How Home Value Factors into EFC

Paying for College
1

<p>So, one of the schools I was accepted into gave me an EFC $10,000 higher than the one projected by FAFSA. According to the school, "The reason for the difference...is due to the value of your home in relation to the debt owed on it.” </p>

<p>Now, I really don't understand this home value stuff. (Btw, I'm stupid and ignorant when it comes to money matters, but unfortunately, since my dad's too busy working and my mom doesn't speak English well, I'm writing all the appeal letters). </p>

<p>We can't exactly sell our home to pay for my college education. So now, is the school expecting us to take out another mortgage on our home??? I don't get it! My family has been diligently paying back their debt each year. It seems like they're being punished for doing that? </p>

<p>We were fine with our FAFSA EFC, but with this new EFC the school is giving us, we don't think we can afford it. And I am refusing to let my family go through any financial difficulty to fund my education.</p>

2

<br>


<br>

<p>Schools that use the Profile include home equity in their finaid calculations. This means that the amount your family home is valued at OVER the amount you owe is considered available to your family. In other words, if you live in a $300,000 house and you only owe $100,000 on that house, you have approximately $200,000 in home equity. That equity can be used to take out additional loans (either home equity loans or second mortgages) to pay for any number of things...including college. Many families are in similar situations especially in housing markets where the values of housing have increased over the years. However, the reality is that your family DOES have the capability to take out some loans using their home equity. Families who do not own homes, or who do not have sufficient equity do not even have this option. We are in a similar situation. Are we excited about taking out another loan....No. But we are certainly in the position to do so...something that many families simply cannot do because they don't have that equity built up.</p>

3

<p>Phantom, think of it this way. Family A buys a house that costs X and Family B buys a house that costs Y which is much less than X, and the family banks the extra money for college for thier kids. Both families have identical finances otherwise. When it comes time for the kids to go to college, Family A who lives in a nicer house, nicer neighborhood has no money in the bank for college, whereas family B has a little nest egg to offset some of the college costs. Why should Family A be rewarded with financial aid when they have that money--it's just sitting in home equity, whereas Family B has it in an account? That is why Profile takes home equity into consideration most of the time. Those who are in your situation can get more favorable treatment from financial aid at schools that use FAFSA only as that methodology does NOT take home equity into consideration.</p>

<p>Of course Family C who blows all of the money, does not buy a house, does not bank it, makes out best of all in this story, as there are no assets to assess! LOL</p>

4

<p><em>sigh</em> jamimom...you're right, I guess, but my family falls within the $40,000-$60,000 bracket, so we're not well off. What happened with our home value was we bought it when it was cheaper, and then the value nearly doubled within 5 years. Ugh...I'll write an appeal letter anyway, but I think I'm gonna have to say goodbye to Tufts...</p>

5

<p>I think a fairer way to assess home equity is by looking at income in relation to home equity. We have a ton of home equity due to the high housing market on LI, NY, but we do not have the ability to pay the difference in cost that a new mortgage would cause. Not to mention closing costs. Our income has not kept pace with the staggering rise in our home equity. In fact, we would not be able to buy this house today with our earnings and would not have enough to put down to make the mortgage manageable. Finaid officers should have to take this into account.</p>

<p>My taxes are slated to rise to close to $11,000 next year, but no financial aid officer wants that information. My electric bill averages over $300 a month (no central air, just window ac's in two bedrooms), but no financial aid officer wants to know that either. Cost of living should be considered as well. We looked at moving to NC last year and found heating/cooling costs, insurance, property taxes, healthcare to be far less expensive than what we are paying here. Many will say it is all relative and maybe it is.</p>

<p>Get the water to douse the flame now, but obtaining a college education is one of the few things in life that you get to have even if you don't have money. I would love a Lexus, but I can't afford it on what I earn. I buy used cars. But if you don't have money, you may not be able to buy a Lexus, but you can have a name brand education at an extremely discounted price. Yes, you'll have loans and yes you'll have work study, but I would venture to guess that you'll have less loans than most middle class peers. </p>

<p>I wouldn't trade my life for the life that poor people endure and I am grateful for all that I have. But I have to wonder how much college would actually cost if it was priced the way other things are. Would there be less middle class "squeeze" ? </p>

<p>Things won't change anytime soon, I'm sure.</p>