Small contracts (<50pts) and FAFSA

[Herding_Cats]

We are starting to consider buying a pretty small contract as we are finding that we visit more often than we thought, and have rented points enough times to figure out that we enjoy the less frenetic feel of the deluxe resorts. For the time of year we usually visit, point requirements are lower, we don't need a big room, and we figure if we go approximately every-other year that a very small contract will work just fine with banking/borrowing points.

That being said, we aren't "upper middle class or higher" when it comes to income. Part of choosing a very small contract is because we don't want to put 5 figures into a timeshare, but would like to have more control over booking our trips and not rely on brokers or strangers to book trips via renting points.


But we ALSO have 2 teenagers (and 1 almost teenager), and the FAFSA is looming. I understand that they consider timeshares an "asset" but how is the value of that asset determined? From what I can tell they don't consider it a "2nd home" (which pretty much guarantees you're not getting any financial aid) but if spending $5k on DVC is going to cost our kids assistance on their college tuition, we will nix the idea altogether.

 

[RoseGold]

These things are a moving target. Current rule: "anyone reporting an income of $59,999 or less does not have to report any assets, including the value of small business or family farm." So you might not have to report any assets at all.

Of course DVC is an asset, and you know how much it is worth.

 

[Brian Noble]

You use their fair market value--the price you could expect to sell it for at the time. For DVC, that's relatively easy because you'll have plenty of references in e.g. the ROFR thread of what contracts are worth. A 50pt contract won't be the tipping point between "aid" and "no aid."

It might be worth looking into what might be a reasonable expectation for costs, depending on where you live and where your kids may eventually want to go. I think for most people it seems a lot more terrifying than it really is. For example, both of my kids were Michigan residents and went to U-M, where there is a surprisingly generous financial aid policy for in-state students.

We were also pretty aggressive at putting money aside in 529s for them, which meant cutting corners in a few other places. Some of those corners were at Disney--and particularly, where we stayed. That's because lodging is probably the biggest variable in a Disney trip. We did about half of our stays off property, but at really nice resorts: Bonnet Creek, Vistana, and this year we are going to Cypress Harbour for a Universal-focused trip. Much less expensive than a DVC villa!

 

[Herding_Cats]

You use their fair market value--the price you could expect to sell it for at the time. For DVC, that's relatively easy because you'll have plenty of references in e.g. the ROFR thread of what contracts are worth. A 50pt contract won't be the tipping point between "aid" and "no aid."

It might be worth looking into what might be a reasonable expectation for costs, depending on where you live and where your kids may eventually want to go. I think for most people it seems a lot more terrifying than it really is. For example, both of my kids were Michigan residents and went to U-M, where there is a surprisingly generous financial aid policy for in-state students.

We were also pretty aggressive at putting money aside in 529s for them, which meant cutting corners in a few other places. Some of those corners were at Disney--and particularly, where we stayed. That's because lodging is probably the biggest variable in a Disney trip. We did about half of our stays off property, but at really nice resorts: Bonnet Creek, Vistana, and this year we are going to Cypress Harbour for a Universal-focused trip. Much less expensive than a DVC villa!

Also a Michigan resident, but up north where our counselors are not great at communicating anything about college/financial aid stuff until late in 11th or 12th grade. That link is SUPER helpful. Thank you! It's frustrating to be basically left to our own devices and clicking around through every single college website. Our oldest is in an engineering program and looking to get into the same focus for college, which makes U of M-Dearborn an option (and also U of M, but I think a smaller campus would be a lot more comfortable for him.)

But also, since we are several hours away from literally all campuses, tuition is not the only cost we are factoring in.

What I very much don't want to happen is buying into DVC and then being put on the hook for 100% of costs because of how ridiculous FAFSA is.

 

[Brian Noble]

Owning DVC (or not) won't really make any difference. You either have the money as cash you didn't spend on DVC, or you have the points as an asset. One might be valued slightly more than the other, but not by enough to matter.

 

[supersnoop]

For FAFSA purposes, parental assets such as cash in the bank and investment real estate increase your expected contribution by 5.64% of that value. Therefore, owning DVC worth $10,000 would decrease aid eligibility by about $564.

What else would you do with the money? Would you still have it in cash where it would count just the same? Would you put it into a protected asset such as a retirement account where it wouldn't count? Or would you spend it on a car, where it also wouldn't count, but would depreciate and likely become much less valuable than DVC over time?

 

[Cfabar1]

You use their fair market value--the price you could expect to sell it for at the time. For DVC, that's relatively easy because you'll have plenty of references in e.g. the ROFR thread of what contracts are worth. A 50pt contract won't be the tipping point between "aid" and "no aid."

It might be worth looking into what might be a reasonable expectation for costs, depending on where you live and where your kids may eventually want to go. I think for most people it seems a lot more terrifying than it really is. For example, both of my kids were Michigan residents and went to U-M, where there is a surprisingly generous financial aid policy for in-state students.

We were also pretty aggressive at putting money aside in 529s for them, which meant cutting corners in a few other places. Some of those corners were at Disney--and particularly, where we stayed. That's because lodging is probably the biggest variable in a Disney trip. We did about half of our stays off property, but at really nice resorts: Bonnet Creek, Vistana, and this year we are going to Cypress Harbour for a Universal-focused trip. Much less expensive than a DVC villa!

Wow… Former Michigander here….

Went to college out of state because the private college i was accepted to was cheaper than Michigan… Wish this program had existed all those years ago!

 

[crisi]

Also take some time to run through a FAFSA calculator. You don't need to be "upper middle class" to not get anything worthwhile in terms of aid - maybe some subsidized loans.

That doesn't mean there isn't money, it just won't arrive via FAFSA. My youngest got a decent scholarship that was merit based - they had to leave that school for various reasons (Covid not being a minor one) and applied and got a transfer scholarship to their current school. I pay $8k a year for a private school education.

And the trick to that is to apply to schools where your kid will be in the top quartile of attendees. You won't get a lot of merit money from your stretch school - you'll get a lot of it from your safety school.