Home equity vs. Non-includable assets?

Paying for College
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<p>jrmills 20, </p>

<p>*Sorry for the rant – don’t mean to make it sound like I’m taking it out on all of you. I just never thought a school like Vandy or Northwestern would be so out of reach for someone who has a decent income but isn’t rich, and really is willing and able to cover $20-30K per year…an amount I thought was awfully significant until today. Sigh… *</p>

<p>Okay, let me apologize in advance for my OWN rant, in a new thread entitled “EFC $47K”. Like you, I thought we did well to scrounge up $22K per year college money, not realizing NU would be such a stretch! (I mean, for a family whose AGI is $150 but is not, in fact, “rich.”) I feel as you–that home equity should not be perceived as some sort of piggy bank, particularly in the current climate. As someone else posted, this is all quite an eye-opener.</p>

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<p>Some schools limit or omit home equity when considering financial aid. Because of my family’s situation I have spent some time researching this issue. Below is a copy of a post I made on another thread last November.</p>

<p>I emailed some colleges regarding the home equity issue and received responses from most of them. All of those that responded provided at least some information regarding their treatment of home equity. The colleges I received responses from were: Yale, Bowdoin, Middlebury, Chapman, Mount Holyoke, Colby, Bates, Barnard, Vassar, and Grinnell. I have included the information they provided on the following updated list. The colleges are listed along with the source of the information. One of the policies of the 568 Presidential Group is to limit home equity to 1.2 times income and I have confirmed this by using financial calculators at a few of the member schools. </p>

<p>Colleges that do not consider home equity:</p>

<p>Chapman University (email)
Grinnell College (email)
Harvard (website)
MIT (if income less than $100,000) (website)
Princeton (website)
Whitman College (website)</p>

<p>Colleges that cap home equity at 1.2 times income:</p>

<p>Amherst (website calculator and 568 group member)
Cornell (website calculator and 568 group member )
Dartmouth (website calculator and 568 group member )
Stanford (website)
Williams (website calculator and 568 group member)
Yale (email)</p>

<p>Boston College (568 group member)
Brown University (568 group member)
Claremont McKenna College (568 group member)
College of the Holy Cross (568 group member)
Columbia University (568 group member)
Davidson College (568 group member)
Duke University (568 group member)
Emory University (568 group member)
Georgetown University (568 group member)
Haverford College (568 group member)
Massachusetts Institute of Technology (568 group member)
Northwestern University (568 group member)
Pomona College (568 group member)
Rice University (568 group member)
Swarthmore College (568 group member)
University of Chicago (568 group member)
University of Notre Dame (568 group member)
University of Pennsylvania (568 group member)
Vanderbilt University (568 group member)
Wellesley College (568 group member)
Wesleyan University (568 group member)</p>

<p>Colleges that cap home equity at 2 times income:</p>

<p>Bates (email)
Colby (email- as long as home has been owned for a number of years)
Middlebury (email)
USC (conversation memama had with a financial representative)
Vassar (email- on a case by case basis, where it is the only asset and
is a form of retirement) </p>

<p>Colleges that have no cap on home equity:</p>

<p>Barnard (email- unless there is some unusual situation such as a prolonged unemployment
period that is still in affect or if one parent is very ill)
Bowdoin (email- but, may limit if owned more than 10 years and in a high real estate area)
Mount Holyoke (email- but, may limit consideration based on location and date of purchase)</p>

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<p>nicekidsmom: I think there is a “donut hole” (as some people have talked about) when it comes to affording the full price for private colleges, and we can’t always assume that people who seem to have the means to afford the full sticker price for college really always can. There are those who are “too rich” to qualify for financial help, but in reality really not rich enough to afford to be full pays either: Those people who have only recently started making a good income, for instance, or didn’t have the means to save earlier on or who were paying off student loans themselves, struggling with medical issues, a special needs child, layoffs or the like.</p>

<p>Great post, but you can get rid of “I think” - there is a donut hole. It’s frustrating to know that you really aren’t wealthy enough to pay the whole bill at a private school, and even more frustrating to learn that the schools don’t consider you needy enough to help. And it just adds to the frustration when you come to a forum like this looking for advice, and some of the people who received significant aid call you “rich,” and accuse you of living an “extravagant lifestyle” and/or not planning adequately. (Note - not everybody is judgmental like that, and I appreciate the useful comments that several people provided).</p>

<p>The other frustration for me is this – my whole adult life, I have paid my fair share in taxes, contributions to the local food shelter and other charities, pro bono legal work and the like. I have never taken handouts from the government, charities or anyone else because I have never needed them until now. And I sort of thought the payback for those years of doing my part would be that if/when I ever did need help, I’d get my fair share. And yet now that I am looking for aid for the first time in my adult life (I took student loans when I was younger, and paid them back), I am told I get nothing because I have no “need,” even though I know that isn’t true. So now I’ll probably have to tell my daughter that she may have to go to a state school while lower income kids can afford the privates…and I’ll still keep paying taxes that fund social programs that benefit families whose kids might go to private schools, still keep giving food to shelters that might be distributed to families whose kids go to private schools, and provide pro bono legal work to families whose kids may end up going to private schools.</p>

<p>The bottom-line reality is that not every system is fair, and the people who bear the brunt of it in this system aren’t the people at the top or the bottom (who either can afford full tuition, or get a free - or significantly cheaper - ride); it’s the people in the middle, who can afford most everything they need in life, but not a full $50K per year tuition bill.</p>

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<p>Can you define the statement “cap home equity”? Does this mean the consider home equity to be fair game up to 1.2 times income, or they EXCLUDE home equity from consideration up to 1.2 times income?</p>

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<p>Sometimes I think Suze Orman doesn’t think anyone should go to college.</p>

<p>That’s a helpful list CountMonteCristo.</p>

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<p>Thanks for reposting that list, Count, I was looking for it earlier.</p>

<p>“cap home equity” means that the most your equity will add to the total of your reportable assets would be actual equity if less than some percent of income, or some percent of income.</p>

<p>If you have $200K in equity in your home and your income is $100K, the value of your equity would be considered $120K at a school that caps home equity at 1.2 x income.</p>

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<p>

I’m sorry you are feeling shell-shocked right now, but the simple fact is that you make THREE TIMES the U.S. median income. So when you keep talking about being “in the middle”, you’re simply not. My valedictorian daughter is at a state school because we couldn’t afford to take out all the loans that were offered as aid (and we made less than the U.S. median income last year and the year before). It sucks. But to most Americans an income of $160k a year is indeed rich.</p>

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<p>Count, thank you for the list. I think you are missing the “category header” for “Boston through Wesleyan”? Or are they part of the 1.2 cap list that maybe ended with Yale?</p>

<p>Thanks again.</p>

<p>– Ranter</p>

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<p>Count, that’s a great list, thanks.</p>

<p>Paying for college is hard for almost everyone, and can get pretty emotional. The sticker price is a shock to a lot of people who went to college when tuition was much lower. Many are dealing with 2 sets of blended step-families, or job losses, or the effects of the last couple of market crashes, all of which makes it harder. </p>

<p>Still, I have a problem seeing how the donut-hole families are worse off than the 0 EFC full ride need based families.</p>

<p>It seems the problem that the donut-hole families have is that they have something to lose, but not necessarily enough to spare. So if a family making $50k got a full ride, and a family making $150K had to pay $50k a year, who’s better off? Well, the donut family could plan ahead for this, and scale down their lifestyle to live on what the $50K family lives on. Then they could pay for college, and when college is over scale back up. That would really stink and I don’t know anyone who would do it, but would it really be worse than making $50K and not having the option?</p>

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<p>I suspect I’m one of the people who came off judgemental and I apologize, as I never suspected that you live an extravagant lifestyle. But, what MomofJandL says much better than myself, those making less than 70K don’t have a choice. I suspect, if you asked most people whether them would prefer making 50K and send their kids to private school “free” or make 160K and be full pay to private school, they would choose the latter. </p>

<p>Many think the publics are a “bargain.” But if I didn’t pay over the years the percentage of my taxes earmarked for the university system, I would have plenty of money to send my kids to private schools. I’m not sure it’s worth it.</p>

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<p>MomofJandL, I disagree that the $150K family paying $50K is better off than the $50K family on the free ride. </p>

<p>I got an academic free ride when I went to school. For the time period, my parents combined were probably about the equivalent of $40-50K per year today. My parents contributed nothing financially, and they were grateful. They didn’t have to change their lifestyle one iota, they were able to continue saving for retirement, go on vacations, continue charitable contributions. The same applies to the 50K family today getting a free ride. </p>

<p>The $150K family being told they have to pay $50K are in a much worse position. A family with a small mortgage/large equity who sells their house (probably getting a fraction of what they could have gotten a few years ago) <em>still</em> has to live somewhere. In our case, the rent on even a crappy apartment would be more than our house payments. All that comes of that move is to liquidate your assets and get higher monthly expenses at the same time. The other option is to take massive loans, eliminate retirement contributions, and generally ruin your future. If you are expected to pay $100K for your child’s college over and above what you expected and saved for, what terms are you looking at for THAT loan? Plus loans are 8% for up to TWENTY-FIVE YEARS. Are you kidding? That would be almost $750 per month for 25 years! The family making $50K and getting the free ride has no obligations after graduation. </p>

<p>“Downsizing” for college is a myth. Sure, you stop all major purchases, quit contributing to 401K, take your lunch and all the usual things, but the idea that someone with $200K in equity in their house is going to be making a good decision by completely liquidating all equity or taking out massive loans is just silly. You still have to live somewhere and if you have been smart your house payments are less than an apartment anyway, if you have any at all. Taking out a 25 year loan for a child’s education when you are in your 50’s is financial suicide. </p>

<p>There is no solution for people in the “donut hole.” On the other hand, the family making $50K just keeps living as before, and in fact are probably better off when their child goes off to college on the free ride, because they aren’t feeding them. At the end of four years when the child graduates, they have no additional debt, and no additional obligations.</p>

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<p>“Count, thank you for the list. I think you are missing the “category header” for “Boston through Wesleyan”? Or are they part of the 1.2 cap list that maybe ended with Yale?”</p>

<p>Sorry for the confusion. Boston College through Wesleyan are part of the 1.2 cap list. I just listed them separately from the other 1.2 cap schools because my only basis for listing them as 1.2 cap schools is the fact that they are 568 group members. For the other schools I have independent confirmation, usually the school’s website or a response to my email. So, I just decided to list them separately.</p>

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<p>Where does the example of the family making $50K and getting a free ride come from? Our family made $50K last year (including unemployment benefits); we’ll be making $35K this year; and we’ll be paying at least $9,000 for each of our two children in college for the 2011-12 school year. We own our home and have savings and retirement accounts (but not huge amounts). I’m not complaining; I’m grateful that our daughters get financial aid and I’m grateful that we own a home. But we aren’t making out like bandits. I know that it’s hard for people who are in the doughnut hole, but it will be hard for us, too.</p>

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<p>jrmills20-</p>

<p>It seems that you have now realized that income, not assets, will be your greatest hurdle in obtaining financial aid. But, since your daughter is interested in Yale, I thought I would mention that in addition to limiting home income to 1.2 times income, Yale (at least as of November 2010) also excludes the first $200,000 of parental assets from financial aid consideration. </p>

<p>The most difficult schools to get into (Yale, Harvard, Princeton, and Stanford) appear to have the best financial aid. I don’t think that Yale has a financial aid calculator, but the last time I checked the other three do. Have you used any of them? If not, I suggest that you do and you may be surprised by the result. </p>

<p>Contrary to the advice given to you by others, I do not think that you should try to talk your daughter into applying to additional colleges. Encourage her to apply only to those schools mentioned in your first post. She could get lucky, but in all probability she will be denied at all of them and financial aid will not be a problem for at least another two years, while your daughter lives at home and attends the local community college.</p>

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<p>mopinionated - *I’m sorry you are feeling shell-shocked right now, but the simple fact is that you make THREE TIMES the U.S. median income. So when you keep talking about being “in the middle”, you’re simply not. *</p>

<p>So we’re down to debates over semantics? I never said we are at the median, I said we are in the middle. The latter has many meanings, including being at some indeterminate point between two extremes. And if you read my note in context, you would see that I was referring to the middle as being between those who get at least some financial aid from private schools, and those who can afford to pay the full cost. Not at the median or 50% percentile, but yes, we are in the middle.</p>

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<p>Count - *Contrary to the advice given to you by others, I do not think that you should try to talk your daughter into applying to additional colleges. Encourage her to apply only to those schools mentioned in your first post. She could get lucky, but in all probability she will be denied at all of them and financial aid will not be a problem for at least another two years, while your daughter lives at home and attends the local community college. *</p>

<p>Good to see that you have a nice sense of humor about other people’s problems.</p>

<p>Maybe the next time an indigent person asks me for pro bono legal advice, I should suggest they go hire a Wall Street lawyer. You’d probably think that’s funny.</p>

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<p>What problem are you talking about? That you make too much money? Yes, I do have a sense of humor. Sorry that you do not.
Its ridicules to say that Yale is your daughter’s back up school. Your daughter has unrealistic expectations and should be looking at some colleges where her chances of admission are better. Sorry that you could not understand the intent of my comment.</p>

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<p>“Its ridicules to say that Yale is your daughter’s back up school. Your daughter has unrealistic expectations and should be looking at some colleges where her chances of admission are better. Sorry that you could not understand the intent of my comment.”</p>

<p>If you were a better reader, you would already realize that I know it is ridiculous for my daughter to consider Yale a backup school, and that I am trying to help her get more realistic expectations. So if the intent of your comment was to inform me of that, you’re a bit late…</p>

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<p>“What problem are you talking about? That you make too much money?”</p>

<p>You’re serious about this? You still haven’t figured out the problem through all these posts? No, it isn’t that I make too much money. It’s that the financial calculators do a very poor job of estimating financial need for those of us caught in what others have described as the “donut hole.”</p>

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<p>jrmills and co8000, only you can determine how much you can pay for college, not random posters on a message board or a financial aid office at a college. I and many others, use a home equity line of credit to help pay college expenses. The equity line is in addition to out-of-pocket and Stafford loans. I understand that you don’t want to tap into that equity as it’s a hard pill for me to swallow. But, I think it’s workable and I think a reasonable sacrifice on my part. I’m fortunate to have choices. Only you can decide what seems reasonable.</p>