home equity and need-based aid

Paying for College
1

<p>Hi,
I'm having a bit of a problem with my EFC so I would really appreciate any help that I can get.</p>

<p>My Parents annual income (from all sources) total around $42,000.
and savings total around $70,000.
But, my home equity is $2,000,000 (yes you heard right, 2 million dollars).
The house that I live in was built by my great grandfather in the early 1900s and its value has literally sky-rocketed since then.
Now, the fact is my parents cannot afford to pay for my education (unless I go to some crappy Community College), so I am in dire need of financial aid.</p>

<p>According to the Princeton financial aid estimator (<a href="https://sweb.princeton.edu/cgi-bin/FinAid/finaid_form.pl%5B/url%5D"&gt;https://sweb.princeton.edu/cgi-bin/FinAid/finaid_form.pl&lt;/a&gt;) my total EFC is coming to around $20000, and my parents are willing to pay that much for my education.
BUT, according to college board's EFC calculator (which refuses to take a home equity value of more than $999,999 , I am not eligible for any need-based financial aid).</p>

<p>So my question is will any of the top liberal arts colleges offer me any need-based aid after they see my home equity?</p>

<p>(The only option I can see is to sell my house, and my parents would rather me going to a community college than doing that. Even I would not agree to selling my house.)</p>

<p>Thanks again for your help!</p>

2

<p>colleges will expect that with that much equity, your family would to take out a home equity loan to help pay for some of your education. Princeton does not take into account equity [ I believe], which is why that figures are different. And the % of home equity that is calculated as "available" varies - for instance, Stanford just recently announced that they would cap the % of equity their financial aid considers at 1.5%. With your parents low income you may qualify for a lot more financial aid. Are you a senior, or are you trying to figure where you can afford to go before you apply?</p>

3

<p>Sorry, it's late- a few typos above- should have read : </p>

<p>be able to take out a home equity loan</p>

<p>financial aid office takes into consideration at 1.5%.</p>

4

<p>I have already applied to many colleges (mostly liberal arts), but the fact is most of them do not offer merit-based aid but instead offer need-based aid.
According to my dad, and my GC, the home equity shouldn't be a problem (even though it's that high), but I would really like to get my doubts on this cleared once and for all.</p>

<p>Thanks a lot for your reply menloparkmom, but I would like to ask you, even with the home equity loan, say at liberal arts colleges, would I have to pay for the entire cost of my tuition or would I have to pay a partial cost?</p>

5

<p>I don't understand the question. You said you used the EFC calculator already. What did it say? The FM and IM EFC's are approximately what your parents will have to pay, depending on the school. If EFC exceeds COA, then expect to pay the COA. </p>

<p>You will want to calculate a consensus method EFC also if you are looking at a Group 528 school. </p>

<p>Where that money comes from is up to you and your parents. It may not be possible for both you to attend your first choice and your parents keep their home, so there may be some difficult decisions to make soon.</p>

<p>(I did not know there were not enough spaces for home equities of $1 mil and over).</p>

6

<p>According to the IM EFC Calculator,
My parents have to pay $51000 if my home equity value is $999,999 (which is the maximum value that the College Board EFC Calculator accepts, and my home equity value is higher....)</p>

7

<p>So now, what are the COAs at the schools you want to go to? None that I know of exceed $51K. Pick one that you and your parents are willing to pay for.</p>

8

<p>yes, but then my parents will have to sell the house.</p>

9

<p>you were not told that you would have to sell the house -- you need to reread the posts.</p>

<p>You have the following options:</p>

<p>Attend a school that you can afford to pay without financial aid. This may be your local state school.</p>

<p>Attend a school that awards merit aid without financial aid being a factor</p>

<p>Attend a school that awards aid based only on FAFSA. FAFSA does not count primary home equity, no matter how high it is</p>

<p>Attend a school that uses an institutional methodology, but that does not count home equity (Princeton is the only one I know of).</p>

<p>Ask your parent to take out a home equity loan to pay for the cost of the school you want to attend.</p>

<p>Your parents could sell the house and use the money to pay your way through college.</p>

<p>You could not go to college.</p>

<p>You could take a gap year, work to earn some money and spend some time researching schools more thoroughly to find ones that you like that are affordable (either lower in cost or award aid)</p>

<p>decide you are going to pay for college entirely on your own -- and start working, take out some loans and look for a lower cost school.</p>

<p>That is nine different choices -- they may not be choices that you want, but at least they are choices.</p>

<p>"According to my dad, and my GC, the home equity shouldn't be a problem (even though it's that high), but I would really like to get my doubts on this cleared once and for all."</p>

<p>This was said by someone who was referring to schools that only use the FAFSA. If your GC allowed you to apply to primarily private liberal arts colleges and knew of the home equity issue, they must be grossly misinformed regarding the financial aid process.</p>

<p>A last possibility would be for you to wait and see where you are accepted and take a look at the financial aid package. When you find you are awarded nothing -- write out a letter explaining the situation (why the house if worth so much, that it was your grandfather's, that you parent's would have a hard time paying off a home equity loan on their salary). I don't think it will make much difference, you may get some unsubsidized loans.</p>

<p>you have to understand that the financial aid officers are looking at your parents home equity and income as a package. Owning the house outright, they are not paying any monthly rent or mortgage, plus -- they would only need to borrow 10% of the value of the home ($200,000) to send you for four years to the most expensive college in the nation. They could then pay that loans off over 30 years with monthly payments equivalent to what many people pay for their current mortgage or rent. Your parents can afford to pay for the college -- they just don't want to.</p>

10

<p>Good post by hsmomstef</p>

<p>I don't recall the exact terminology but several private schools cap home equity at 2.4 times income (this may be an old list so double check)</p>

<p>Amherst College
Boston College
Bowdoin College
Claremont McKenna College
Columbia University
Cornell University
Davidson College
Duke University
Emory University
Georgetown University
Haverford College
Macalester College
Massachusetts Institute of Technology
Middlebury College
Northwestern University
Pomona College
Rice University
Stanford University
Swarthmore College
University of Chicago
University of Notre Dame
University of Pennsylvania
Vanderbilt University
Wake Forest University
Wellesley College
Wesleyan University
Williams College
Yale University</p>

11

<p>The unfortunate part is that is seems you got some bad advice from your GC. If you knew the way the system worked, you could have geared your applications to schools on the list that FresnoMom posted or schools that only use the FAFSA. That is why you might want to consider the gap year.</p>

<p>If I was your parents, I would borrow the money and pay for the school -- but if that wasn't possible (bad credit, already have a home equity loan I am having trouble paying, etc) than I would suggest you take the gap year and reapply.</p>

12

<p>Thanks for the great replies hsmomstef and FresnoMom.
Unfortunately, I believe that the taking a loan is out of question, as I have siblings who will be attending college in a few years, and even though taking a loan only for me may seem plausible, when my siblings are added to the equation, the amount of money taken as loan would become too much.</p>

<p>And FresnoMom, I guess I'm kind of unlucky, as I applied to only one of the colleges on your list (Macalester College).
It seems that I will have to wait and see the results, and if I get no need-based aid or merit-based aid, I will have to go to a state school.</p>

13

<p>I can't help but be curious here. How in the world do they pay taxes on a 2 million dollar estate on their $42,000/yr income?</p>

14

<p>Mo4, my guess: it's in California.</p>

15

<p>no kidding momofour
although if it is paid for- that means that otherwise they don't have a mortgage- but they still would have housing maintaince costs as well as the taxes ( and ins)
There are also waivers for those with disabilities/low income, but I can see a developer just itching to get their hands on it.</p>

<p>our house is also built in early 1900s ( 1901) but not worth $2,000,000 !</p>

<p>It must be pretty sizable, if I wanted to stay in our house ( and if it had been in the family for 100 years, I can see the motivation), I would rent out a room or two or possibly convert part of the house to an apt( if it was bigger)- that is what many in our area do actually. It allows you to stay in your house and adds rental space, instead of tearing down the house and building apts</p>

16

<p>Fresnomom's list is the Group 568 schools, which I misnumbered in my earlier post. Most of them use the consensus approach, but there are a lot of tweaky variations. Check out <a href="http://www.gao.gov/new.items/d06963.pdf%5B/url%5D"&gt;http://www.gao.gov/new.items/d06963.pdf&lt;/a> (2 meg pdf file) for a fascinating history and lots of inside dope.</p>

17

<p>With 2 million in home equity, you could still put four kids through college for $40000/yr for four years and still have over 1.3 million in equity. What about a reverse mortgage? </p>

<p>And with taxes, insurance and maintenence, there has got to be more here than just a large family with only $42,000 in earned income. Is there a trust helping to keep up the home?</p>

18

<p>OP: In my experience, many people with low/moderate income, but high home equity-say a long time resident of either coast- may not be able to afford the additional payment, but the equity is considered for some schools and not for others.</p>

<p>Your list should have included:
Flagship state schools
Private schools which only use FAFSA (Baylor, Whitworth, Gonzaga types, etc)
Any school with a low income program which limits home equity, for which you qualify- UVA, Stanford, Princeton and others cap equity or do not count it with certain incomes</p>

<p>I can understand wanting to keep the home in the family and not being able to afford higher payments, but those are life choices. Schools who included home equity would ahve cost us $20-25k more, if they were a straight profile school. I learned the hard way to pick schools which were the right financial aid fit for our fmaily, but my first D definitely had no choices other than the financial safety, as we did not know enough yet. D2 had 6 choices with similar net costs.</p>

<p>You may have applied to the wrong list of schools, if so, perhaps a gap year and reapplying would be smart??</p>

19

<p>sunnyflorida,
if the house is in Calif and has not been sold in 100 years they may well be minimal taxes [ read less than $500/ yr] because of Prop 13. Reverse mortgages are only approved for older persons- mnimum age is usually over 65and if the OP has younger siblings that is probably not the case for his parents.</p>

20

<p>Op, somemom's suggestion of a gap year may be good advice in your case. Sounds like you and your parents need to do more research to find a "financial fit" for your family.</p>