I went on to some of the Ivies’ websites and checked out their financial aid policies. Most of them have financial aid calculators and a lot of the stuff I find very confusing.
My family income is around 75k~ a year which is right in the middle. I heard Ivies give a good amount of financial aid and when I plugged in my income, it said that I only needed to pay around 10k a year for a lot of the Ivy schools.
However, a friend told me that Ivies will be significantly less generous if you own a home. My family owns 2 homes but they are both not paid off. We rent a third house that is not ours and basically only keep up with the mortgage our 2 houses by renting them out to others.
Does anyone know if this is true or not? I don’t know exactly the worth of our houses, probably not a lot as one of the houses is near Detroit lol so the forms are difficult to fill out.
Thanks
House value minus mortgage for each house. Add that to net worth. Remember not just income is important but so is your parents net worth. For example if you have $500k net worth after subtracting mortgages and $50k annual income you may be surprised what you could be on the hook for. Schools don’t care that you’re not living there…still an asset.
So is net worth what ultimately determines the amount of financial aid?
Not just net worth. Income, family size, siblings in college, etc, too
I’m checking for clarity. Are you saying that your primary residence is a place you rent…and that you own two rental properties which you rent to others?
If so…neither of those rental properties is a primary residence. The equity in both will be counted as an asset, and the rents received will be counted as income (your family should be doing a schedule on their taxes for these properties). In addition, some of the deductions allowed by the IRS for these properties might not be allowed by the financial,aid departments at the colleges…and will be added back in as income.
Does the $75,000 in income include the rents you are receiving?
And lastly…but IMPORTANT…the Net Price Calculators will NOT be accurate for you because your family owns rental properties. So don’t completely believe those figures.
@thumper1 Yes you are correct. I think the 75,000 counts the rents I am receiving.
Are you the parent or the student? In one post you talk all it “my family owns two houses”, and in the post above, you talk about you receiving rent.
If you are the parent, surely you know if that $75,000 includes the rent.
If you are the student, you need to find out the correct figures. There are some fafsa EFC calculators where you could plug in the correct number, including the info about the two rental properties, and get an estimate of your FAFSA EFC.
But keep in mind, the Profile schools could very well view these rental properties differently than the FAFSA.
They usually will not count the primary residence that you own and live in. But extra properties and rental properties complicate the NPC. Equity in properties can mean you have some means to borrow to help with your cost. Income from rentals is income.
since neither of these homes are your family’s primary residence, the net price calculators will not be accurate in your situation. The homes will be considered an asset and the rents collected, even though they are being used to pay the mortgages on these homes are still considered income.
The school will base your financial aid on income from work (if your parents work), a percentage of equity on each of the homes, and the rents collected.
Since I am the child, I am not exactly sure if my father calculated this in his salary or not.
So he basically earns 75k a year in salary, and from each house we collect about 3000$ (We won’t really earn much money as the rent is also very expensive), so does that mean our income is 81k a year when we fill out the forms for financial aid?
3,000 per year rent? That is $250 rent per month for two houses, sounds odd.
If your parent’s income will be similar to last year, you can use the tax return to run the fafsa4caster. I think it will tell you which box goes in the calculator.
@BrownParent Sorry 3000$ per month each for both houses so a total of 6000$ per month. We basically break even on both of the houses.
Ok thanks, I will check out the fafsa4caster.
So basically, your family has $75k in income from salary (work) and $72k in rental income in addition to the equity in 2 rental homes.
with $152k in income and equity in 2 homes it is really going to be a stretch for you to get financial aid even at the ivies as many will consider you to be full pay. It will not matter that most of the rent you pay is going back to pay the mortgage on these 2 homes.
And then you live in a house that costs $6k per month in rent?
@annoyingdad do you have the link to the fafsa formula so this student can plug,in the numbers?
@rdeng2614 you will need to get your parent tax return, or have your parents sit with you to do this. It is essential that you put in accurate numbers.
This will give you an estimated FAFSA EFC only. The schools you are talking about in your subject also use the CSS Profile. Each school has its own formula for computing aid using the Profile information.
Colleges do not give need based aid so that families can continue to own properties other than their primary residence. Is that what you are hoping will happen?
The formula for calculating financial aid places a much higher value on income than on assets like a home. I don’t remember the exact percentiles but a fairly small percentage of your families net worth is considered as part of your Expected Family Contribution. If it’s your assets the percentage is much higher. Also, some fixed amount of your parent’s assets are excluded from consideration altogether, the amount will depend on the age of the oldest parent.
At $75K/year unless your family owns a mansion(s) outright, the Ivy League schools are going to be lower in cost than probably even your State College. Probably a good idea to have a very frank discussion with your parents about your college plans / costs and the family financial situation. First, I would suggest you understand financial aid better yourself or your parents might freak out about Princeton costing $60K/year before you even start the discussion. If you are an exceptionally strong student then Merit Aid is also a factor. Generally speaking the top 20 or so colleges in the US do not offer merit but the next tier or so down some colleges offer a strong student $20K - $25K/year in merit aid. The amount of merit aid will vary widely from college to college
@Wje9164be the FAFSA formula assesses assets at 5.6%. But the Profile schools could assess 100% of the equity in those rental properties. The schools the OP is writing about use the Profile.
In addition, the rental properties have $6000 a month in income. That is $72,000 a year. Add that to the $75,000 income the parent apparently earns, and you have almost $150,000.
This is really the problem. You will not know how much the Ivies expect your family to contribute since the NPCs at each school will not be accurate in your case because of the rental properties. My advice is to apply to the ones you like and are a good fit, but ensure you have a financial safety school to fall back on in case the Ivies are too expensive.
OP: you’ll need to clarify some numbers to get a better estimate. You don’t need to share those numbers with us, but you’ll be able to get a more accurate estimate if you follow this process.
Do you have your parents’ most recent tax return and W-2 forms? From the W-2 form(s) look for the box labeled Medicare wages (box 5) – this is your parent’s wages from work. If both parents work, keep a separate amount for each.
==> When a net price calculator asks for wage income, use this number.
On the tax return, the rental property net income should be on line 17 of the 1040: write down that amount.
On the Schedule E in the tax return (rental income) look at the amount on line 18 (depreciation), and ADD this total to the rental property net income.
==> When a net price calculator asks for real estate income, use this number. If a net price calculator DOESN’T ask for real estate income, add this to any other investment income you are reporting and report it there.
From an asset perspective, you need to know how much each of the properties is currently worth (zillow can give you a rough idea) AND how much mortgage is associated with each property. If rental house A is worth $150K and you parents have a mortgage balance of $120K on that property, then the net value of that property is $30K. That $30K will be an asset that has to be reported. Add up the total values of the two rental houses, and add up the total mortgages. Calculate the net value of the rental property.
==> Some net price calculators will ask for the value (equity) of rental property and the amount of the mortgages (debt) separately. Some ask for the net value. Be prepared either way.
This will not be perfect, but it should let you get a more accurate answer from the Net Price Calculators.
Harvard’s is particularly easy to use.
Don’t forget about 401k and/or tIRA contributions.