Will taking out a 50k investment property loan during FAFSA application affect SAI calculation?

This is an excellent question that comes up a lot. The FAFSA now uses the SAI (Student Aid Index) instead of EFC, but the principle remains the same. Any cash assets you have at the time you submit your FAFSA will be counted, regardless of whether you intend to spend them on renovations. You have a few options: 1. Submit your FAFSA before taking out the loan 2. Take out the loan but immediately pay contractors/purchase materials so the money isn't sitting in your account 3. Set up a dedicated business account for your rental property (this can help separate business assets from personal assets) Remember that parent assets are assessed at a maximum of 5.64% for the SAI calculation, so $50k would add at most about $2,820 to your expected contribution. However, if your SAI is already high, this might not make a significant difference in aid eligibility.

OMG the same thing happened to us last yr! We had $ in our acct from selling a car that we were gonna use for roof repairs & it COMPLETELY messed up our fafsa. My son lost like $3000 in grants bc of it!! The financial aid office wouldn't budge even after I explained. So frustrating!!!

Actually, if you're planning to use the loan for a rental property, you might want to consider how you're structuring the property ownership. If the rental property is owned by an LLC rather than personally, and the loan is taken out by the LLC, it could potentially be treated differently for FAFSA purposes. Also, the timing of when you submit the FAFSA matters. Remember that for the 2025-2026 school year, the FAFSA uses your 2023 tax information but asks for current asset information at the time of filing. So if you can time the loan and renovations correctly, you could minimize impact.

I work with a lot of families on FAFSA strategy, and here's what I typically recommend: time major financial moves around your FAFSA submission. First, submit your FAFSA as early as possible (October 1). Then once it's submitted, make your financial moves like taking out loans for investment properties. Keep in mind that if your student will need FAFSA for multiple years, you'll need to think about this strategy for future years too. The FAFSA snapshots your assets at the moment you submit, so planning when you have cash on hand is really important for maximizing aid eligibility.

I tried calling FAFSA to ask similar question abt money for my business and was on hold for almost 2 HOURS before getting disconnected! Then tried for 3 more days and never got through. Finally used Claimyr (claimyr.com) and got through to a FAFSA agent in like 10 mins. They have this cool system that waits on hold for you then calls when an agent picks up. Saved me a ton of stress. Their video shows how it works: https://youtu.be/TbC8dZQWYNQ The FAFSA person told me that taking equity out of rental property isnt counted against you since your net worth didnt change (you just converted equity to cash but still have the same debt). But once the cash hits your account, its counted as an asset until you spend it.

One more thing to consider is that the 2025-2026 FAFSA has simplified the asset questions compared to previous versions. Now there's just a single question about total cash balance rather than breaking out each account type. This means it's even more important to plan when you have large sums in your accounts. Also, don't forget that business assets with fewer than 100 employees are now excluded from the SAI calculation. If your rental property qualifies as a small business (which many do if properly structured), that could significantly impact your strategy.

my cousins husband works in financial aid office at a college and he always tells people to just submit fafsa first before getting loans and stuff. he says they see so many ppl mess up their aid by having too much cash when they file. just my 2 cents

To address your follow-up question about loan approval vs. disbursement: The FAFSA only asks about current assets at the time of filing. So if you have loan approval but the funds haven't been disbursed to your account yet, those funds wouldn't count as assets. However, be careful with the timing because verification requests from schools can come later, and they may ask for updated bank statements. My recommendation would be to submit your FAFSA as early as possible (October 1), then arrange for your loan to be approved and disbursed after that date.

Just wanted to add another perspective as someone who went through this exact situation two years ago. We had a similar renovation loan for our rental property and made the mistake of taking it out right before filing FAFSA. It bumped our SAI up by about $2,500, which cost us nearly that much in lost Pell Grant eligibility. What we learned for the following year: we set up automatic payments to contractors and suppliers so the money never actually sat in our personal accounts. We had the bank disburse the loan funds directly to the roofing company and HVAC contractor. This way, the cash never showed up as our assets on the FAFSA snapshot date. Also, keep detailed records of all renovation expenses. Some schools will consider professional judgment appeals if you can demonstrate that the money was already committed to necessary property maintenance expenses, though success varies by school. One last tip: if you do end up with the cash in your account when filing, consider prepaying some other legitimate expenses (property insurance, property taxes, etc.) to reduce the cash balance before your FAFSA snapshot date.