<p>My daughter is a HS junior and considering several schools (Yale, Northwestern, Vanderbilt) that use the Profile in addition to FAFSA. We have a reasonably high home equity (about $250,000), but pretty small levels of savings/checking/mutual funds. Am I correct in understanding that colleges might actually view our home equity as a "savings account" that they'd expect us to use for our daughter's education...essentially requiring us to take out a second mortgage? Do they take into account that this has a higher cost (mortgage interest) than simply withdrawing money from savings or checking? Seems like it's quite one thing to ask people to take out some of their savings, and a very different matter to expect them to take out a loan on their house....and potentially leave them without a place to live if they should lose their job while the children are in school.</p>
<p>I have also read comments about moving home equity into "non-includable assets" to legally shelter them from financial aid calculators...but can't seem to find a list of such assets. Is there a list that someone can direct me to?</p>
<p>I believe I’ve seen the figure 5.6% bandied about as applied to reportable assets in general, but each institution sets its own criteria, since they’re playing with their own pot of money. Obviously, your first issue is going to be your AGI from your tax returns. Where that income level falls is going to weight your eligibility for aid more than savings/checking and to some degree, assets.</p>
<p>Just a word of initial advice – your D is applying to very competitive schools at in an all-time-historic selectivity environment, none of which are a financial safety for upper middle class families. I strongly advise you to include a state flagship and some programs where your daughter would be in the top of the admit range to serve as a FINANCIAL safety. With the home equity you have, you could get dramatically and generally unpredictable results from the CSS-driven privates (and quite a range of same), depending on your income and other variables. I would not want to see you cornered.</p>
<p>Best wishes.</p>
<p>PS - And no, most institutions do not take into account differentials such as interest rate on whatever asset/revenue options you have to finance a student’s education. They’re essentially not there to “help” your student go to school unless that student is dramatically socioeconomically challenged and will help their population meet diversity objectives. Otherwise, it’s pretty much just business ;)</p>
<p>kmcmom13: Thanks for the reply. Yes, we are working with our daughter to identify safety schools, both from an acceptance and financial aid perspective. It has been a challenge with her, as she initially told us that her only college choices were Cambridge and Oxford. When we first suggested that she consider some fallback schools, she said “OK, I’ll apply to Yale as a fallback.” lol Fortunately, she is now starting to understand the need to cast the net more broadly.</p>
<p>If I’m understanding your comments about assets correctly, it’s disappointing to hear that schools seem to treat $250,000 home equity essentially the same as a $250,000 pile of cash. Doesn’t take a rocket scientist to see that they’re pretty fundamentally different. Oh, well…</p>
<p>Anybody have further input on “non-includable assets”? I understand that basic things like our 401(k) and IRA aren’t included, and have seen reference to the term “non-includable assets” on pay sites. I’d hate to pay someone several hundred dollars just to have them tell me to max out my 401(k) contributions. Duh. Are there others that people aware of that are legally permissible, but less obvious?</p>
<p>The 5.6% is a FAFSA number-- basically, they will add 5.6% of the value of parental assets after asset allowance. The asset allowance varies by the marital status and age of older parent. Profile schools are under no obligation to stick to 5.6% and can do what they want. As far as sheltered assets… It’s a whole different ball of wax with Profile schools. When I filled out my Profile, I had to answer what I had in retirement and whether or not I was expecting a pension. I have no idea what they did with that info but you should realize that schools can ask school-specific questions. </p>
<p>You need to figure out what you can pay and what they are likely to estimate they will expect you to pay. For example, Yale has excellent need-based financial aid so if your daughter is fortunate to be accepted, you won’t do much better out there-- on NEED-based aid. However, if your daughter has the stats for Yale, she could probably get good MERIT aid at a lower-ranked school. </p>
<p>Have you run an online calculator for an estimate-- College Board has one that gives you FM and IM numbers. (You could do it now, it doesn’t ask a ton of questions but will give you a ballpark.) And what are you able to pay? Since I don’t think Cambridge or Oxford have financial aid and living expenses are high there, I am guessing you are able to pay a significant amount.</p>
<p>jrmills, have your D go and read the accepted/rejected student threads on the Yale, Northwestern and Vandy forums. This isn’t to dissuade her so much as to help her understand that these are tough tough schools to be admitted to. It’ll make her take seriously the process of finding matches and safeties that she’d be willing to attend. Have her figure out what she likes about her reaches, and then look for those characteristics elsewhere. </p>
<p>And yes, run a FAFSA forecaster and a private school aid forecaster. The Princeton financial aid estimator is a good one to use, since it will give you one of the most generous estimates of need-based aid. That’s an upper limit, not a guarantee of what you’d receive. </p>
<p>"Since I don’t think Cambridge or Oxford have financial aid and living expenses are high there, I am guessing you are able to pay a significant amount. "</p>
<p>Nope. We have told her that she would very likely need to foot most or all of the bill at those places (less about $25 -30K total that we have in a 529(b) plan for her), so I’d be surprised if she’d be able to come out of one of those places will less than a six-figure debt. It’s frustrating – she is a really smart kid academically, but doesn’t seem to grasp the financial realities. She’s adamant that the UK schools are her primary plan, with Yale, Northwestern and Vandy as “backups.”</p>
<p>My advice is also to figure out what you can pay and have a heart to heart discussion with your D about the financial end of picking a college/uni. Kids in general just don’t have a clue how the parental ability to pay is equally as important as the students ability to get accepted. Add the total lottery chances at some of the very selective colleges and you could have a very unhappy spring next year without a balanced list of college applications. She won’t come out with six figure debt as the maximum amount of loans she can take out is significantly less than that…you will come out with the debt as the cosigner.</p>
<p>You’ve got six months to practice the tough love and what happens if you have to say “no”! And you’ve got six months to read tons on CC about great colleges that practice decent financial aid both publics and FAFSA only…Hopefully your D will keep her “dream colleges” in persepctive and balance it with some reality choices. Best wishes!</p>
<p>Anybody have feedback on my other question - what do the pay sites mean when they talk about legally converting home equity into “non-includable assets”?</p>
<p>I’m reluctant to pay a bunch of money to someone only to have them tell me to take out a home equity loan and put the money into something like an IRA (which I can’t do). Are there less obvious “non-includable assets”?</p>
<p>Annuities, for one, are often mentioned … but those can be tricky/restrictive as in investment option.</p>
<p>PS - before moving money around, and certainly before paying for advice about mving money around, I’ll call these schools and ask them explicitly about the asset exclusion rules … most profile schools protect some assets and some home equity from their Profile calcualtions … your “problem” may not be as big as you think it is.</p>
<p>What is your income? Need based financial aid is primarily driven by INCOME…with an allocation from assets added in. Parent assets are assessed at 5.6% or so. There is an asset protection…whereby some amount of parent assets are not assessed at all in the FAFSA financial aid formula.The home equity in your primary residence is NOT mentioned on the FAFSA. </p>
<p>But you have a different issue. The schools you’ve listed use the CSS Profile in addition to the FAFSA for determining awarding of institutional need based aid. </p>
<p>Some schools cap the amount of home equity tapped in the formula. Some don’t use it at all. I believe Yale has a very low %age of home equity that they include as in your asset count. I don’t know about Vandy and NU. You need to check each school’s policies to find out how THAT SCHOOL uses home equity.</p>
<p>Re: moving to “non-includable assets”…I’m assuming you mean qualified retirement plans. I can’t think of another “non’includable asset”. There is a dollar limit on the amount you can move into retirement accounts per year. Plus your issue is home equity…not something you can “move”.</p>
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<p>I don’t think any student should use ANY of the above listed schools as a “backup”. They are all highly competitive for admissions. </p>
<p>If your daughter is really a competitive admit for these schools, there are others where she might garner some merit aid to help pay for the costs of attending.</p>
<p>Again, step one really should be running the calculators and deciding what you can pay. </p>
<p>Paying for the British schools on loans is not reasonable unless you are willing to take the loans. She is limited to about $5,500 each year. </p>
<p>Is she by any chance a Natl Merit Scholar? Students who are in the right range for the schools listed often are able to garner generous merit scholarships at other schools. What are her scores?</p>
<p>Hi Jrmills20… I can just tell you what happen to us… Son applied to a few CSS schools, Uof Michigan, Boston College, University of Richmond. Even though our EFC was 2800… AGI was 38,000(husband business tanked last year) and family of 6. We had 250,000 in equity in the house of which we used 125,000 to get us by this past year plus and restart the business. … Well, Michigan told us directly they gave us such crappy aid because as they said “you still have 125,000 on your line of credit you can draw from to pay the 48,000 a year bill.” Boston College did not use the equity in the house or at least to the extent Michigan did… and am awaiting Richmond. Boston College told me that it was NOT the ability to write the 50,000 check but if you can take a loan and be able to make payments on that loan. With the 100% need meet schools the only ones that I saw really making out our the families that don’t own homes but rent and don’t have any other assets… I can’t tell you how many people I have spoken too that were shocked at what they got. This whole process has been a reality check. Good luck to you.</p>
<p>^Just for the record, it sounds like UMich was using a business valuation as well because normally in that income range there would be more assistance forthcoming despite the equity. That said, as a public state, Michigan makes no claims to meet need of out of state students, and DOES meet need of in-state students. Hopefully,GoGiants, you’ll get better results at your meet-need schools!!!</p>
<p>OP - what state are you from? I stress that financial safeties include instate schools.</p>
<p>One last note - you’ve asked several times about non-included assets. What these planners typically tell people is to spend out their liquid assets or shelter same in retirement funds or annuities. Eg. if you need a new car, buy it. Use cash asseets to pay down mtge (I realize you have the opposite problem since you’re talking about css schools). Etc. etc. etc.
To my mind, it’s not typically great advice – far smarter financially to make good decisions about a budget and foster realistic expectations in your student about where they’ll be able to attend. I find that when parents are reluctant to present harsh realities to their children, the world steps in later and makes quite a show of it ;)</p>
<p>You mentioned having a 529 with assets. I am going to hazard a guess that between the 529 and the home equity, and if applicable, an income sufficient to fund same, that you might find yourself in a completely unfunded position. Please do run those calculations, and best wishes.</p>
<p>UMich does NOT meet full need for out of state students…they say so on their website very clearly. BC and U of Richmond meet full need. The disparity between the above poster’s aid from BC/UR and UMich is likely due to that fact.</p>
<p>Michigan 1st offer of FA was 8,000 more in grants… Their final offer took most of our grant money away… When I asked them what happen… There answer was the equity in our house… that we had a line of credit we could draw from to pay the bill.</p>
<p>When it comes to private schools using their own need calculators, nothing is necessarily “safe”. Some schools look at even assets in qualified 401K plans They can ask for any and all information including what cars you own. So it comes down to finding a school that excludes those assets. Some schools cap or exclude home equity. It’s really a crap shhootwhen you don’t know where your kid is going to end up applying.</p>
<p>My understanding of the answer to your question: retirement annuities. Not all annuities are created equal, so it would need to be an annuity that would behave like a retirement investment - that is, put the money out of reach for now. But if you tried to shift home equity to an annuity, you would have to come up with payments on your home loan. If you can do that while funding an annuity, then you might as well do it to just pay for college.</p>
<p>Another approach: some PROFILE colleges cap home equity as a multiplier of salary. Others omit home equity altogether (e.g. Princeton, Whitman). Also, you probably know that FAFSA-only colleges don’t count home equity. Sorry, just realizing that some of this has already been covered.</p>
<p>Thanks to all for the input. In response to a few of the questions/comments:</p>
<p>*I don’t consider Yale, Northwestern or Vandy “safety” schools - my daughter does. She has an OK shot to get into any or all, but is certainly not a lock. She has a 3.9 with several AP courses (with 4s, 5s and more in progress), a 32 ACT, several good community activities, some summer and online courses through Northwestern, and a tie-in to Vandy because I went there. I understand that there are long lists of people with stats like that (or better) who didn’t get in.</p>
<p>*We live in Minnesota. I have not been overly impressed by the state universities here (other than some specific programs she isn’t interested in), but fortunately have a good reciprocity deal with Wisconsin, so I hope to convince her to apply to UW-Madison, and maybe Milwaukee.</p>
<p>*AGI is around $160K. I understand that is the primary factor in determining aid, and don’t have any problem helping her out of current income to the extent we can, but am more unsure about the asset thing (esp. home equity). We really don’t have anything of value other than the home equity and retirement accounts (I drive a 22-year old Acura Legend). We have basically foregone newer, nicer cars, vacations, etc to pay off the house as much as we can. The reason I’m concerned about the home equity is that I have seen people I am very close to lose their homes – so I am terrified of a college telling me that our home equity is in essence a bank account to tap into. I understand an economist sees it that way, but after seeing others lose their homes, I don’t think I’d sleep at night if we had to go back into debt to finance her college. And it seems unfair that others could buy a new Lexus or Mercedes while we were driving old cars and paying off the house…only to be told that we have to tap into our home equity, but the other guy won’t be made to sell his Lexus.</p>