cavalier1138 wrote:Question about asset allowances (because I am largely financially illiterate):
Looking NYU's limits, it says that I cannot accrue more than $20,000 in assets during the program. So how do the following hypotheticals work out?
A. I win a small sweepstakes of $50,000. I put the money in a savings account.
B. I win the same small sweepstakes and within the same tax year invest the money in a mutual fund.
C. Same money. This time I use it as the down payment for a condo within the same tax year.
Do all three of those result in me being taken out of the program? Or is there a difference based on how the money ends up being reported on my taxes?
I would be very interested to see what they consider to be a liability against any assets you have. If they include your student loans as a liability, that leads to a somewhat absurd scenario in which you could have $200k in the bank and $200k in loans and be on LRAP. On IBR, that liability actually goes up, so you could keep feathering your bed of cash?
If they exclude your student loans from your liabilities, that makes a lot more sense. This would keep you from relying on their assistance when you realistically can handle it yourself and also ensure that you are devoting maximum reasonable ongoing efforts to servicing your loans. So it definitely discourages savings outside of a retirement account and makes buying a house pretty tricky unless you can work out your payment plan such that you don't get more than $20k in equity at any point while your on LRAP. Realistically, $20,000 in net assets should allow you to keep a month and a half or so salary in savings and own a decent, non-luxury car outright.Obviously, anyone seriously considering going to NYU and relying on LRAP should discuss this in detail, probably over several meetings, with the financial aid office, but, hey, we're here so why not try and speculate a little bit?
Here's my best guess about what will happen under your three scenarios:
1. If you leave it in that savings account and your total debt on everything other than student loans is less than $30,000, you have >$20,000 net asset and you would be disqualified from the program.
2. Same situation as 1, a mutual fund is just a savings account with slightly greater risk. It's still a liquid asset.
3. This will depend on how much equity this creates in the condo for you. If that equity + your other assets doesn't exceed your other non-student loan debt by more than $20,000 you should be okay.
And by the way, if you did get that windfall and direct it exclusively toward paying your loans, the net asset question goes away because you've converted the asset into debt service on your loans. In terms of further implications, you'll report that $50,000 as income, which for that one year will change your AGI, your IBR payment and your amount of eligible support. So, that might be something you have to plan for. At NYU, anyway, that would be enough to knock you out of assistance for a year, but not out of the program.
Again, clearly, if you do end up winning $50,000 your first call should be to NYU's financial aid office to see what you should do with that money.