Spouse wants to take out a personal unsecured loan to pay off debt during FAFSA process?

[TorrezJon]

If my spouse took out a personal unsecured loan to pay off my prior Student loans plus pay off his 401K loans and other credit cards, property tax, etc...would this affect my FAFSA application for financial aid for Physicians Assistant school that I submitted in the past few weeks?  I’m going to call the school today because it seems the FAFSA approved me for a lot less than I need.  My fear is that my spouses loan can be frowned upon meaning they can see 40K coming in and then 40K coming out to pay off things.  They can think they don’t need financial aid if they can use 40K to pay for other things although the 40K will help consolidate and lower total monthly debt payments.

Thanks greatly in advance.

[MT2PA]

I'm not sure how it will affect aid, but it just generally sounds like a bad idea.  You're borrowing money to pay off previously borrowed money.  If this were a good idea, everyone would do it.  No one does.

[fishbum]

Proceeds from a loan are not considered income and thus shouldn’t affect your financial aid. The plan makes sense to me assuming that the rate on the new loan is lower than the ones being paid off. 

[TorrezJon]

19 minutes ago, fishbum said:

Proceeds from a loan are not considered income and thus shouldn’t affect your financial aid. The plan makes sense to me assuming that the rate on the new loan is lower than the ones being paid off. 

Yes you are correct.  Better rate and lower monthly payment. 

[TorrezJon]

1 hour ago, fishbum said:

Proceeds from a loan are not considered income and thus shouldn’t affect your financial aid. The plan makes sense to me assuming that the rate on the new loan is lower than the ones being paid off. 

The only thing that worries me is although loan proceeds are not income, it can be looked upon as an asset?

Also since I completed my FAFSA about 10-14 days ago, they wouldn’t consider the loan deposits anyways because isn’t the snapshot of bank account balances up to the date you submit your application for FAFSA?

[fishbum]

3 hours ago, JackTorres said:

The only thing that worries me is although loan proceeds are not income, it can be looked upon as an asset?

Also since I completed my FAFSA about 10-14 days ago, they wouldn’t consider the loan deposits anyways because isn’t the snapshot of bank account balances up to the date you submit your application for FAFSA?

If assets are being considered, they should be offset by debts. That is to say, you have $40k in the bank but you owe 40k, so it should offset from that standpoint.