford loans.

5) Don't worry about it. Do your FAFSA and know that you will have enough money for school either way.

 

[Playmakur42]

Yes, but you obviously REALLY need to trust that family member, since you will be signing your house(s) over to them. Personally, I wouldn't risk that just for an additional $8k/yr in subsidized Stafford loans.

Thanks for the info. I appreciate you taking your time to help out.

Maybe I could create either a LLC or perhaps put the properties into some type of trust rather than signing over to family. I need to research that or perhaps talk to a real estate attorney.

 

[Playmakur42]

5) Don't worry about it. Do your FAFSA and know that you will have enough money for school either way.

Taking a laissez-faire attitude w/ the med school loans scares the &%*% out of me. I prefer to know what I'll be charged, to the penny. I do appreciate the input though.

 

[TMP-SMX]

Taking a laissez-faire attitude w/ the med school loans scares the &%*% out of me. I prefer to know what I'll be charged, to the penny. I do appreciate the input though.

Well if you made over a certain amount of money it makes no difference what you do now. You won't be eligible for subsidized stafford loans or need based aid.

 

[Playmakur42]

Well if you made over a certain amount of money it makes no difference what you do now. You won't be eligible for subsidized stafford loans or need based aid.

And what is that certain amount of money? 50K, 100K, 200K?
Is this decided from Gross Income or Net Income?

 

[Sol Rosenberg]

And what is that certain amount of money? 50K, 100K, 200K?
Is this decided from Gross Income or Net Income?

It's not well publicized, which is why I suggested doing that "mock FAFSA." You input all the relevant numbers (you enter GROSS income, and all of your assets, but you don't have to include retirement accounts and your PRIMARY residence as assets. The suggests an obvious strategy for "hiding" assets from your FAFSA: Put as much in retirement accounts and your primary residence as possible) It then tells you your Expected Family Contribution (EFC.) If your EFC < Your school's cost of attendance (COA) you will be eligible for the difference in need based aid, which most commonly means Subsidized Stafford Loans (which have an ~$8k/yr maximum.) The other form of Federal need based aid is Perkins Loans, but I believe that their award is up to the discretion of your school. Whatever the case, they have an even lower maximum per year ($1500, IIRC?) and their award to medical school students is rare (but not unheard of.)

It seems a little odd to me that someone with such substantial [current] income and assets would be concerned over a possible ~$8k/year in subsidized Stafford loans (wouldn't it better to take out a HELOC or Home Equity Loan on one of your properties?) but I obviously don't know your entire situation. You will always be eligible for ~$28k in unsubsidized Stafford loans, regardless of your financial situation and whether you include parental income.

 

[TMP-SMX]

I believe it is $30,000 unsubsidized and $8500 subsidized and if you aren't eligible for the subsidized it is $38500 unsubsidized stafford loans.

 

[yadayadadude]

The other form of Federal need based aid is Perkins Loans, but I believe that their award is up to the discretion of your school. Whatever the case, they have an even lower maximum per year ($1500, IIRC?) and their award to medical school students is rare (but not unheard of.)

I've been offered $6K in Perkins each year of medical school. Perkins is a great deal b/c it shares all the perks of the subsidized Stafford, but the interest rate is fixed at 5%.

 

[Sol Rosenberg]

I believe it is $30,000 unsubsidized and $8500 subsidized and if you aren't eligible for the subsidized it is $38500 unsubsidized stafford loans.

OK, so then really all you are saving by trying to "hide" assets is the capitalized interest on the loans while you are in medical school (= $8500*10*0.068 = $5780 + compound interest on that once the loan enters repayment.) This interest is also tax deductible, so the real number is less than that. But money is money, so maybe it is all worth the trouble

I've been offered $6K in Perkins each year of medical school. Perkins is a great deal b/c it shares all the perks of the subsidized Stafford, but the interest rate is fixed at 5%.

No doubt. I was just too lazy to look up the terms of Perkins loans, since I find it unlikely that I will be awarded any (I am in a situation that seems similar to the OP.)

 

[ncalcate]

5.) Any other advice you think might be helpful to me?
Thanks for the help!

You're pretty savvy, and you probably already know this, but the two best ways to "hide" money/assets from being factored in your EFC is to place them in your main home and/or a retirement plan. I'm a non-trad myself and on learning this in advance of school, I maxed out my IRA, upped my contribution to my 401(k), and placed a huge down payment on my primary residence. You definitely want to contribute as much as possible to your IRA or 401(k) because it will be many years before you can begin to contribute again - assuming you don't work while in school, which is a pretty safe assumption.

Good luck.

 

[Doctor Bagel]

I've been offered $6K in Perkins each year of medical school. Perkins is a great deal b/c it shares all the perks of the subsidized Stafford, but the interest rate is fixed at 5%.

I've never gotten a freaking Perkins loan, which is really starting to irritate me. Maybe this year because neither my spouse nor I have had any income the past year. Anyway, yes, they're great, but who knows how the heck each school decides to give them out.

If you look in the sticky thread at the top of this forum, you should probably find something that tells you how to calculate your EFC. Sol's right that you're never sure until you run the actual numbers. As a rule, real estate assets other than your primary residence will be considered. However, if your income is below a certain number (~$49k/year) and you can file an EZ or A form, you qualify for the simplified formula for calculating an EFC, which means assets don't matter.

 

[yadayadadude]

I've never gotten a freaking Perkins loan, which is really starting to irritate me. Maybe this year because neither my spouse nor I have had any income the past year. Anyway, yes, they're great, but who knows how the heck each school decides to give them out.

I agree, there's something almost shady about the way they mysteriously vary from school to school. Do schools have to pony up some of their own money, is that it?

 

[Doctor Bagel]

I agree, there's something almost shady about the way they mysteriously vary from school to school. Do schools have to pony up some of their own money, is that it?

I actually sent my financial aid office an email last year asking how they awarded them but didn't get a response. I know in general submitting early helps, but I've always submitted by the financial aid priority date and still don't get them. Oh well.

 

[yadayadadude]

I actually sent my financial aid office an email last year asking how they awarded them but didn't get a response. I know in general submitting early helps, but I've always submitted by the financial aid priority date and still don't get them. Oh well.

Well, if submitting early supposedly makes a difference, that means the variance between schools is even greater than I thought ... I submitted my financial aid application in September this year and still got $6K in Perkins (which I believe is the maximum). I'm sorry to hear it's such a frustrating mystery at other schools.