I know there are a small number of Profile Schools that do not consider home equity and a larger number that do but cap it at 2.4X income or something like that. For those schools does it matter how much home equity you have?
What about at non Profile schools where home equity is not even calculated?
To put out a ridiculous number, lets say you have $1.5M in home equity (I do not know anyone who has that who is seeking FA, just curious) on an income of $100,000 (how this could happen, you bought many years ago when both husband and wife had full time jobs before one started working part time to be available for kids or decided to do a startup, you inherited money and bought your dream house and a bunch of other ways).
So will most Meet Full Needs schools really value your $1.5M house at $240K??? or less???
I know they ask what year you bought. I thought that was to get a sense of value, so if you owned for 20 years it should have gone up a bit, not to see how recently you spent too much on a house. Wouldn’t a school wonder about a family that inherited money last year (for example) and went out and spent $1.5M on a new house, paying cash and now has nothing left for college?
What if it was a school that did not factor in home equity? Would this be something they would even check? All of a sudden you are living on Park Avenue from East Harlem, would they care?
I do not know anyone who did this, does anyone? What was the school’s reaction? Just curious
If a school sets a limit on the equity of 2.5%, and the income is $100k and the house is worth $1M (paid off with the lottery winnings), the formula is going to consider the value of the house over the income to be an asset and include that in the school generated EFC. In this example, $100k income x 2.5% protected leaves $750k as an unprotected asset for the $1M house.
If the schools doesn’t care about home equity, it doesn’t care and doesn’t consider those questions on the CSS. That’s the school you should be looking at if you have a low income but high home equity.
Oh wait, I thought it was the opposite, that the school CAPS home equity at 2.5x income. So only the first 250 counts. You mean it gives an allowance? That would make so much more sense and it probably should be done your way but I just ran the NPC for Vassar and when I increased my home equity by $1M, my EFC did not change.
I also ran Emory’s and while my EFC doubled, I still got a decent amount of aid, considering I put that I owned a house worth 1.5M that I bought last year (I most certainly do not own, this was just an exercise). Emory asks for the year you bought as well and what you paid, the other two did not.
Still if I were a FA officer I really would not have much sympathy for someone who spent 1.5M on a house last year. I wonder if they would do a manual adjustment at any of these schools.
We have friends who own a $2 million house outright. They don’t work, and haven’t in 10 years - they live off the income from their investments and are fond of telling people that they’re on a “fixed income.” They were applying for aid because that income was under $100k and they have several kids in college. Interesting how people have such a warped perspective of need.
This is not correct, and SeekingPam’s original assumption is correct. Profile schools that look at home equity put a cap on the number, usually at some factor of income.
Vassar supposedly does use primary home equity in the FA calculation, apparently up to 1.5 times income (see the link in post #4). So using the hypothetical in OP’s first post, only $150k of the $1.5m in home equity would be considered in putting together a FA package.
Again, this is not correct. The income factor does not define how much of the home equity is protected (not used in determining FA), it does exactly the opposite: it defines how much of the home equity is used in the FA calculation. Any remaining equity is then not used (protected).
I would imagine in their case their assets are over $1M if they are living off of them and getting close to $100,000 a year, probably closer to $2M to net that much? This may prevent them from getting FA beyond home equity.
Also, unless they are of retirement age or disabled, if they are not employed that dings them a little in the formula too. I know two parent households where only one works lose about $1000 in aid a year.
It was something a FA officer mentioned to a friend once. They were self employed, both worked in the business but only one drew a salary to save on FICA.
NPC and FA is premised on two parents working. If only one is working, this changes the formula slightly. I would IMAGINE that if neither is working, it changes the formula even more.
Try it on an NPC. Run the same numbers with one parent working and then with two parents working (in situations where it is a two parent household who are both the biological or adoptive parents of the student). Eg after reading a post on another thread I just ran it for Vassar using similar numbers to the poster, in one example I allocated 50k in income between two parents and got an EFC of $17,855. When I had one parent make $50k alone, I got an EFC of $18405. The income did not change, just who earned it.
It just seems odd to me. Someone wins the lottery and instead of using the $2M for college buys a house with it and continues to apply for aid?! Also, the school that sees this, still awards aid?
Pam- in this and in all your other posts you are poking around to find the holes in FA.
They exist. It is a system- an imperfect system- designed so that first of all, the Federal Government is spending the dollars in an entitlement program to people who are actually entitled to benefit. So that’s your FAFSA system. Will it work for every single kid? No. But it’s designed to be easy to administer for the greatest number of eligible recipients.
Then you’ve got the colleges own funds. They COULD ask every single applicant to fill out a 90 page form which correctly captures that a family with a Picasso on the wall (worth millions) a Steinway in the front hall (could sell it for 50K) and inherited jewelry in the vault (worth a few million) but living in a 125K ranch house in Tulsa OK on an income of 35K is NOT deserving of institutional aid.
But the relative frequency of such high assets/non liquid/lower income families is deemed to be somewhat smaller than the typical family. And the hassle of reading and evaluating the forms would be huge.
So sure- on occasion a family “qualifies” for aid who shouldn’t, and a deserving kid who should get funds through some quirk of the system does not.
What’s your beef?
I’m sure there is someone in America with my identical income, expenses, and assets paying less in taxes. That’s just the way the system operates. Do I lose sleep over it? No. I could spend my life moving assets around to try and capture every break but I’d rather work my job, invest as prudently as I can, and not let someone else’s bank account bother me.
Indeed they don’t, if the information linked to in post #4 is accurate. I should have qualified my statement with “most.” Schools that the linked website says have no cap on home equity include:
•American University
•Bentley College
•Boston College
•Elon University
•Emory University
•Holy Cross College
•Ithaca College
•Johns Hopkins University
•MIT
•Northeastern University
•Providence College
•Rensselaer Polytechnic Institute
•Roger Williams University
•Stonehill College
•Union College
•University of Michigan
•Williams College
A house rich but income and asset poor family will get hammered on need-based aid at these schools.
@blossom when I enter a system I like to understand it. I am entering this system for the first time I need to understand the parameters. I will be in this system for a long time. Maybe I want to refinance my house, maybe I am deciding whether to sell, buy or rent. Maybe I just had nothing better to do last night and was wondering.
Too many people do not understand the rules and then wonder why the NPC said X and their net cost is now Y?! Suddenly Junior is not going to Harvard because he did not qualify for aid and they cannot afford it otherwise.
Personal property from what I can tell is not factored so the Steinway, the Stradivarius and the Picasso do not count. Those are the rules, they apply to everyone. So when my German Shepard vomits on my Persian rule and ruins it I have only myself to blame! Same as when my kid shoots hoops indoors and hits the Picasso and my 5 year old bangs on the keys of the Steinway and cracks one! Good thing I have none of those. And I am sure there are families that buy diamonds in the prior prior prior year so that they do not have an asset! Personally I would probably lose them and will not even buy real earrings for that reason.
I do not think a question such as did you buy a house in the last 5 years and how much did you spend results in 90 pages of documentation. My question was very simple, is there an upper limit on home equity for the schools that either do not factor it in or cap it? The answer seems to be no. While that is surprising, that seems to be the answer even if you took your money and paid cash for the house the day before applying for FA. Amazing.
Why do you find that amazing? If you took your money and paid cash for the house a month before applying for FA and the home equity (or all of it) wasn’t used in the FA calculation, would that be any less amazing? How about one year prior? Five years prior? At what point is it no longer amazing? Where do you draw the line?
Is it amazing that a kid with wealthy grandparents lives like a member of the 1%- fancy vacations, golf lessons, running a tab at the restaurant of Nana’s club, and yet the parents (modest earners) qualify for need based aid? Is it amazing that a divorced father who moved millions of dollars off-shore so his ex-wife would only get 50% of a much smaller sum in a community property state has his kids precisely the right number of nights per year so that they qualify for need based aid? Is it amazing that someone with stock in a closely held and thinly traded corporation can adjust the payouts and/or valuations so that in some years they’ve got LOTS of assets and in other years nothing???
No single system is going to accurately capture every family’s financial true picture. The kid who will inherit millions of dollars someday from the rich uncle who has no kids- is it fair that RIGHT NOW he’s getting need based aid?
That article is somewhat outdated. Certain schools no longer consider home equity, and even the ones that do such as Emory, I ran the NPC last night and with my numbers and $1.5 million house bought in 2014 (the most recent year available), I would still qualify for some aid, about a 22k grant. Not as much as with more reasonable home equity and not as much as a capped school like Skidmore or Vassar but still way more than I would get if that same home equity were only $150,000 and I had $1,350,000 in investments. Then I would get almost nothing according to the NPC for Emory.