Home Equity Question

Paying for College
1

<p>Our only significant asset is our home equity and it has been difficult finding out how various colleges treat home equity. I have been able to figure out that some colleges (Harvard and Princeton) do not consider home equity (at least for the primary residence) and that some schools (Stanford, Williams, Amherst, and Dartmouth) limit home equity to 1.2 times income. But, I have not been able to find out exactly how home equity is treated at other top colleges and universities. Does anyone know of any lists or other way of easily finding out how other colleges treat home equity? </p>

<p>Thanks</p>

2

<p>Count – how have you been able to figure out how Harvard and Princeton treat it? By talking to other parents and working backwards from their aid numbers? Or if you call the FinAid office at these schools, will they tell you? I thought home equity wasn’t included at all – it also brings up the question of who determines your home’s market value especially given the shaky nature of the housing market. I bet the home equity calculation for aid is one of those things that aren’t set in stone but are subject to market conditions (supply and demand for finaid) but maybe I’m too much of a skeptic…I’ll follow this thread with interest.</p>

3

<p>These 25 schools are currently part of the 568 President’s Group, ([568</a> Group Member Institutions](<a href=“http://568group.org/membership/index.html]568”>http://568group.org/membership/index.html)) whose purpose is essentially to collaborate on EFC calculations under the auspices of a limited antitrust exemption.</p>

<p>Amherst College
Boston College
Brown University
Claremont McKenna College
College of the Holy Cross
Columbia University
Cornell University
Dartmouth College
Davidson College
Duke University
Emory University
Georgetown University
Haverford College
Massachusetts Institute of Technology
Northwestern University
Pomona College
Rice University
Swarthmore College
University of Chicago
University of Notre Dame
University of Pennsylvania
Vanderbilt University
Wellesley College
Wesleyan University
Williams College</p>

<p>The official policy of this group, so far as I can tell, is to cap home equity valuations at 2.4 times annual income. However, some members of this group seem to be doing more than this. MIT, for example, does not consider home equity at all for families with less than 100k annual income ([MIT</a> Facts 2010: Tuition and Financial Aid](<a href=“http://web.mit.edu/facts/tuition.html]MIT”>Undergraduate Tuition & Aid – MIT Facts)) and, as the OP has already pointed out, Amherst, Williams, and Dartmouth (at least) have capped this at 1.2 times income. (See <a href=“http://www.nytimes.com/2009/04/05/realestate/05mort.html[/url]”>http://www.nytimes.com/2009/04/05/realestate/05mort.html&lt;/a&gt; for a little more).</p>

<p>Yale once was a member of the 568 group but is no longer so. Their current home equity policy is now not clear.

</p>

<p>You have already mentioned Stanford’s, Harvard’s, and Princeton’s policies. Harvard’s can be found here:

</p>

<p>Stanford’s here:

</p>

<p>Perhaps others will contribute to this thread to form a more comprehensive list of policies and references.</p>

4

<p>Descartesz – hugely helpful info. Forgive me a basic question – when you say “The official policy of this group, so far as I can tell, is to cap home equity valuations at 2.4 times annual income” does that mean if income is $80,000/year, then $192,000 (2.4x$80K) is…what? Amount of hypothetical assets I could tap for tuition? Regardless of whether you have equity or not? Or only if you list having at least $192K in home equity?</p>

5

<p>My non-professional understanding is that, in your example, $192K represents the maximum home equity they will count in your asset base. (A fixed percentage of the total asset base will be part of your expected family contribution.) If in your example you have x amount of equity and x is less than $192K, they will total x into your total asset base. If x is greater than $192K,they will total $192K into your asset base.</p>

6

<p>Count…</p>

<p>Are you the student with a lot of equity in a home, but income is about $8k per year?</p>

<p>If you are that student…
I do think that schools are going to question how your family eats, pays property taxes, pays utilities, etc, on such a low income.</p>

7

<p>I asked an MIT financial aid officer about this and she was very cagey. She would not commit to MIT having any limit at all on home equity for higher-income families. Does anyone know from personal experience what their policy is?</p>

8

<p>The nice thing about Stanford is that they cap home equity and then consider that capped amount as part of a $250,000 of typical assets for families making under $100,000. The info on typical assets is found here and does include business assets: [FAQ</a> : Stanford University](<a href=“Financial Aid : Stanford University”>Financial Aid : Stanford University)</p>

<p>Another great school is Whitman College in Washington which does not consider home equity.
[Financial</a> Aid](<a href=“http://www.whitman.edu/content/catalog/financial-aid]Financial”>http://www.whitman.edu/content/catalog/financial-aid)</p>

<p>I thought I read Yale counts HE as part of assets but has a generous asset allowance, but can’t find a citation for that right now.</p>

9

<p>^^^</p>

<p>I think the OP’s home has more than $250k in equity.</p>

10

<p>Classof2015,
As Descartesz has mentioned, I got the information about Harvard and Stanford from their websites. I also found the information about Princeton from their website. The information re Williams, Amherst, and Dartmouth is from the financial aid calculators on their respective websites. For each of them I put in different home equity numbers and each time the amount included in the calculations was limited to exactly 1.2 times my annual income. So, I concluded that they must be limiting home equity to 1.2 times income. </p>

<p>Descartesz,
Thank you for all the helpful information. The New York Times article indicates that Columbia University has some kind of cap (perhaps 2.4 times income?) but that Sarah Lawrence College does not.</p>

<p>mom2collegekids,
No, I am not the individual you reference. I may not make a lot of money as a high school teacher, but I do make significantly more than $8,000. This is my second career and I purchased my home when I was working in a different profession that paid significantly more. Even though the housing market is generally depressed, I live in Orange County, CA, and my house is still worth substantially more than I owe on it.</p>

<p>Calreader,
With respect to MIT, if you follow the link provided by Descartesz, you will see the statement, “For families earning less than $100,000, MIT eliminated home equity in determining their need.” This indicates they still consider home equity (perhaps at 2.4 times income?) if income exceeds $100,000.</p>

<p>2blue,
Thank you for the information regarding Whitman College.</p>

<p>I would like point out that just because a college has a lower cap on home equity does not necessarily mean that it will compute a lower EFC for you. For example, our EFC using the Princeton (home equity not considered) Calculator is substantially more than both than Stanford and Williams, both of which have 1.2 times income caps on home equity.</p>

<p>Based on what I have found out and the contributions set forth above by others, it appears that the following is true:</p>

<p>Colleges that do not consider home equity:
Harvard
Priceton
Whitman College
MIT ( if income less than $100,000)</p>

<p>Colleges that cap home equity at 1.2 times income:
Amherst
Dartmouth
Stanford
Williams</p>

<p>Pursuant to the information provided by Descartesz, it also appears that the following colleges may limit home equity to 2.4 times income:
Boston College
Brown University
Claremont McKenna College
College of the Holy Cross
Columbia University
Cornell University
Davidson College
Duke University
Emory University
Georgetown University
Haverford College
MIT (for incomes above $100,000)
Northwestern University
Pomona College
Rice University
Swarthmore College
University of Chicago
University of Notre Dame
University of Pennsylvania
Vanderbilt University
Wellesley College
Wesleyan University</p>

<p>If anyone has any additional information on this issue, please post it on this thread.</p>

<p>Thank you.</p>

11

<p>Ahhh…good…you’re not that student. :)</p>

12

<p>Whitman College excludes home equity from their calculations:</p>

<p>[Whitman</a> Financial Aid](<a href=“http://www.whitman.edu/content/catalog/financial-aid]Whitman”>http://www.whitman.edu/content/catalog/financial-aid)</p>

13

<p>An earlier CC thread on the 568 Group.</p>

<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/416797-experience-financial-aid-568-schools.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/416797-experience-financial-aid-568-schools.html&lt;/a&gt;&lt;/p&gt;

<p>Anecdotal evidence suggests that the guidelines are not always adhered to.</p>

<p>This Forbes article states that the 568 group collectively reduced the multiplier to 1.2. Duke and U Penn are explicitly cited.</p>

<p><a href=“http://www.professionalplanningservices.com/articles/College_Aid_Planning.pdf[/url]”>http://www.professionalplanningservices.com/articles/College_Aid_Planning.pdf&lt;/a&gt;&lt;/p&gt;

<p>I have to say that, after searching a few of the member colleges websites for mention of the home equity cap I have not found any. It seems that if they are practicing this they are not publicizing it. I suspect that at least for some of these schools they try to practice this but find many cases in which they do not adhere to these guidelines (exception for “professional judgment” is allowed) and hence do not feel comfortable publishing it as policy.</p>

<p>I will also add that the news media are not trustworthy on this issue. I found a 2010 US News article citing Brown as a school that excludes home equity even though Brown’s own website says that they do include it.</p>

14

<p>In order to provide a complete discussion of this topic, it should also be remembered that non-Profile schools usually use only the federal methodology (FAFSA) to determine their EFC’s. This methodology excludes home equity. Thus if a school does not appear on this list:</p>

<p><a href=“https://profileonline.collegeboard.com/prf/PXRemotePartInstitutionServlet/PXRemotePartInstitutionServlet.srv[/url]”>https://profileonline.collegeboard.com/prf/PXRemotePartInstitutionServlet/PXRemotePartInstitutionServlet.srv&lt;/a&gt;&lt;/p&gt;

<p>it is likely it does not consider home equity in its fin aid decisions.</p>

15

<p>Re: home equity – so if understand this process correctly, I would fill in my home equity based on what I think my house is worth minus any outstanding mortgage debt. In your experience, do fin aid people then use their own estimate of home equity or do they take yours at face value? I could get 3 realtors giving me 3 different estimates of what my house would sell for, and I could go on Zillow and get a different number. And I would have another number if I wanted to sell my home within 30 days as opposed to waiting to get a higher price. Any thoughts/advice?</p>

16

<p>Co2015: Obviously no one value will be authoritative. I used Zillow myself when estimating the value of my home. Make sure the Zillow profile is correctly updated.</p>

<p>In my experience Zillow tends to underestimate market value, but you can compare its estimates to recent sales in your neighborhood to see if you need to make adjustments.</p>

17

<p>Classof2015:
Regarding how colleges determine the present value of a home, I recall seeing a posting on another thread that indicated that at least some colleges use a federal housing index to determine present value. I know that most, if not all, of the financial aid calculators I have used have asked for the date of purchase and purchase price, which colleges could use to determine present value by using an index. It seems more likely that the colleges would do this rather than doing a search for sales of comparable homes.</p>

<p>With respect to what home value you should report, I believe that you should report a value that has a reasonable basis. Whether it is based on comparable sales or an indexing should probably be based on which method is more favorable to you. As long as you have a good basis for the reported value and it is reasonable, I think it is likely to be accepted by the colleges. Just be aware that colleges will likely check your reported value by using some type of index and I do not think that you want to do anything to cause them to begin to question everything else you have reported to them on the financial aid forms.</p>

18

<p>Here’s a link to the Federal House Price Calculator…</p>

<p>[Federal</a> Housing Finance Agency - HPI Calculator](<a href=“http://www.fhfa.gov/Default.aspx?Page=86]Federal”>http://www.fhfa.gov/Default.aspx?Page=86) </p>

<p>It calcs a value very close to what zillow is currently assessing (at least in my area). Do you guys knock off say 4% or so for what the broker would charge therefore less money in your pocket?</p>

19

<p>I found the calculator odd. It did not go back far enough. We purchased our home the year we were married. The government must assume that the entire nation “trades up.” Too funny.</p>

20

<p>Yes - the calculator only goes back 20 years. My house is definitely at the low end of the Zillow range. Hope that is not going to be an issue.</p>