Our son will be headed to college next fall and as such, we’ll be filling out the CSS Profile application. We recently took out a sizable Home Equity Line of Credit (HELOC) to pay for home improvements. Our house is paid off and I know CSS will look at the equity of our home. Two questions: does the amount drawn on our HELOC get reported on the CSS? Does the total value of the available funds in the HELOC get reported?
Not sure on CSS but I know it’s ignored on FAFSA so probably the same.
The HELOC would reduce the equity of your home. If your house is worth $100k but you have withdrawn $20k, the equity is now $80k.
I believe the CSS wants to know the equity. If you have a $500k home but a $400k mortgage, then you report the equity of $100k. Same with a HELOC if you have borrowed the full amount of the HELOC. If the HELOC is sitting there ‘just in case’ then your home still has its full equity (as you could just cancel the HELOC since nothing is owed on it).
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I’d be concerned it would be seen as a cash account.
If the cash from the loan is sitting in your bank account the day you file CSS Profile (and FAFSA), it will be counted as an asset. And agree with above, also reduces your home equity in Profile.
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I’m going through the CSS process for the first time this year, and have a somewhat similar issue - refinanced months ago to take out cash for long-overdue home repairs and improvements, which greatly reduced the equity remaining in the home. As I understand it, the money withdrawn will still show up on CSS as long as it is in your possession and control. Your home equity will decrease by the amount withdrawn, but until you have paid for the improvements, that money is presumably sitting in a cash account that will also have to be reported. It sounds like you still have another year until you have to submit the forms, so hopefully you can have the work completed and paid for by then. I agree with others that a HELOC with zero balance won’t be reflected on CSS.
In our case, we are making a huge effort to pay our contractor as much as possible before completing the CSS for our senior.
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I’m curious too: when it comes to css formulas: does money in the bank count the same as home equity? is one more important to the formula?
which would give a higher EFC – 100K in bank or 100K more in equity?
OP - that’s what I would find out. if one amount is seen differently with the CSS.
Money in the bank/investment account is assessed at 5.6 percent, unless it is in a bona fire retirement account (IRA/401k etc — not a savings account that you are intending for retirement).
Home equity can vary as to how it is assessed. FAFSA-only colleges and many CSS profile colleges ignore it. Other CSS profile colleges will assess it at the same 5.6 percent as cash or investments, but will cap the equity that is assessed at a percentage of income (often 1.2-2 times income, but sometimes more). A few colleges will assess the entire home equity at the 5.6 percent. Those assessment can sometimes be appealed.
There is also a small set-aside of assets that are not assessed, based on the age of the older parent.
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Don’t assume that Profile schools in calculating institutional need-based aid use the same formula that FAFSA uses when determining federal benefits (for instance, assessing parent assets at 5.6%). Profile simply collects data; the schools that use that data can use whatever formula they like, and you can bet that those formulas are not always in lockstep with FAFSA.
FAFSA definitely ignores primary home equity, but only a small minority of Profile schools, not “many,” do not look at primary home equity when determining institutional need-based aid. Most schools that use Profile factor primary home equity into their need-based aid decision.
You’re right – I re-checked my data and I agree – only a small minority of Profile schools will ignore home equity. Thanks for that.
As for the asset percentage, though, I am seeing various sources reference 5.6% for FAFSA and 5% for CSS Profile. I ran numerous NPCs when my kids were applying to colleges in the past couple of years, and those values seem accurate based on my finances and the colleges they applied to (admittedly a relatively small sample)
That’s on the FAFSA….not for Profile purposes.
There is no set percentage for anything Profile related, because there is no Profile formula, like there is with FAFSA. Each school that uses Profile will do what they want with the data collected.
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Then I guess the takeaway is that everyone should run as many NPCs as needed to make sure they can afford that college.
Good heavens! I would never have thought that a HELOC factors into the financial aid decisions.
Are there are any books or websites that CC folks can recommend that can demystify the financial and financial aid aspects of paying for higher ed? We are thinking about a HELOC and I just would hate for something like this affecting decisions, given the costs involved for colleges.
Yes, that has always been good advice. Nobody should ever think that a good result from school A’s NPC means they can afford school B.
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It might and it might not. There are multiple factors involved, most critically which schools are being considered.
From the interwebs: The CSS Profile assesses the money you have , but it also examines the money you pay out with questions about your family’s medical expenses, debts, mortgage status, business expenses and other costs not included on the FAFSA.
I think adding a HELOC would reduce your equity but not count as available funds as I think the questions only ask you to list mortgages and maybe total payments or just the regular mortgage payment. I’ll be in the same boat as we want to do a cash out refinancing for home repairs but am afraid with how slow things are right now it will take longer and have some cash still at hand. Trying to find out if there can be any “escrow” type ways to put the $ once we decide with whom to renovate, into a hold account so it’s not on the books. (obviously earmarked for the work but the CSS doesn’t GAF about that part)
If you have the money in your accounts…it’s ON the books. Best to complete the Profile when either you haven’t taken those funds…OR you have already paid out to the contractors doing the work.
so any available credit in a HELOC counts as money on the books? Wouldn’t that also be the case for available credit on credit cards? (obviously those don’t count)
That’s not what I said. I said….if you have taken funds from your HELOC and they are in your bank account awaiting paying your contractors, they are assets.
@BelknapPoint maybe you can explain this better than I seem to be doing!