<p>So, my prediction EFC with Federal Methodology is only $2,000, while my EFC with the Institutional Methodology is $21,000. I was shocked when I saw this, as my family only makes $22,000 a year! I identified the cause as being the equity on the home we live in. The house is fully paid off, so the equity is the price of the house, about $275,000. Is it reasonable to expect $22,000, as the Institutional Methodlogy says? Also, do colleges use a blend of the two?</p>
<p>Did you get those EFC numbers from FAFSA and a school that uses Profile or did they come from an online calculator? A $2K EFC seems high for a $22K income. Is your home really worth $275K in today’s market and did you factor in all selling costs?</p>
<p>Schools do use both EFCs in packaging aid. They are required to use the FAFSA EFC to determine your eligibility for federal aid and, if you qualify for state aid, it is usually based on the FAFSA data and is a separate calculation determined by your state. They will use the Profile data, in accordance with their own policies, to distribute institutional aid.</p>
<p>Was your family required to file a 1040 (long form), and not able to file a 1040A ? </p>
<p>With a $22K income, if your family filed a 1040A, I believe your FAFSA EFC would be $0.</p>
<p>Does your family own a business? </p>
<p>The Profile doesn’t give an EFC so where did this number come from? If it is from an online calculator that is from a particular school, it is likely it is accurate for THAT school only. Schools use home equity in different ways (they use it all, they cap a certain %age, or they don’t use it at all). You need to find out about home equity.</p>
<p>If your family owns a business, it is very possible that the family contribution computed by a Profile school will be higher as they often add back IN business deductions as income. </p>
<p>If your family doesn’t own a business, your family contribution sounds high to me. Check your numbers very carefully.</p>
<p>Profile uses ALL assets in its calculation, but at a rate of ~5.6%. Thus, a home with $275k in net equity would increase your EFC by ~$16k. Some colleges – highly selective ones – cap home equity at a multiple of earnings. Worth checking them out if you have high stats.</p>
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<p>Blue, do ALL Profile schools assess assets at this %age? How did you find this out? This %age if for FAFSA calculations. I don’t believe anyone really knows HOW and HOW MUCH assets are dealt with at Profile schools. Each school has its own formula.</p>
<p>For example on many school websites, it actually includes the %age of home equity the school considers (places like Stanford, for example do NOT use ALL of the home equity for calculating financial aid).</p>
<p>Thanks for the replies! The numbers I received were from the Collegeboard calculator. I recalculated and received <1000 for Federal, but still 20000 for Institutional. However, on the FinAid calclulator, my Institutional comes out to be only $2000, as it puts the simplified needs test into effect. </p>
<p>To be more specific about my situation, we have $285000 in equity on our own home, and $150000 equity on another home. With the 5.6% thing, I see where the $20000 came from.</p>
<p>Do colleges really expect my family to take out huge amounts of money through equity to pay for college?</p>
<p>I thought the 5.6% was a FAFSA thing. I have never heard it in relationship to CSS before.</p>
<p>With an income of below $31,000 I would expect your FAFSA EFC to be 0. The finaid calculator is a couple of years out of date and still has the $20,000 income cut off for the auto 0. That is assuming you qualify for the auto 0 EFC (by for instance, filing a 1040A or ez rather than a 1040). If, with that income, you do not qualify for the auto 0 then you will not qualify for simplified needs either, and your second property (but not primary home) will affect your FAFSA EFC.</p>
<p>CSS does not have a simplified needs test or the auto 0. For institutional methodology, all schools will probably consider the 2nd property as an available to help towards paying for school. The primary home will be treated differently by each school. Some will consider equity in the primary home, some may not, some may cap the amount they will consider at some multiple of income. The institutional methodology estimates are very general and do not take into account the multiple different ways individual schools will treat assets.</p>
<p>To be more specific about my situation, we have $285000 in equity on our own home, and $150000 equity on another home. With the 5.6% thing, I see where the $20000 came from.</p>
<p>So do you rent out this other home?</p>
<p>It is pretty common for schools that use PROFILE to expect you to access equity- so your best bet may be to include schools that only use FAFSA.</p>
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<p>Well…your family owns a second piece of real estate. To be honest, not very many families are in that position…many low income students don’t own their primary residence. </p>
<p>The second home would be considered an asset for FAFSA purposes. My guess is the family is filing a 1040 tax return and would not qualify for simplified needs as a result. Is that correct? The $150,000 in equity on that second home would add $8400 to the FAFSA EFC. If the second home is a rental property, the rents would be included as income.</p>
<p>I agree with Swimcatsmom about the 5.6% asset counting for Profile. I’m not sure that is how the Profile schools use assets.</p>
<p>BlueBayou quote: *Profile uses ALL assets in its calculation, but at a rate of ~5.6%. *</p>
<p>That’s FAFSA’s formula. Do you know if it really is CSS’s formula? And do you know if all CSS schools use that formula?</p>
<p>To the OP…</p>
<p>What about the rental income from that second home? Did you include that as income on FAFSA?</p>
<p>Also… do you have any non-custodial parent income that will get considered by some CSS schools?</p>
<p>*Do colleges really expect my family to take out huge amounts of money through equity to pay for college? *</p>
<p>Schools consider equity (especially equity from non-primary residences) as assets that can go towards college costs. That’s really no different from if the money were sitting in a bank somewhere (as far as they are concerned).</p>
<p>Remember, it’s a choice to go to a CSS school. It’s not a req’t. If you want to avoid the CSS calculation, then go to a FAFSA only school that is good meeting need.</p>
<p>Yes, they will really expect you to use the home equity. That’s where your family’s net worth is. FAFSA looks at the second home, so I’m surprised your EFC isn’t higher, but FAFSA only schools are clearly the way to go here.</p>
<p>^^If they qualify for the simplified needs formula (income below $50k and meet one of the other criteria, such as filing a 1040a/ez), all assets are ignored by FAFSA. If they don’t, their FAFSA EFC will jump quite a bit.</p>
<p>Run some numbers on the Collegeboard’s EFC calculator, Thumper, use your own numbers, and see what you come up with on the IM. I think they separate the contributions on that, as in “Parents Contribution from Income”, “Parents Contribution from Assets”, and “Students Contribution from Income” etc. </p>
<p>So it might be possible to see what % the assets are assessed at.
Our assets are usually negative after they deduct the allowance. :)</p>
<p>^^If they qualify for the simplified needs formula (income below $50k and meet one of the other criteria, such as filing a 1040a/ez)</p>
<p>Would somebody with rental property qualify for 1040a/ez?</p>
<p>I also wonder if total income is as low as the OP states. I wonder if the OP is just stating “earned income” and not what the “income plus rental income” is. </p>
<p>The stated income sounds too low for a working parent PLUS rental property income.</p>
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<p>I don’t think so.</p>
<p>I’m wondering how one would pay property taxes on two homes and support a family on $22K if the second home weren’t rented…if that is the actual total income, I’m guessing they have qualified for food stamps or free/reduced school lunches.</p>
<p>No, you do not qualify for 1040A if you have rental income. I know because we rented out our home when we were stationed overseas. Even though we were getting less rent than the mortgage and my husband was a lower rank then, our FAFSA EFC has only risen 3K while our income has risen more than 30K. I think the rental status of that property, even though we were renters in the new home, made our EFC so much higher that even the resulting rise in income has only made a small difference.</p>
<p>I’m guessing they have qualified for food stamps or free/reduced school lunches.</p>
<p>You can’t get food stamps any more unless you are working at least 20 hrs a week ( which most students can’t do- especially if they don’t have a car- which I don’t think you can own & get assistance anyway)</p>
<p>You * can own* a house, but I want my taxes back if you can own * two*.</p>
<p>EK, I’m talking about the whole family qualifying for a federal means-tested program. A family making $22K/year would certainly qualify for the school lunch program and they may qualify for food stamps as well. Afaik, assets are not a factor for food stamps or school lunches - eligibility is done by family size and income, though I think there are asset limits for the other programs. TANF and Medicaid recipients are allowed to own cars and their own residence, though a second house would clearly be a different story. Why would a car be excluded? So many areas do not have public transportation and the states/counties want people to work and have access to medical care!</p>
<p>Anyway, the only reason I brought up the benefits eligibility was that they clearly are low income and may qualify for one of the Simplified EFC forumulas on that basis. One does not have to file a 1040A/EZ in that case and FAFSA uses 2 year “lookback” period for the means-tested programs. So, for 11/12, if anyone in the household received benefits during 2009 or 2010, they would qualify.</p>
<p>this stuff happens because EFC is a complete joke. It assumes that parents will turn their lifestyle upside down, sell their home, and go into debt for the next 30 years in order to pay for college. It’s crazy, and I’d advise us all to have a chat with our congresspeople. It’s a complete penalty for any success. It encourages us to NOT save for college, and to not save at all. Assets kill you in this game. Those with nothing…basically pay nothing for college. Those that have assetts and a job…pay for the others to attend.</p>