<p>Because I live abroad, I do not currently own a home. We have, however, set aside funds to purchase a home in the future, when we return to the U.S.. Are we likely to be penalized by the college financial aid process for not having part of our net worth invested in real estate? Is there a scenario where it might be wise to buy a home (effectively fencing off part of our net worth) so that you are more likely to be considered for financial aid? How do colleges view your primary home in calculating aid grants? Many thanks.</p>
<p>If you have money in the bank the day you file your financial aid forms…it doesn’t matter WHAT you “plan” to use it for in the future…it is listed as an asset on the FAFSA and Profile forms. Parents DO have an asset protection that increases with their ages so SOME of that assets are protected from use for the FAFSA calculation. For Profile schools…all bets are off as they are not required to use the FAFSA formula!</p>
<p>The reality is that your family contribution is largely based on your parents’ incomes. You might be fretting over this for nothing…if your parents have a substantial income, you would not receive need based aid regardless of your asset amounts.</p>
<p>Re: your primary residence…it is not included anywhere on the FAFSA form. HOWEVER, the equity in your primary residence IS included on the Profile…and schools use varying %ages of the home equity ranging from none to all in their calculations…depends on the school.</p>
<p>I would strongly suggest that you use an online financial aid calculator…use the Institutional methodology and run the numbers BOTH ways…with the money in home equity…and with the money in savings. You may find there is no or little difference whether you have the money invested in a home or have the money in a bank account.</p>
<p>Then run the calculators using the federal methodology. This will give you an indication of whether you would be eligible for federally funded grants. If your family contribution is more than $5400…you would NOT be eligible for any federally funded grants but you would be eligible for a loan.</p>
<p>Short answer…do these calculators and get a GUESSTIMATE of what the family contribution will be with the money in the bank…or with the money in a house purchase.</p>
<p>If you live abroad and buy a home in the US now, it would not be considered your primary residence. The net value of the US home would be reported as an asset on FAFSA and Profile, so it really doesn’t have any net impact on your EFC calculation.</p>
<p>vballmom makes an excellent point. If the home is NOT your primary residence, the equity in that home is reported on the FAFSA too!! Good catch!!</p>
<p>Do the funds exceed “asset protection”?</p>
<p>I don’t know if CSS has any asset protection in its formulas…nor do I know if a CSS school could choose to ignore any asset protection.</p>
<p>I don’t know if you could loan that money to someone, and then have them pay you back when you go to buy your home.</p>
<p>CSS Profile schools do not use the same formulas as the FAFSA…and in fact any income or asset protection would vary by school…which is one reason why need based awards (even at schools that meet full need) vary from one another.</p>
<p>A loan is still an asset.</p>
<p>CSS/Profile is run by collegeboard which also sells PowerFAIDS software to colleges and universities to generate fin aid packages. The software can be configured to create custom formulas. It’s quite sophisticated. It’s very hard to get a CSS school to divulge the details of their formula. I’ve tried without success.</p>
<p>Many thanks for your input. I’m just getting started in this process, and clearly have a lot to learn. I will run the calculators and see what pops up. Regards,</p>
<p>You can try and explain your special circumstances. You also need to look at some what-if scenarios.</p>
<p>You have the money anyway and it is going to hit your aid calculations (that is what I assume, but you need to run the calculators).</p>
<p>The calculators may not really care it is in a bank money market account or invested in a non primary residence. It is a asset. Given that housing prices are very low, may be it makes sense to buy the house now and rent it out. You will save money if the prices go up, get a better return than the bank etc. I am not suggesting you do this, however realize that there is an opportunity cost for the money, and you need to take into account other factors in making a decision on buying now or buying later.</p>