<p>If a school is using the CSS as their guiding light versus the FAFSA, is there a percentage of home equity that they expect to be spent toward a student's education?</p>
<p>We recently sold our old home for financial reasons and have purchased a house half the size and are paying for it with the proceeds of the sale of our home, leaving us with no mortgage.</p>
<p>Are we now going to get clobbered because we don't have a mortgage?</p>
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<p>It depends on the Profile school. Some don’t use home equity in the primary residence at all…some use a capped %age of home equity…and some use it all. YMMV…so check with EACH college for their policies.</p>
<p>If the college has a financial aid calculator of their own on their website…use that for a guestimate of what your family contribution will be.</p>
<p>In my discussions with FA offices at various CSS schools, I have found that some schools cap it at 1.2 X Income (Dartmouth, Georgetown), others cap it at 2.4 X Income (Vandy), while others have no cap at all (Northwestern). Other still (UChicago, Emory) said that they have no specific cap, but they will consider it on a case-by-case basis when they look at the overall financial strength of family assets. Bottom line is, as Thumper pointed out, you really need to call each school individually to find out how they assess home equity.</p>
<p>As others have mentioned, some schools limit or omit home equity when considering financial aid. Because of my familys situation I have spent some time researching this issue. Below is a copy of a post I made on another thread last November. I limited myself to colleges that I thought my daughter should consider.</p>
<p>Colleges that do not consider home equity:</p>
<p>Chapman University (email)
Grinnell College (email)
Harvard (website)
MIT (if income less than $100,000) (website)
Princeton (website)
Whitman College (website)</p>
<p>Colleges that cap home equity at 1.2 times income:</p>
<p>Amherst (website calculator and 568 group member)
Cornell (website calculator and 568 group member )
Dartmouth (website calculator and 568 group member )
Stanford (website)
Williams (website calculator and 568 group member)
Yale (email)
Boston College (568 group member)
Brown University (568 group member)
Claremont McKenna College (568 group member)
College of the Holy Cross (568 group member)
Columbia University (568 group member)
Davidson College (568 group member)
Duke University (568 group member)
Emory University (568 group member)
Georgetown University (568 group member)
Haverford College (568 group member)
Massachusetts Institute of Technology (568 group member)
Northwestern University (568 group member)
Pomona College (568 group member)
Rice University (568 group member)
Swarthmore College (568 group member)
University of Chicago (568 group member)
University of Notre Dame (568 group member)
University of Pennsylvania (568 group member)
Vanderbilt University (568 group member)
Wellesley College (568 group member)
Wesleyan University (568 group member)</p>
<p>Colleges that cap home equity at 2 times income:</p>
<p>Bates (email)
Colby (email- as long as home has been owned for a number of years)
Middlebury (email)
USC (conversation memama had with a financial representative)
Vassar (email- on a case by case basis, where it is the only asset and
is a form of retirement) </p>
<p>Colleges that have no cap on home equity:</p>
<p>Barnard (email- unless there is some unusual situation such as a prolonged unemployment period that is still in affect or if one parent is very ill)
Bowdoin (email- but, may limit if owned more than 10 years and in a high real estate area)
Mount Holyoke (email- but, may limit consideration based on location and date of purchase)</p>
<p>Great research Count.</p>
<p>The Count reveals an important benefit of the cost calculator requirement: the ability to determine what limits are in place by running a number of iterations with different values.</p>
<p>Wow, Thank you Count for sharing.</p>
<p>What happens to how colleges compute home equity if one suddenly becomes unemployed. As I see most colleges cap home equity at 1 - 2 time INCOME. But if you become unemployed your income suddenly goes to zero. What do colleges do this this situation></p>
<p>^^Having gone through this I can tell you that in general they wait a year and assume you will find a job within that year’s time. Any adjustments, in our experience, occurred the next finaid year when clearly you’ve depleted assets to make ends meet.</p>
<p>^^Having gone through this I can tell you that in general they wait a year and assume you will find a job within that year’s time.</p>
<p>This depends on the college.
When my husband had to take a downgrade in pay after 9/11 , the college accepted the latest paystub and adjusted our EFC ( & grants) to reflect the lower income right away.
This however was a school that met 100% of need, which most schools do not.</p>
<p>But if you become unemployed your income suddenly goes to zero.</p>
<p>It also really wouldn’t go to zero.
If you are laid off, you would be eligible for unemployment as well as retirement funds which may be cashed out upon leaving your company.</p>
<p>Each school looks at equity a little differently.</p>
<p>When you say for example a school caps home equity at 1.2 times income does that mean they discount that amount or does that mean they assess that against you even if equity is greater? If they assess it against you how much do they calculate as a percentage should be part of the EFC? For example. If we have $100,000 in equity what percent of that is counted as availabile for EFC? And do they assess that percentage EACH year? e.g. if they assess 10% then does that mean after 4 yuears they’ve assessed that you could spend $40,000 of your $100,000 equity? Just trying to understand.</p>
<p>THANKS.</p>
<p>What it means by “capping home equity” is that the home is assessed at the lesser of the ''cap times the income figure" or the actual amount of home equity. So, say your home equity is $100K, and your income is $,40K, If the cap figure is 1.2, then amounts would be the lesser of $48K (1.2 x$40K income) and $100K. So, yes, $48K of your home equity would be considered part of your assets and be subject to the 5.6% or whatever the percent that school is using to assess parental assets.</p>
<p>If you paid off your mortgage with money sitting in an account, you are better off than having that full amount sitting there and being assessed at 5.6% In the example just given, say, instead of paying for the house in full, you have that same $100K sitting in the bank. It would then be assessed as a cash asset at the full $100K level. As a house payoff, it is only assessed at 1.2 x your income, which if it is $40K, you are clearly in better shape because the $100K pay off resulted in an asset being assessed at $48K, but depending on your income, it can be a moot point.</p>
<p>Where it is not smart to pay off your home is if you are doing so when you owe money elsewhere. Whereas owing on your home cuts down on the equity value of the home, owing on your car, or an unsecured loan or credit cards or any number of things, does not reduce your asset value. Say you have debts totalling $50K for your cars, some student loans of an older kid, credit card debt, furniture, etc. And your house is paid off. If you are eligible for financial aid, you would be better off borrowing against the equity of your house so that the equity is reduced by $50K ir paying off those bills rather than having the money sitting in an account, because you are going to be hit 5.6% towards EFC if the money is in an asset, forget any loans against it. The home mortgage is one of the few things that count in terms of a debt reducing the asset because it is so secured.</p>
<p>Yes, they assess it every year, so in 4 years you are assessed more than 20% on that your assets if you have them sitting there all of that time. </p>
<p>The other thing that concerns me as an issue is that if you have sold that house in the key year for financial aid, the year under examination, the money you made on the sale is considered income. If you rolled it into another house, that’s one thing, but if some of it was not, that is income and it is going to be hit a big 20-40% towards your EFC. Makes you not so concerned about that measly 5.6% doesn’t it? That is a big problem for anyone who has something like this happen–a one time event that leads to a blip in income. Happened to a friend of mine whose husband got a payout from a job termination which he rolled into a business for himself. The colleges did not care. That was income, and was hit as part of the EFC. In a case like that, if it truly going to impact aid, a gap year might be a good idea.</p>
<p>So in answer to the original question of “am I going to be clobbered for not having a mortgage”, the answer is yes, if you have a different way to spend down the money, but no if you are going to have it sitting in an account anyways. You can’t make it disappear into air, you know. I guess you can invest it in oriental rugs or something like that.</p>
<p>Bear in mind that this only matters at schools that you think you are eligible for aid, and that tend to meet most of the demonstrated need. Run your numbers through the PROFILE sample calculators. If you are expected to come up with close to the cost of the college even without the home equity, it’s really a wash. If this is the make or break issue, it might be something to consider.</p>
<p>Great info from the Count but I can’t believe it’s accurate. I had a incident last year with one of the “568” group member (what does that mean?) where they dinged me a couple of thousand of dollars in aid because Zillow said my house had appreciated (which, by the way, it hadn’t). My equity is way above the 1.2 x limit, so if the school went by that, it shouldn’t have been an issue at all. In fact, it was a bit of a battle with me needing to document why Zillow was wrong (!), and the error was never fully corrected. So either these limits are new, or they are not fully followed? </p>
<p>An aside, but I’m still incredulous that a school would rely on Zillow to that extent.</p>
<p>ANY list or really ANY information needs to checked for accuracy and relevance. When you have a list of schools of interest, if home equity is an item that is going to make a difference in financial aid awards, contact the school directly and ask what their cap is and what they use for home equity value. </p>
<p>Zillow was and is an quick and available tool to come up with a check as to what the home value is. It can also be wrong and if the values so derived are off, and the school come up with a different number, really though any method, the home owner needs to “prove” that it is wrong. The schools are not the only ones that are way off on some home values. Our neighbors and I are all fighting our township on what they consider the value of our homes for tax purposes. No way we could sell a house at what they are using. My neighbor had her house on the market for nearly a year, and could not sell it at near the value they assess. Can’t get the financing for those numbers either which is another thing. </p>
<p>A problem with PROFILE schools is that they can be capricious in coming up with their definition with need. Any guideline can be broken by what they see as an exception in a particular case. If they see someone sitting in a house worth millions, they may take exception the cap. They may take qualified plan monies into account when they generally don’t, if they see a huge amount sitting in there.They can put their own stipulations on anything and take a case individually. That’s why the “meeting full need as they define it” can be a useless thing, as some schools define it with a lot of exceptions. I don’t say that they go after the gold in your teeth, just to be funny.</p>
<p>*We recently sold our old home for financial reasons and have purchased a house half the size and are paying for it with the proceeds of the sale of our home, leaving us with no mortgage.</p>
<p>Are we now going to get clobbered because we don’t have a mortgage?*</p>
<p>Either way, schools that use home equity would consider the equity no matter what you had done. Even if you hadn’t sold that larger home, you still had a lot of equity in THAT home. It’s not the fact that your current home is paid off. It’s the fact that with EITHER home you had a lot of equity.</p>
<p>Of course, now with no house payment, you can more easily afford to contribute towards college.</p>
<p>FWIW, on the Johns Hopkins NPC website, they state that home equity is not considered at all if you have an income of $150K or less.</p>