This discussion was created from comments split from: How on earth do people pay for college?.
Hi, my D got an ED admission from top20 university.
Last week we received a Financial award letter and it took away our joy of celerbration. Total cost $81K and our family contribution is $76K. Yes, you heard it right.
This is out financial status.
Living in NJ.
Household income $160K
Home purchased $810K with 450K down payment.
Current value at Zillow $ 960K (not true, we purchased this house with poor conditions they require repairs and improvement.s But we never done any improvements, so the market value would be $ 830K I think)
529 for my D and 10th grade son $40K
Mutual fund $50K
We ran NPC on 10/30/2019 and they gave us $48K family contribution ( I input current home value at $820K as I mentioned above)
Now we are just shocked…
Have you seen anyone experienced case like us?? I am bringing $ 8K /mon after tax from my work. $76K/ year?? $6K per month??? How on earth can anyone do this?Is this something that we can appeal and get it adjusted?
@saniel Just my opinion: I don’t think that you can afford this. I do not think that it is worth it. Rutgers is a very good university and since you are in-state would be a lot less expensive. Spend the big bucks when you are looking at a master’s degree program.
Whether your comment is off-thread or not is of course an entirely different question. Your comment does seem to address the initial question of “how do people pay for college”.
Well, you should really start your own thread instead of hijacking the OP’s. Do you have a second home? Rental properties? Is the $160 total gross or AGI? What’s the university? What is the form of the $5k in financial aid – a loan or a grant?
If you input all the numbers correctly in the NPC and the CSS, then, yes, you should definitely appeal. All colleges have a formal appeals process. Be very, very polite. Ask why the actual award given differs from the NPC.
You should recheck your numbers, do you have a second property? Remarriage/divorce/own business/IRA rollover? Overseas financial holdings/property?
Which school?
Rerun the NPC. What was your FAFSA EFC BTW?
Everyone should make sure the numbers are correct and that the college FA office did not make a mistake, you did not make a mistake. If you don’t understand how they fit the numbers- though precise formulas often not shared, you are not getting the full picture. So a sit down and go over the numbers with the fin aid Director is in order here. Have the NPC numbers right in front of you too and have the FA director explain the difference.
You ask how people are supposed to be able to pay for college. You and your student are expected to pay with past, present and future earnings. Like the 3 Ghosts of Christmas visiting Ebenezer Scrooge, so do the financial aid formulas often work.
Both you and your student should have been saving. When I was a kid, lower middle income family as we were, I got savings bonds for all sorts of things and when the piggy bank got full, it was emptied into a bank account. A certain. % of gift money, babysitting and chore money, award money went into the college fund. My parents also put a bit away too.
When my kids were born, my niece and nephew, we gave money as well as a gift. We knew college was something we wanted to afford for them in the future.
Then you have present earnings. Your student may have to work. Part time during the school year, full time summers. Most college students work fir personal ventures, help out on college costs, and because they have to do so to meet the college bills. Parents have to take austerity measures those years. Vacations might be to visit college kid. Not the time for major spending. It’s like buying a Mercedes or whatever car each year and driving it off a cliff.
Then there are the student and parent loans. You borrow if you have to do do. If you’ve saved enough, can pay enough out current income, you borrow less or none. Kid can borrow $27k over 4 years, maybe you parents borrow $50-60k., more. $320k of college cost, you save a third, pay a third, borrow a third. You shuffle those numbers the way you can work them if a private school is what you think is a priority.
But most students commute to college, work full or part time. Going to sleep away college is a luxury. State schools cost far less, and there are sometimes merit awards in the mix.
That’s how people afford college, if they can.
You have $550,000 in assets at least (home equity and 529 accounts, and mutual funds). Right there you have $30,800 toward your family contribution. Your income of $160,000 would add about $40,000 additional (estimate 1/4 to 1/3 of your income…so $40,000 is on the low side). That would be over $70,000…so really, this financial aid award doesn’t sound that “off” to me.
You earn $160,000 a year and bring home $8000 a month? You are paying over $5000 a month in taxes? Even in NJ, that seems high to me.
A few questions…even though I think this award is pretty close given what you posted here.
- You mention home equity and mutual fund and a 529. Do you have any other savings or checking account monies?
- In 2018, did you do a rollover of a tax deferred retirement account?
- Are either parents self employed?
- Do you know what this college does in terms of home equity? Some schools tap all of it, some a %age of your income...the formulas vary. What does this college do?
- Are you absolutely sure your numbers are accurate?
- Does your income of $160,000 include your contributions to tax deferred retirement accounts made in 2018? Those contributions are added back in as income. With two parents, this could easily add $40,000 to your “income”.
- Are you sure you put parent info in the parent section and not the student section?
- Does this college meet full need for all accepted students? Was your financial aid application complete by the ED priority deadline date?
If it were me, I would print out the FAFSA and Profile (assuming this is a Profile school) and check every single entry…just to be sure it’s accurate.
I think the large amount of home equity is probably what is largely driving this EFC discrepancy. Some colleges that require the CSS are going to look at ‘locked up’ assets (such as a huge home equity) as available to tap to pay for college.
I would also question whether the income is gross or net. That too can make a difference in calculated EFC through a college’s NPC.
There is a huge disconnect between saying you make $160k/yr and that you only bring home $8k a month. Colleges add back in your 401k contributions, IRA contributions, etc. Retirement contributions are a choice, not a bill.
The NPC offered by colleges is only as good (or accurate) as the information provided to it.
Yes you should check to make sure there aren’t any errors in the information the college is using to determine the family contribution, but you should also do a check on if you understood how to fill the NPC out correctly in October (and if you understood how family contributions would be determined).
I would highly recommend people contact the schools their children are considering applying to ED and ask for a financial pre-read if you are not prepared to pay full price upon acceptance. We found schools were very helpful when asked for this, they want to make sure everyone is one the same page when it comes to ED applicants - getting accepted and turning it down because it wasn’t affordable isn’t what anyone is hoping the result will be.
While I agree with this advice, it should be understood that some schools as a matter of policy will not provide a financial pre-read. Just don’t expect every school to respond the same way when this is asked for.
@saniel wrote: “Home purchased $810K with 450K down payment.”
If you made that purchase recently, the college may have felt the $450K cash expenditure was money that should have gone to your children’s education and that making such an unusually high down payment was an attempt to shield liquid assets from consideration for educational expenses.
@tdy123 the colleges don’t care when you make a home purchase…but for Profile Schools that use primary home equity, this $450,000 at least in equity is at least partially going to be assessed as part of the family contribution. There is no way around that this family has $450,000 in equity at least as that is what they put down on the house when they bought it.
You do bring up a good point. This is a very large down payment…more than 50%. The family knew that a kid was going to college. Wondering why some money wasn’t put aside for college costs.
Interesting. I heard the large down payment (and/or paying off mortgages) as a tool to shield assets from being considered eligible for use for funding college from schools that do not count home equity in a panel discussion by financial advisors on maximizing eligibility for Fin Aid. Possible downside was described as colleges questioning the timing of the purchases.
The $450k ‘down payment’ could have been the equity from the sale of another home, basically a roll over. I think it is pretty common to use the proceeds of one home sale for the purchase of a new home.
If the OP put down the value of her home as $750, I don’t think the schools are going to go on Zillow and put down a different value. Some schools get 30k applications and they just don’t have the time to google every entry on the CSS.
It doesn’t really matter WHAT the school considers as they have the right to consider just about anything. Once the OP determines that the school has used the correct numbers and has awarded the correct amount of aid, and the OP feels it is not going to work, it is time to move on. This school is too expensive.
It sounds like this is a college that uses home equity when they calculate the EFC. I think this school is too expensive for your family.
Have you checked your daughter’s other choices to make sure she’ll have affordable options in April? You don’t need anymore nasty surprises.