My family doesn’t own a home (zero home equity) and we just rent. I’m trying to figure out how this affects financial aid for my son entering college.
I am aware that some colleges don’t consider home equity at all, some consider a portion, and some consider all. But I can’t find any information on how a college is likely to treat a family that doesn’t own a primary residence but does bear the expense of paying (pretty high) monthly rents. Any advice would be very welcome. Thanks!
Paying rent for your primary residence will not in any material way affect any need-based financial aid for your son. It’s a cost paid to maintain a place to live, just as paying a mortgage and property taxes is for many homeowners.
Edited to add: most colleges don’t consider equity in a primary residence at all, as it is not reported on FAFSA.
This won’t affect college financial aid…at all.
Thank you both. The question wasn’t so much about whether the rental payments would directly affect my college FA, but about whether I am better off holding $$$ in a savings/brokerage account or putting them in home equity.
Since many (not all) college will exclude at least a portion of home equity, it might make sense to put in a down payment and “shield” some of that money. Basically, by transferring the money to one asset class (real estate) rather than another (stocks), I am excluding it from the FAFSA.
Does that make sense?
Money in the bank will look like potential college funds.
This can be an issue for retired parents. Money in the bank might look like retirement funds to someone who is already retired and has bills to pay each month, but might look more like college funds to the schools.
One option is to find an affordable university to attend and do not worry about need based financial aid.
Yes, that makes sense. For a school that does not consider primary home equity, a dollar that is taken from a reportable asset (like a savings/brokerage account) and used to buy a primary residence will no longer be assessed against need-based financial aid.
Yes, equity in your primary residence is viewed by most schools as less accessible for tuition than money in the bank. So if it makes financial sense for you to buy a home to live in as your primary residence now, and your kids are not yet in college, then by all means, use your savings to buy a home to live in.
It depends. Money in a regular savings is considered an asset on both the FAFSA and the Profile.
The FAFSA doesn’t consider home equity in your primary residence…at all. SOME colleges that use the CSS Profile do consider primary home equity.
Im going to give you some very free advice that really comes from @blossom who can clarify. Do NOT do anything financially that you wouldn’t be doing anyway. IOW…don’t buy a house or primary residence just because you think it might help with financial aid.
The vast majority of colleges do NOT use the CSS Profile…so your primary residence equity won’t matter. And the very vast majority of colleges do not meet full need for all students. You could do financial gymnastics that won’t net you a dime of additional need based aid.