<p>I'm new to this and am trying to learn about home equity and the Profile. Can anyone provide some basic infomration about how home equity factors in? Is there a factor in the formuila that assesses home equity and adds to the expected contribution?
Th</p>
<p>The CSS Profile doesn’t do anything with home equity. It doesn’t have a formula. It merely reports the figures to the colleges you select, and they then apply their own particular formula to your financial figures.</p>
<p>Some schools don’t regard home equity. Some cap it at some percentage of income. Some may consider it in total. Just varies.</p>
<p>My kids schools did consider it, but with a cap. Before the recession the percentages were lowered, but I don’t know what they’re doing now.</p>
<p>I feel it’s fair because it is part of a financial profile, so I do have more money than someone with my exact profile and no home equity.</p>
<p>Thanks for replies. If schools apply their own formulas, is there a typical or range of expectations that schools will have for use of home equity? We own about $200K of our home and have been told that Profile schools will offer little aid unless we take out a 2nd mortgage and buy life insurance or annuity.
Th</p>
<p>200K equity seems too low to affect a financial aid request.</p>
<p>I encourage you to contact someone who has an accounting background and is professionally familiar with financial aid decisions.</p>
<p>We have about 200K in home equity and it doesn’t affect our aid at my son’s Profile school. But that doesn’t tell you much because his school caps it at a percentage of income and even at that it comes in under a protected asset allowance since we have a modest income and no other assets.</p>
<p>The biggest variable is the individual college’s policy on home equity. Other variables may include income (if it’s capped relative to income), other assets, etc. Even if you work with a professional, unless they know the specific policies of specific colleges it won’t tell you much.</p>
<p>You can call the college financial aid offices and ask them. Sometimes they’ll tell you, sometimes they won’t.</p>
<p>Most people just apply to a range of schools and see what FA offers they get back… and then compare them. Personally, I wouldn’t rush out and take out a second mortgage on a hunch that it might help.</p>
<p>Is the person telling you this selling life insurance?</p>
<p>A few Profile schools, like Harvard, don’t consider home equity at all. At most colleges your income will largely decide how much they’ll expect. I wouldn’t say $200K is by any means too little to consider, with strong income many colleges will want 5.6% of that.</p>
<p>Some colleges will cap home equity to 2.4 times income. Here is a thread I’ve found.</p>
<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/159932-home-equity.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/159932-home-equity.html</a></p>
<p>We own about $200K of our home and have been told that Profile schools will offer little aid unless we take out a 2nd mortgage and buy life insurance or annuity.</p>
<p>I don’t understand this… I’ve never heard of anyone being told to buy life insurance/annuities in relation to student aid. And why would a school offer “little aid” UNLESS you take out a 2nd mortgage? Why would a school care WHERE you get the money from?</p>
<p>I think you are worrying too much! Fill out 1) when you bought the house 2) how much you paid at that time and 3) current value of the house (available from county tax office). That’s it. </p>
<p>All of this is going to be set against the rest of your numbers. For instance, you might have the exact same mortgage/equity as your twin sister. But if you have $500K in the bank and she has $0, then your financial aid results are going to be completely different.</p>
<p>Fill out the form truthfully. Don’t jump thru hoops to try to get more aid by taking out another mortgage or doing something else to lower your equity - that will cost you more than whatever increased aid you would get. I’ve never heard of someone doing that - is someone trying to sell you something?</p>
<p>It really doesn’t matter what formula the college or CSS uses, because you have no control over it and can’t change it. Tell them the truth, and deal with the result.</p>
<p>HMom5 and others:
Here is the argument that has been made to me (yes, by a college planning service sellng insurance):
“Profile looks at equity and the last two tax returns. If equity is placed in an annuity it is not included on the Profile calculation. $200K home equity thus reduced to $100K significantly reduces the expected contribution. Buy our annuity.”
However, if schools only expect 5.6% of home equity to be available, as some posts suggest, diffence is only $5,600. Hardly worth the trouble and payment of annuity commission.<br>
If, however, schools expect more from home equity… Which is my question for those of you with more experience.<br>
I realize schools all have unique ways of assessing our finaicnal capabilities, but I assume there is a range and some fairly common formulas.
I’m not trying the juke the system, I just want the same as all of you - maximum choice for my son.</p>
<p>If you have a good income, then I think all of this might be for naught. Depending on where your son applies, he may just get offered student loans anyway. And, then you’ll have done all this for nothing. </p>
<p>most schools don’t have their own money to give. Most only can give federal aid which is only “free money” to low income students.</p>
<p>Where is your son applying?</p>
<p>This discussion can go both ways: leave it alone or plan just incase. Your financial aid base year starts Jan. 1 of the students junior year, and by then you have not been accepted to any schools yet. So do we start calling all the potential schools to find out the rules? That a lot of busy work! From my point of view you can do 2 things: 1. do nothing and cross your fingers (you get what you get), or 2. Plan ahead with no risk! If you can liquidate this equity at a good rate and you can afford the payments why not. I would use it to pay off consumer debt to increase cash flow in preperation for college expenses and then move the rest into a non-assessable asset that you have complete access to. Now your prepared for the best, and lets say a year down the line the student picks their school and equity is a non-factor, liqidate the non-assessable asset (e.g. $200k in-200k out) and pay down the new mortgage. If equity does count: leave equity in non-assessable for the 4 years and you could receive $11,200 p/yr in aid, thats $44800 over 4 yrs. Now liquidate the non-assessable asset and pay down mortgage (guarenteed 200k in-200k out). Not a bad deal, plus now you lower your AGI because the increase mortgage interest reduction you receive on taxes. Whats great is this senario is that there are non-assessable assets that provides you with access to your money and no early surrender fees and guarenteed return of the full principle investment after 12 months. Its a win win across the board for the parent.</p>
<p>FAFSA calcultors are not perfect, but at least they give you ballpark. CSS is harder since it varies by college, so it is harder to predict things at CSS colleges. These two things that helped us do some early planning</p>
<p>1) The online MIT financial aid calculator, accessible to anybody. It gives FAFSA (for goverenment aid) and MIT figures.
[MIT</a> - Student Financial Services](<a href=“MIT Student Financial Services”>MIT Student Financial Services)</p>
<p>2) Carnegie Mellon estimate form (you need to submit it to get back an answer, but I don’t think the admissions application needs to be filed yet)
[Admission</a> > Estimate Form](<a href=“Home - Computing Services - Office of the CIO - Carnegie Mellon University”>Home - Computing Services - Office of the CIO - Carnegie Mellon University)</p>
<p>In both cases we learned that we would not qualify for aid (other than loans) unless we had 2 in college. It was good to know that early in the cycle. Certainly packages vary a lot, but this gave us two initial datapoints.</p>
<p>“there are non-assessable assets that provides you with access to your money and no early surrender fees and guarenteed return of the full principle investment after 12 months” Like what? My advice is to cross your fingers and keep your home equity. No Profile school asked us to dip into our home equity, and they were all more generous than I expected with institutional aid.</p>