We moved to a different state a few years ago and decided to rent out our old house instead of sell it since we may want to return in a few years. We found a great rental in our new town. But as we started to look at the college process, it came to my attention that having a rental property or second home counted as an asset in the financial aid process. Of course, our house is not a second home since we actually live in a rental property – but am I right in thinking it will count against us because we don’t live in it?
I did various net price calculators and we got substantial aid when calculated without the old house included. But since the property values have skyrocketed since our move, including the house means we get 0 aid. Friends keep urging me to see a financial planner to see if there are ways around this but I don’t want to throw money away if it’s pointless. And I guess we could apply to expensive schools and then explain to the financial aid officers but again, has that ever worked?
I am proceeding to look at schools that have low fees and/or high merit. But wondering if anyone else has been in this situation? Are there any options? It seems odd that someone in our exact situation who happens to be living in the same exact house would get aid where we don’t.
Two families can have identical incomes and number in the household and still get very different aid. Financial aid policies are designed around the most comm on situations. Most families don’t own one house, rent it out, and then rent another. Most families who have a non-owner occupied house have it as income (rental) or as a vacation home. My sister and her husband have two homes because he works in a different town. They get dinged for it as a second, vacation, home even though they actually need it for work. They just have to accept that their situation is unique and they don’t fit the financial aid formula to their advantage. It is actually and asset to have two homes, so not really a penalty.
Single parent families get hit very hard even if the same number of people as a two parent family. Almost all the credits are cut in half, the asset protection allowance is very low, and yet the tuition is not cut in half. I have two in school at once and my asset protection is about $10k and AOTC is phased out at $80k, whereas a two parent family with one child gets an asset protection of double mine, tax credit for double the income (even if only one parent works), and is paying only one tuition.
What can you do? Sell the house or move back to the house. Has a school ever excluded the asset? I’m sure it has happened but I wouldn’t count on it, especially for federal formula aid.
I didn’t even think about the double whammy element, @“Erin’s Dad”! And thanks, @twoinanddone --I figured that was the case. As I mentioned, people keep assuring me that it can’t be the case we’d be treated differently for owning a house whether we live in it or don’t, but your post reminds me that there are lots of crazy quirks to the system. And though our income would normally net us aid (and our job situation has changed so that our income is lower this year than the tax year going to FAFSA) we will proceed with the assumption that no aid is coming our way.
Is there any point in trying to explain our situation to financial aid officers–and if so, at what point would we do that? After an aid package (or no package) is offered?
If it is a CSS school, you can try to explain it on that application. On the FAFSA, there is no way to explain it, you just have to appeal after acceptance. Some schools might talk to you about how they would handle it.
I haven’t looked at CSS yet, that’s good to know. The real drag for my S is that we won’t be able to apply anywhere ED, which may limit some athletic opportunities.
If applying as an athlete to a D3 school, they are likely to give a financial aid pre-read. They will let you know what aid to expect because they will want him to apply ED. If it is to a D1 or D2 school, the school can’t give an athletic scholarship and need based aid. You might not know if you’ll qualify for federal need based aid, but the rest should be clear.
Your house in the other state is a rental property. It cannot be YOUR primary residence if someone else is paying rent and living there. The apartment in which you reside is your primary residence.
It’s the equity in the rental property that will matter. Do you current,y have a mortgage on that property?
Re: the above…division 3 schools don’t give athletic scholarships…but yes, they should be able to give you some kind of pretend especially if your son is a recruited athlete.
But assets will be as of the date of filing…so if the family moves back into their house in the other state…it could end up being their primary residence for future FAFSA forms.
Yes, that’s true. From something OP mentioned above I wasn’t sure if they knew that 2015 taxes will be used for two FAFSAs. Might not make any difference but wanted to point it out.
It sounds like the family wants to keep the house.
If they sell it to someone else…the cash equity in their bank account is treated the same way for FAFSA purposes as the cash equity in their rental house as an asset.
Yup, it’s especially annoying for us that the FAFSA is using 2015 taxes because we will have a much lower income this year. That would be another reason to put in an appeal, but I think the equity in our house will wipe out any possible aid regardless.
And yes @thumper1 we do have a mortgage. And you are probably right they we will be able to get a financial pre-read later this year from D3s but from what people are saying here it won’t be good. I was just trying to figure out if there were any options or reason to see a financial planner before then. We wouldn’t be able to sell the place and buy another in our current location, and right now we have no plans to move back so I guess were likely stuck in MeritAidland.
We had a one time special circumstance this year which impacted aid for next year. They recalculated our aid after my request. I just want to let you know that we sent in a letter plus all of the required forms, plus we wrote a very lengthy explanation on the part of the profile that allows for explanations (at the very end). When I called the school I told them that in addition to faxing over a letter plus all of the required paperwork, we also explained it again on the profile. The FA counselor that we were assigned to said, “Oh, we never read that.” So…in addition to writing it on the profile, I would also send a letter.
I wouldn’t write off the D3/small LAC pre-read so fast. Schools can do what they want with their money. It is going to be a hard sell anywhere, but don’t write it off that quickly, and it may not have as big an impact as you think (it is mortgaged, there are expenses like taxes and upkeep). It may depend if the school is a heavily endowed one like Williams or Amherst or one with not such a deep endowment.
I didn’t want to play the ‘explain it again’ game with financial aid year after year so daughter went for the athletic/merit combo. (It’s the school she wanted too) I still ended up explaining special circumstances, but at least the merit/athletic awards were set. We also had some state grants that are set. Your son may have to have a more open mind about the type of school he can attend but I’m sure there is one that will give a combo of grants and merit that will work for your family.