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Going back to school
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December 19, 2000: 6:05 a.m. ET
Consider selling your house, and keep your 401(k) where it is
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NEW YORK (CNNfn) - Going back to school after being in the work force for a while can bring up all kinds of nagging financial worries. What will happen to your retirement savings and your home while you're in school? How can you prepare for those staggering student loans?
In response to a reader's question, Elissa Buie, a certified financial planner from Falls Church, VA, and a member of the Financial Planning Association, said one option might be to sell your house to avoid getting spread too thin.
Ask the experts a question
I am 28 years old and have been working as a drafter at a small architectural firm for the past several years while my wife has been teaching at the local university. We have been saving for retirement in IRAs as well as through employer-sponsored programs. Two years ago we purchased a house.
We will be heading to the east coast in a year an a half so I can attend graduate school in architecture. At that point we will have around $80,000 in retirement savings and $30,000 equity in our home. We will not have much money set aside for school tuition, because most will be spent in our cross-country move. We are planning on renting out the house while in school, but the rent will not cover much more than the mortgage payments.
My wife will be working while I go to school, but will probably not be making much more than room and board for the two of us. I anticipate that tuition alone will be approximately $25,000 per year for the 3-1/2 years it will take for me to get my degree. Our only other debt at that point will be a student loan from my wife's graduate school of approximately $26,000.
What advice do you have about protecting our retirement and home during this period of drastically reduced income and increased expenses? Is there anyway for my wife and I to make ourselves more eligible for tuition assistance? Although I need to go back to school, I am very worried about restarting my life in five years with almost $100,000 in new student loans.
First, you are doing exactly the right thing thinking about this now rather than waiting until it is almost time to leave for school. And in the big picture, I don't have to tell you that this is a great investment in your future, so it's almost certainly worth the investment of time and money you will have to make.
That said, you have quite a few issues to consider. Being a generalist, I am not an expert on financial aid, and I suggest you find one. But I will give you a general overview of what I think you should consider.
First, contact the school you plan to attend now and speak with a financial aid counselor. Tell them your situation and see what they recommend regarding the home equity and the retirement assets. Even to the extent either of them impacts the aid for which you qualify, you appear to be in a situation to qualify for some straight aid.
Look also into grants, scholarships and, of course, loans. You might also check into other alternatives such as work/study programs. I'm sorry I can't be more specific about your particular situation but you really need to speak with a financial aid expert to get information relative to your particular situation and the specific school you are planning to attend.
You seemed also to be asking about the protection of your assets from creditors and the like during this time of significantly reduced income. In general, your retirement assets will be protected from creditors. You may want to consider leaving them with the former employer if that is possible to potentially increase that protection.
On the topic of the house, I have to say that I think you will be living somewhat on the edge retaining the house, with rental income that just covers the mortgage and no significant reserves. If you have a tenant who doesn't pay their rent, harms the house in some way or even if you just have a period of vacancy (common for rental properties), you may find yourself without sufficient funds to cover the mortgage. Losing your home, and the equity you have built up in it, could be a serious blow to your future finances.
I wonder if you might consider selling the home? It may make sense to do so now, even, if that meant reducing your expenses thereby enabling you to build up your reserves. Of course, you would want to coordinate this with what you find out about qualifying for financial aid. But the financial aid situation shouldn't be the only deciding factor as building reserves for your protection should be a high priority.
As a final note, I suggest you find a good insurance agent/adviser and look into the possibility of getting individual disability insurance to protect yourself in case you have a disability during your school years that could permanently impact your income. This is a very complicated issue and one that should be considered with independent professional advice.
I hope this helps, and good luck! 
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