<p>Hello Everybody!</p>
<p>Why does calculating need based financial aid involve one's assets? Just because a family can afford a $1,000,000 house does not mean it has $200,000 to spend on his child's education. I guess if a family had no assets, then it certainly cannot afford to send a child to college, but having assets does not mean a family could. Why do they not base it on discretionary income (income left after bills are paid) instead? Am I missing something? I guess I just do not understand the theory behind it. Could someone help me out?</p>
<p>You could write your own thoughts/questions about calculating aid too, if you wish. </p>
<p>Thanks in advance for people who can clarify this for me!</p>
<p>lol…</p>
<p>because life is about choices. If a family chooses to have a $1M home or lots of bills because they live a costly lifestyle, why should others (schools and taxpayers) give that family money for college???</p>
<p>Taxpayers and institutional funds aren’t going to subsidize families who had the ability to save for college but didn’t. Buying a $1M house is a choice. While a family may have had the income to buy that house in a vacuum, it’s only because the family didn’t take into account other costs, such as sending their kids to college. Taking bills into account doesn’t distinguish between car payments for a new BMW or a 3 year old used car. Families are on the hook for paying for college first, out of past income(savings), current income and future income(loans). Lifestyle choices that don’t include saving for college aren’t going to be rewarded.</p>
<p>Money to fund financial aid is a limited resource (as in, money does not grow on trees). A family that can afford a $1,000,000 home is in a far better position to pay for college than a family that can barely afford to make rent on a small apartment in a crummy part of town. For that reason, the financial aid formulas take many aspects of a family’s financial strength into account. The formulas are not perfect, but they are applied to all in order to have as fair a distribution of available aid as possible.</p>
<p>The formula assumes families will be able to pay with savings, current income, and future income (borrowing). It assesses current income most heavily. Assets, particularly those held by the parents rather than the student, are given a protection factor. </p>
<p>FAFSA-only schools do not consider the value of the home. Not all Profile schools consider the value of the home, and those that do have varying formulas for consideration.</p>
<p>I guess I am referring to people who live in areas where the cost of living is very high, not just millionaires and billionaires. For example, a house around NYC will cost a lot more than the same size house in say, Oklahoma, but a person living in Oklahoma might have more money left in their pocket at the end of the month when their bills are all paid than the person that lives near the city (despite the fact the Oklahoman may have a smaller income). I guess my point is that the increase in income as people live closer to cities is not necessarily proportional to the cost of living.</p>
<p>I guess I think that giving less money to people with more assets would make sense if college is actually affordable, but it is not w/o any kind of aid. Especially since this will become the student’s debt, and people that are 18 yrs old do not have $200k lying around, no matter how much money their parents have.</p>
<p>@kelsmom: good to know!</p>
<p>It’s a balancing act as to how assets should be treated in financial aid considertations. That a family with a multi million dollar home and a huge savings/brokerage account get the same aid as another famly making the same income but not have anything does not seem right either. The asset assessement is intended to take into account past income, but the small percentage (about 5.6%) and protection allowance is there to make it so that there isn’t too large of a hit on those who save rather than fritter away the money. The whole process is not perfectly fair, nor does it always make sense, but this is what was decided upon.</p>
<p>I guess I am referring to areas where the cost of living is very high. For example, a house around NYC will cost a lot more than the same size house in say, Oklahoma, but a person living in Oklahoma might have more money left in their pocket at the end of the month when their bills are all paid than the person that lives near the city.</p>
<p>But the person living in NY is likely earning a lot more for the same type of job than that person in OK. Professional salaries vary by region because of the cost of living.</p>
<p>Nobody has to live in a million dollar home. Where do the middle income people in your city live???</p>
<p>Are you suggesting that a family should downsize so that they can pay for their kids’ education?Are you suggesting that a family should downsize so that they can pay for their kids’ education?</p>
<hr>
<p>Life is about choices. Every choice an adult makes from the time he/she first begins earning money impacts how much he/she will have available to pay for things in life. </p>
<p>Frankly, I would downsize to pay for my kids’ educations … I did, in a way, because I bought a house for less money than I “could” have paid. I was then in a position to pay for college without borrowing … but not for “any” college … for one I could afford. Again, choices.</p>
<p>No choice is right for everyone. But again, funding is limited and choices must be made by those who distribute that money.</p>
<p>^^ yeah I know; I edited my post while you were typing this, though. I do not think that the income increase is proportional to how much more it costs to live near NYC.</p>
<p>@mom2collegekids: I was just using the $1M as an example. I guess that was a little extreme. No, the middle class in my neighborhood are not millionaires. lol</p>
<p>Latin4life, though income increases may not be proportional all of the time to move to higher cost area, the are more opportunities in some of those areas. I have friends in areas where it is so inexpensive to live, but there are no jobs to be found. The kids can find zero employment as a lot of the summer positons that most kids would be taking in most areas are hotly fought over by adults trying to make ends meet. So,it can be a balancing act. </p>
<p>My brother lives in one of the most expensive areas in the country. He was shocked to find that he can make about $800 a month just driving one of his kid’s classmates to and from school and to extracurriculas that the classmate is sharing with the kids. That kind of opportunity often exists in high cost areas. There are all sorts of opportunities there. </p>
<p>The more your house is worth on the market, the better your chances of being able to downsize. Even in the NYC area, there are pockets where one can find lower cost housing than others. Some choices have to be made. </p>
<p>But it is not always fair. There are a lot of unfair things in the way financial aid need is calculated and there are niches where it’s absolutely unfair. Not denying that a minute. Sometimes it’s unfair in a favorable way to some, and not to others.</p>
<p>“The more your house is worth on the market, the better your chances of being able to downsize.”</p>
<p>Yeah but after the housing bubble burst, homes are not as liquid as they used to be…</p>
<p>A lot of you are saying that you have to choose to live in a less-costly area/home in order to pay for your kids’ college, but what if you buy your house before you have kids?
And how was anyone 18 years ago supposed to know that college was going to cost them $200k per kid???</p>
<p>What I am trying to say is that the cost of college has grown so much that even the more affluent members of society may not be able to make ends meet without aid. They could have saved their money early on, but it still may not amount to as much as college actually costs.</p>
<p>No one has to go to a $50k per year college. The vast majority of students in this country don’t. Most commute to a local CC or a local 4-year U. Taxpayer funded aid is designed to help students achieve this. A $50k sleep away college is a luxury.</p>
<p>(1) Because lots people don’t have much money left after all their “expenses” are paid and you can’t shift that entire burden to the taxpayers.<br>
(2) AND all discretionary expenses are not created equal–think summer camps and cars and vacations, as well as tutors, houses, eating out etc.
(3) Would it encourage or discourage savings if you knew the more you spent on stuff the less you’d have to pay for your child’s college?<br>
(4) Would YOU be willing to pay more for someone else’s kids’ college or have your taxes go up because they charged a trip to Hawaii for graduation and added a new kitchen to the house?</p>
<p>^ I see your point. Obviously people need to prioritize their money. It is clear that families should be spending it on college rather than vacations and even bigger homes; I get that.</p>
<p>But here is what I do not get…
“Would it encourage or discourage savings if you knew the more you spent on stuff the less you’d have to pay for your child’s college?”
That is not what I meant. I meant that if someone has $1000 (with a $80,000 income) after he pays his necessary bills before vacations and other wants, and someone else has $10,000 (and makes $50,000) after he pays all of his necessary bills, then why should the person with $10,000 get more for their kid’s college? Just because he makes less?</p>
<p>Basically what you guys are saying is that people should seek lower statuses of living in order to be able to afford college, right? That seems like the total opposite of the American dream…</p>
<p>And doesn’t financial aid come elsewhere besides the government? Private schools give out money from applications fees, donations and tuition, do they not? How else are there scholarships that will let students attend private colleges for free? I am asking about applying for aid from the private schools, not apply for federal grants, so taxes will not be as affected.</p>
<p>You know…you could sell your $1,000,000 house and find a rental in a low income part of town…something not very big…maybe a one bedroom. See if you like that way of living.</p>
<p>I guess what I am saying…be grateful that your family have the assets they have as you certainly have benefited from them. Stop wishing that your assets didn’t count towards college funding.</p>
<p>The reality is that the vast majority of colleges use the FAFSA only for awarding need based aid. This does NOT use any information about your primary residence at all. So your million dollar home would have NO bearing on the awarding of need based aid at these schools.</p>
<p>There are 300 or so schools that use the Profile. Some of these schools cap the amount of home equity in your primary home, some don’t count it at all, and others use more. If you don’t want your home equity to be considered…do NOT apply to a college that requires the Profile and doesn’t cap home equity.</p>
<p>In both cases, the primary driver in the need based aid formulas is parent INCOME, not assets.</p>
<p>As noted, no one NEEDS to attend a college that costs $50,000 a year. You can attend a community college and commute from home for well less than $10,000 a year.</p>
<p>People are supposed to pay for their children’s education out of
Savings
Current income
Future income
So of you saved 200/month for 18 years you will be able to make a dent in the costs.
If you are thrifty for those years you would have kept your car for a few years longer and made some of your own home repairs.
Tuition costs shouldn’t come as a shock to anyone who has internet access.</p>
<p>I thought the American dream was to take advantage of opportunity to better one’s life. It’s the opportunity to pursue success, not to be <em>given</em> it.</p>
<p>If you decide bettering your life and success is to spend your money to attain a higher “status of living” that’s your choice. If making that choice means you can’t send your kid to an expensive college, well … that was your choice.</p>
<p>My family’s choice was to live in a house with a mortgage ~1/3 of what we qualified for. Our choice is to live on one income and save the other for college and retirement. Our choice means being frugal: e.g. no cable, my cell is a flip phone which costs $6/month, we have nothing fancy. Horrifying, right? Our choice meant we have a “lower status of living” than our peers, but it also means that we will be able to afford to be full-pay for our kids’ colleges. We’re immigrants, and we think we’re living the American dream.</p>
<p>@thumper1: I appreciate you commenting on the discussion, but I do not appreciate you stating that I am ungrateful. Trust me, I am not ungrateful. Secondly, I never stated that I own a million dollar house or live in a rich community. That is not even close. I was just using those numbers as an example. Just because I questioned the way financial aid was calculated from the “rich person’s point of view” does not mean I am wealthy. That is just the way I thought about it. Thirdly, how have I obviously benefitted from these assets that do not apply to me (because I made them up)?</p>
<p>My whole point was that money is probably tight for more affluent people, too. That’s all.</p>
<p>Money is tight for affluent people only if they spend more than they need to. It’s a <em>choice</em> for them. Money is <em>always</em> tight for economically disadvantaged people. The latter don’t have a choice at all.</p>