<p>Can some of you that have gone through the process tell me how much of ones home equity is considered an asset for those schools that use the IM or CSS Profile?</p>
<p>From what I can tell it is up to the indivdual schools. Some cap the equity at so many times annual income. Once a number is determined by a school is it considered an asset just like if you had the money in the bank or mutual funds?</p>
<p>I emailed one school last week and they never responded so it seems they don't want to be transparent about much of these FA determination methods.</p>
<p>Each Profile school handles it a bit differently. Best to contact the finaid department of schools you're applying to and see if you can get a straight answer. Sometimes the finaid staff isn't sure, though. I got email replies from about half of the colleges I queried; some were vague.</p>
<p>After an asset protection allowance (actually it's a couple different allowances: an Emergency Reserve Allowance of about 20K to 30K, and an Education Savings Allowance that's typically about 20K), assets are assessed at between 3% and 5%. </p>
<p>Let's take for example a family whose primary residence is valued at $500K, with a $200K mortgage. Assume they have 10K in savings/checking/stocks, and combined Asset Protection Allowances of 45K. Parents AGI is 60K. Here's roughly how different colleges might handle equity (simplified a bit for clarity).</p>
<ol>
<li><p>Some colleges consider the full equity (value less mortgage) as an asset in the formula. In this example, there's 300K equity, 265K over the allowance. The parental contribution to the EFC from assets will be about 12K (about 4% of the assets over the allowance).</p></li>
<li><p>Some colleges cap the home value at some multiple (typically 2.4 X AGI), then subtract mortgage debt. So in this example, 60K X 2.4 = 144K capped home value. 144K value less 200K mortgage leaves no equity to assess. Since this families assets are less than the allowances, they would have no contribution to EFC from parental assets when applying to this hypothetical school.</p></li>
<li><p>Many colleges are now capping equity at some multiple of AGI (as opposed to capping home value, in example #2 above). 1.2X or 1.5X are typical. So with a school that caps equity at 1.2X AGI, they would multiply 60K X 1.2 = $72K max equity. If actual equity was less, they would use that number. So this family would have reportable assets that exceed their allowance by $37K $82K assets less 45K allowance). Their parental contribution to EFC from assets would be about 1K (roughly 3% of the assets over the allowance).</p></li>
<li><p>Some Profile schools have stopped considering home equity altogether (Harvard, MIT). </p></li>
</ol>
<p>Obviously, if you might be eligible for need-based aid, and if you have significant home equity, you'll fare better with schools that cap home value or home equity. Still, for most families, the most significant contribution to EFC comes from parents' income, not parents' assets.</p>