For conservative long-term investors, aggressively prepaying their home mortgage to avoid high interest costs can pay big dividends as a college and retirement strategy. The client is positioning a potentially assessable asset (savings) into a non-assessable investment (personal residence). The Institutional Method (IM) PROFILE schools will assess the personal residence as an asset.
The parents reduced their assets by $5,000 by prepaying home mortgage. Since the parents assets were assessed at 5.6% the asset reduction may increase the childs financial aid eligibility by $280 ($5,000 x 5.6%).
If you are in a financial aid asset assessment rate of 5.6%, you could increase your financial aid eligibility up to $56 for every $1,000 of asset reduction by prepaying home mortgage.