Financial Aid Independence

A Long Overdue Response...sorry...I was out of town for a few days and then the real world kicked in. We have been absolutely slammed at work with folks visiting from out of town. Trust me - it is not a complaint, but when I get home, the last thing I want to do is sit down and write some more.

Still, I promised a commenter on an old thread a response, and I hate to have it buried in the recesses of a year-old post. The commenter wanted to know about "principle residence" and how a second home might qualify the family for additional aid benefits.

If we own second home (recreation) about 45 minutes from primary, is there a way in Junior year our son can claim living on his own at the second home address (maybe paying us rent)so that he can obtain more benefits on financial aid? In essence they would NOT look at parents assets??

There are a number of factors at play here, and the first thing that I would suggest is to contact the financial aid office at the schools that you are considering to see if they have any advice. The reason for this is that while there are some universal guidelines, every school has the opportunity to administer financial aid under the auspice of "professional judgement," which allows for some leeway in some unusual circumstances. My answers below should be considered "common practice," what you might expect at MOST schools.

1. Living at a separate address (especially a house owned by a student's parents) does not mean that you are independent for the sake of financial aid. Generally, there are four (common) circumstances in which a student is considered to be independent for the purposes of financial aid.
(a) The student reaches the age of 24 during the year in which aid is awarded;
(b) The student is married;
(c) The student is a single parent, with custody of child(ren);
(d) Both of the students parents are deceased.
(a) and (d) are not really things that one can control (members of the Menendez family are obviously excluded), but just circumstance. I would not recommend engaging in (b) and/or (c) EXCLUSIVELY for the purpose of gaining additional financial aid. Why do colleges enforce this rule? Students who are not dependent on their parents for funding their education are dependent on the university for funding their education. It is in the school's best interest to ensure that students and families are linked for as long as possible.

2. Some schools have residency requirements that require students to live on campus for a certain number of years. Other schools link their academic scholarship offers to living on campus. Be sure that you are aware of all the rules regarding housing and residency before considering this as a plan to reduce costs on housing.

3. The second home may be killing your chances at financial aid now. While equity in your primary residence is considered an excluded asset, the same is not the case for a second (vacation) home. While you can use a mortgage to offset the value of the second home, it is still considered an asset, and the net value will be included in the FAFSA calculation. If you own the home outright, this could be substantial. Also, some private colleges may view ownership in a second home as a luxury and may be less willing to provide additional need-based institutional aid.

I hope this helps. Further, I hope that my delay in responding was not too inconvenient for you.