<p>After reading here about schools that offer grants in place of loans for families making less than the school's specified annual income, I was excited because we seemed to fit the criteria for some of the schools.</p>
<p>I then tried using the EFC estimate calculator on FinAid.org. I selected Institutional Methodology and filled in all the blanks, including home equity (estimated market value less mortgage). </p>
<p>The equity in our home (about half its value) seemed to have a significant impact on the amount of EFC. The instructions on the FinAid site said to consider paying off mortgage, etc. if you wanted to increase the size of your financial aid package. That totally confused me because then we would have 100% equity and that calculation, of course, made the EFC higher! </p>
<p>I'm confused how the home equity calculator is used in the IM calculation. I must be naive, but I didn't think the schools expected us to draw down on our home equity to pay for college when my husband is in his mid 50s. </p>
<p>I believe the schools our son is looking at use IM and FM. At this point, I'm totally confused and rather disappointed because the parental contribution was much higher than I expected. Am I doing something wrong or is this just the stark reality? If it's reality, can the parental contribution be made up in lower-interest (i.le. not private) student loans, even at a school that offers loan elimination/grant aid?</p>
<p>It all depends upon the whim of each school, assuming that they use the CSS. From what I understand, they can do whatever they want in using/not using it. The FAFSA doesn't ask for home equity, so schools which only use fafsa obviously don't use it.</p>
<p>Yes, it's a stark reality. I found the topic was widely discussed during admissions presentations three years ago when we were visiting schools.</p>
<p>
[quote]
The instructions on the FinAid site said to consider paying off mortgage, etc. if you wanted to increase the size of your financial aid package. That totally confused me because then we would have 100% equity and that calculation, of course, made the EFC higher!
[/quote]
That would work for FAFSA if you had unprotected assets. For instance if you have a house valued at $300,000 with a mortgage of $100,000 and you also had cash in the bank of $120,000 then the net value of the house, $200,000, would not be reportable on FAFSA but the $120,000 in the bank would be a reportable asset. If you paid the mortgage off in full using the money from the bank then the net value of the house, now $300,000, would not be a reportable asset for FAFSA but the remaining money in the bank, $20,000, would be. So for FAFSA you have reduced your reportable assets from $120,000 to $20,000 which could increase your financial aid eligibility.</p>
<p>From what I understand schools that use CSS may take into account the value of your house for institutional aid. Some will cap the value of the house used in the financial aid process at a certain multiple of your income and some may not. The FAFSA EFC calculation is a pretty exact process based on a strict formula. i.e. it is not open to interpretation depending on each school. On the other hand the information you provide on CSS may be used differently in one school than in another. So you may find that your expected contribution at one CSS school may be higher than at another. You will not really know until you apply.</p>
<p>It depends on the school as everyone is saying. If the school of choice is FAFSA only, home equity on a primary residence does not count, so paying of a mortgage with money in accounts would cut down on your asset count. For schools that use PROFILE, it differs widely from not counting home equity to capping it at a certain value, to counting every bit of it. Depending on your specific situation, you may want to target schools that put you in the most advantageous position to get financial aid.</p>
<p>SOME profile schools limit the amount of home equity considered to a percentage of your income or HYPS type schools with special programs may limit it based upon whether or not you qualify for their limits.</p>
<p>Several years ago when my older Ds were applying and P was about the only one with no loans, we learned that FAFSA is the way to go for us. We have west coast home equity but could not afford to access it and stay in our homes so the additional Profile expected contribution made those schools inpossible</p>